Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. Delta Air Lines earnings and more economic data at a tap.
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The stock market rally eased on Wednesday as the Federal Reserve saw a banking crisis as catalyst for a recession.
Newly released minutes from the Fed’s March 21-22 meeting showed that Fed staff expect a “moderate recession starting later this year.” Policymakers expected that banking pressure would “affect economic activity, employment and inflation,” the Fed’s meeting minutes showed. However, members remained “extremely alert” to inflation risks. While many policymakers considered keeping interest rates steady, they ultimately voted to raise the interest rate by a quarter point, to 4.75%-5%.
Before the opening, CPI came in lower than expected, with CPI inflation falling a full percentage point to 5%. But core inflation, which excludes food and energy, rose to 5.6%, as expected.
The odds of a Fed rate hike in early May have barely fallen to around 70%.
Chinese stocks were hit hard after that Berkshire Hathaway (BRKBCEO Warren Buffett has expressed concern about geopolitical tensions, particularly China and Taiwan. Ali Baba (Baba), JD.com (Dinar), PDD Holdings (PDD) And Tencent Holdings (Czech Republic) Everything fell hard.
BABA stock continued to slide overnight on a report that SoftBank planned to sell a significant portion of its stake in the Chinese e-commerce giant.
TSLA stock hit resistance at a key level, and continued to consolidate before that Tesla (TSLA) earnings next week.
Shopify (Shop), service now (now), Cloud Flair (network), Crocs (CROX) And merck (MrkAll are trading near potential entry points.
Delta Airlines (DAL) reports its earnings early Thursday, and the results are rolling in for the carriers. DAL stock fell 2.4% on Wednesday, below its 200-day line, after that American Airlines (AAL) gave preliminary results for the first quarter that were slightly above January guidance, but below the analyst consensus. AAL shares fell 0.2% to a three-month low.
ServiceNow and CROX are on SwingTrader. Now Stocks and Crocs are also on defect 50. Shopify was IBD stock on Wednesday for the day.
Dow jones futures today
Dow Jones futures fell against fair value. S&P 500 futures were little changed and Nasdaq 100 futures were up 0.1%.
The Labor Department will release the March Producer Price Index and Weekly Unemployment Claims at 8:30 a.m. ET.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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Stock market rise
The stock market rally initially opened with a strong rise on the CPI inflation index, eased, and then wobbled until fears of a federal recession took hold.
The Dow Jones Industrial Average fell 0.1% in the stock trading session on Wednesday. The S&P 500 fell 0.4%. The Nasdaq Composite fell 0.85%. Small-cap Russell 2000 shed 0.7%.
US crude oil prices rose 2.1% to $83.26 a barrel, the highest close in nearly five months.
The 10-year Treasury yield fell 1 basis point to 3.42%, after hitting 3.34% shortly after the open. The two-year yield fell 9 basis points to 3.97%. The 3-month Treasury bill yield fell by just 2 basis points, to 5.01%.
Exchange Traded Funds
Among the ETFs, the Innovator IBD 50 ETF (fifty(down 0.7%, while the Innovator IBD Breakout Opportunities ETF)fit) increased by 0.1%. iShares Expanded Technology and Software ETF (IGV) was down 0.2%. NOW stock was an important component. VanEck Vectors Semiconductor Corporation (SMH) decreased by 1.8%.
Reflecting more speculative stories, the ARK Innovation ETF (ARK)ark(down 2.9% and ARK Genomics ETFs)ARKG) fell 2.3%. Tesla stock is the #1 held stock across Ark Invest’s ETFs, with Shopify in the top 10. Cathie Wood’s Ark also owns a small stake in BYD.
SPDR S&P Metals & Mining ETFs (XME(down 0.8% and US Global X Infrastructure Development Fund)cradle) increased by 0.4%. US Global Gates Foundation ETF (Planes) was down 3.1%, with large components for Delta and AAL stocks. SPDR S&P Homebuilders ETF (XHB) decreased by 0.1%. Energy Defined Fund SPDR ETF (xle(Increased 0.1% and SPDR Healthcare Sector Selection Fund)XLV) finished higher fractal.
SPDR Financial Selection Fund (45) decreased by 0.2%. SPDR S&P Regional Banking ETF (Creates) decreased by 1.1%.
