Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, after a market sell-off as Federal Reserve Chairman Jerome Powell said a March Fed rate cut was unlikely.
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The stock market rally began on Wednesday with technology companies falling strongly after earnings from Microsoft (MSFT), the parent company of Google the alphabet (Google) and Advanced micro devices (AMD). But the sharp losses widened after Federal Reserve Chairman Powell’s comments.
While the major indices still look healthy, investors should be cautious about new purchases in the very short term and consider taking some profits.
Profits
Qualcomm (kcom), Next tracker (NXT), a former parent of NXT drape (Flex) and Technology alignment (ALGN) reported Wednesday night. QCOM stock fell overnight on strong earnings and consistent guidance. Nextracker stock has risen significantly, indicating a buying opportunity. ALGN stock has risen above its 200-day line. FLEX stock rose modestly.
Royal Caribbean (RCL) pre-opening reports. RCL stock has an emerging base and is finding major support.
Amazon.com (Amzn), apple (Apple) and Meta platforms (META) looms Thursday night. All three Magnificent Seven shares fell modestly on Wednesday.
Meta is on IBD Leaderboard. MSFT stock is on IBD Long-Term Leaders. Meta, Google, Microsoft, and Novo Nordisk stocks are all in the IBD 50. Google stocks are in the IBD Big Cap 20.
Dow jones futures today
Dow Jones futures rose 0.1% above fair value. S&P 500 futures rose 0.2%, and Nasdaq 100 futures rose 0.35%.
The yield on the 10-year Treasury note fell to 3.94%.
Crude oil futures rose.
Remember, an overnight move in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Fed Chairman Powell refuses to cut interest rates in March
As expected, the Fed took no action at its two-day meeting and officially moved monetary policy away from a tightening bias. However, policymakers have indicated that they are not ready to cut interest rates yet.
“The Committee does not anticipate that it would be appropriate to lower the target range until it gains greater confidence that inflation is moving sustainably toward 2 percent,” the Fed statement said.
Fed Chair Powell was blunt, saying “I don’t think it’s likely” that policymakers will feel confident enough by the March meeting, despite “six months” of good inflation numbers. He said the current policy is restrictive and he believes it would make sense to relax it sometime this year.
The Fed meeting announcement and Powell’s comments came a few weeks after Fed and ECB officials rejected consensus on fast and deep interest rates in 2024.
The odds of a Fed rate cut in March fell to 36% Wednesday evening, down from 40.4% on Tuesday. Markets saw a 60% chance of a rate cut in March shortly before the Fed’s announcement and Powell’s comments, due to weak economic data.
There is a 95% chance of a reduction by May 1st.
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Stock market pool
The stock market rally extended its losses after the Fed’s announcement and especially Powell’s comments, closing near session lows
The Dow Jones Industrial Average fell 0.8% in stock market trading on Wednesday, pulling back from a new all-time high during the day. The Standard & Poor’s 500 index fell 1.6%. The Nasdaq Composite Index fell 2.2%, just below its 21-day moving average
Microsoft stock fell 2.7% on Wednesday despite strong earnings and guidance. Google stock fell 7.5% amid weak ad revenue growth. AMD stock fell 2.5%, but came well off its lows despite immediate earnings and weak revenue expectations. Reports from the three tech giants relying on AI have impacted other technologies.
Meta shares fell by 2.5% and Amazon shares fell by 2.4%. AAPL shares fell by 2%, which was the sixth loss in a row.
Elsewhere, losses were muted – until Powell refused to cut rates in March.
The Russell 2000 fell 2.45%, breaking its 21-day line and approaching its 50-day line. Regional banks were a major drag on the small-cap index.
The Invesco S&P 500 ETF (RSP), which has been near breakeven for most of the session, fell 1.3%. The RSP index closed just above 21 days. The First Trust Nasdaq 100 Equilibrium ETF (QQEW) fell 1.4%, less than the Nasdaq 100’s 1.9% decline.
A week ago, the Nasdaq was extending from its 50-day line. But it rose just 2.6% above that key level on Wednesday
Remember, markets often have a second-day reaction to Fed meetings that reverses course. Friday’s jobs report will also put Fed Chair Powell’s comments in a new context.
The 10-year Treasury yield fell 9 basis points to 3.965%, closing below 4% for the first time since January 12.
Ahead of the open, a weaker-than-expected ADP hiring report and hiring cost index pulled revenues down a few basis points. Treasury bond yields reached 3.94% during the day New York Community Bancorp NYCB (NYCB) fell to a surprise loss in the fourth quarter due to a spike in loan loss provisions as it faces stricter capital requirements.
US crude oil prices fell by 2.5% to $75.85 per barrel.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) was down 2.2%, with MSFT stock as a major holding. VanEck Vectors Semiconductor ETF (SMH) fell 1.4%. QCOM stock is owned by SMH, along with AMD.
In a reversal of stocks with more speculative stories, the ARK Innovation ETF (ARKK) fell 3.1% and ARK Genomics (ARKG) lost 3.3%.
The SPDR S&P Metals & Mining ETF (XME) was down 1.6%, and US Global Jets (JETS) was down 0.8%. The SPDR S&P Homebuilders ETF (XHB) and the Energy Select SPDR ETF (XLE) both fell 1.9%. Healthcare Sector SPDR Fund (XLV) fell 0.1%.
The Select Industrial Sector SPDR Fund (XLI) gave up 1.2%.
The Financial Select SPDR ETF (XLF) fell 1.1%. The SPDR S&P Regional Banking ETF (KRE) fell 5.85%, first with a collapse in NYCB stock and then adding to losses on Fed Chair Powell.
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What are you doing now
The stock market rally took a backseat to Fed Chairman Powell, but major indicators aren’t showing much damage, at least so far. But stocks that triggered buy signals on Monday may now be in trouble.
Earnings will remain intense on Thursday, with the jobs report due on Friday. These factors can provide the catalyst for a market rebound or sell-off.
Investors will likely wait until the dust settles on Friday morning before considering new purchases. They may want to exit recent entries and consider taking at least partial profits in various stocks, especially those with accrued dividends.
However, the current action could generate new settings in the coming days and weeks. So keep working on your watch lists. But you also need to have your exit plans ready
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