Top five Chinese stocks to watch now
Buffett warns of Chinese tensions
Warren Buffett said Wednesday on CNBC that he believes the electric car giant is in China BYD (I will) is “unusual” while Taiwan Semiconductor (TSM) “Awesome project.” But that didn’t stop Berkshire from significantly reducing its stakes in the two companies.
Buffett made a big bet on TSM in the third quarter, but cut the position by 86% in the fourth quarter. He said he had “reassessed” tensions between China and Taiwan, not business or management.
Meanwhile, Berkshire nearly halved its large, long-term stake in BYD starting in August, with the latest share reduction revealed earlier this week.
TSM stock fell 2.7% on Wednesday, trading below its 50-day line. BYD stock fell 3.9%, down 50 days.
But many Chinese internet networks have suffered even greater losses. BABA fell 5.9%, lowering the 50-day streak within the base of a mug with a handle. The Financial Times reported late Wednesday that SoftBank plans to sell the bulk of its stake in Alibaba. Alibaba shares fell slightly overnight, clearing initial after-hours lows.
JD shares fell 7.65% to their worst level since their October low. PDD stock slid 5.2%, and began to lose sight of the 200-day line. TCEHY shares shed 5.4%, down more than 50 days.
Krane CSI China Internet ETF (web) fell by 4.5% to 28.62, below the 200-day line. It hit a 52-week high of 36.19 on Jan. 26, having more than doubled from its October low.
Stocks near buy points
SHOP stock rose 1.2% on Wednesday to 45.30, but came in just short of the day’s high of 48.75. Investors can use 48.36 as early income. JMP Securities upgraded Shopify stock to a buy rating on Wednesday.
NOW stock rose 0.3% to 471.43, but it’s far from session highs as well. ServiceNow now has a handle on the base of its cup, giving it 482.43 buy points.
Net shares rose 3.9% to 63.04. On the day, the shares surpassed the early entry at 63.19 in a consolidation process.
CROX shares fell 1.5 percent to 126.19. Shares are working at 143.60 official buy points. But investors can use 130.90 as early income, which will clear the bulk of trading since January 18th.
MRK stock rose 1.1%, to 113.75. The stock is near the 115.59 consolidation buy point. Pharmaceutical giant Dow Jones has been rocking in recent days, and not much of a shake-up.
Tesla stock
Tesla shares fell 3.35% to 180.54. A bearish reversal from near the 50-day moving average. Shares are still within the base of a cup with a handle at 217.75 overbought, according to MarketSmith analysis. The base formed below the 200-day line, which drifted down to around 214. Investors may want to use a decisive clearing of the 200-day line as an entry.
The Hong Kong Economic Times reported on Wednesday that Tesla will cut some prices for the Model 3 and Y in Hong Kong on April 15, including a 14% cut for the Model 3 performance variant.
TSLA stock fell 10.8% last week as Tesla slashed electric vehicle prices in the US and Australia after record first-quarter deliveries fell short of what was seen.
Tesla’s earnings are due on April 19, with focus on gross margins.
Market rally analysis
The stock market was up and down on Wednesday, taking a more decisive downward trend starting in the mid-afternoon. Not only are Fed staffers anticipating a recession, markets are seeing policymakers still raise interest rates, one last time.
A bearish external reversal is never a great sign, but the leading indicators haven’t changed their character significantly – yet.
The Nasdaq fell for the third consecutive session below the 12,000 level but is still above 21 days. The tech-heavy index has suffered three distributive days in the past five sessions, which is something to note.
The S&P 500 briefly surpassed its early April highs before fading. The Dow Jones has reversed from its best in nearly two months.
The Russell 2000 fell back below the 21-day streak.
Some of the leading stocks made gains. But many others have reversed opening gains.
The Nasdaq, S&P 500 and many growth stocks are about to break above key levels. But they are also not far from breaking the important support level.
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What are you doing now
This is not a stock market rebound. Major indices have moved sideways over the past two months, with big swings across sectors and leaders at various points. So while investors should get involved, it’s not the time to be too aggressive.
How exposed should you be? If your shares work, your exposure could be 40%, 50% or more depending on your risk tolerance. If stocks get dumped or you have to cut a number of losers, your exposure could be much lower.
Either way, if and when conditions improve, you can gradually make new purchases and add to your exposure. Stay engaged and stay flexible. Have your watchlists ready and your exit strategies in place.
Read the big picture every day to stay in sync with market trend, leading stocks and sectors.
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