The Fed is fueling a big rally, search now
Dow Jones futures fell slightly overnight, along with S&P 500 and Nasdaq futures. The Federal Reserve raised interest rates by half a point on Wednesday, but the stock market surged and Treasury yields fell as Fed Chief Jerome Powell signaled that significant rate hikes were not considered in June and July. Apple stock made an early entry as Exxon Mobil (XOM) broke.
lithium giant Albemarle (ALB) and cybersecurity leader Fortinet (FTNT) were notable winners in after-hours earnings.
The Fed meeting ended Wednesday afternoon with a half-point rate hike to a new target range of 0.75% to 1%. Policymakers also voted to start trimming the central bank’s massive balance sheet, with that trickle down to $95 billion a month in September. Both movements were expected.
Fed chief Powell said it was crucial that inflation be brought down quickly. But Powell said he sees “50 basis point” rate hikes on the table for the next two Fed meetings. He added that policymakers were not actively considering 75 basis points. Markets had priced in a good chance of three-quarter point increases at the June and July Fed meetings.
Less hawkish-than-expected rate hike forecasts from Fed chief Powell sent stocks soaring and Treasury yields lower.
After the close, Albemarle soared 15% on strong earnings and guidance. ALB stock has already risen 9.3% to 215.47 in Wednesday’s regular session, resuming its 50-day line as a rival Livent (LTHM) soared 30% on earnings and outlook on Wednesday, flashing early entries. Albemarle stock signals a gap above its 200-day line, potentially breaking a trendline and another early entry.
Fortinet topped quarterly views, although it gave mixed indications. FTNT stock was up 4% late in the session, but has some distance before being in the buy range. The cybersecurity game fell during the day on Wednesday, approaching 2022 lows before bouncing back for a wafer-thin gain.
Shopify (SHOP) and Datadog (DDOG) report early Thursday. But the two former software leaders are near 52-week lows.
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Shares of Exxon Mobil and LNG issued buy signals on Wednesday, as energy prices surged and Energy Cheniere (LNG) is experiencing meteoric revenue growth.
Growth stocks rebounded strongly on Wednesday, but remain degraded. Apple (AAPL) has just triggered a buy signal. Tesla stock is the only other megacap above its 200 and 50 day lines.
You’re here (TSLA) and LNG stocks are on the IBD ranking. Fortinet stock is on IBD Long-Term Leaders. CF stock is on the IBD 50. CF Industries and PXD stocks are on the IBD Big Cap 20, which is filled with energy, fertilizer and other commodity names.
The video embedded in the article discussed Wednesday’s strong market rally and analyzed XOM stock, Mattel (MAT) and General dynamics (GD).
Dow Jones Futures Today
Dow Jones futures fell slightly from fair value. S&P 500 futures fell 0.1% and Nasdaq 100 futures lost a fraction.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally Wednesday
The attempted stock market rally had its ups and downs before the Fed meeting announcement and immediately after. But major indexes rose sharply at the close after Fed chief Powell signaled 75 basis point rate hikes off the table.
The Dow Jones Industrial Average jumped 2.8% in Wednesday’s stock trading. The S&P 500 index jumped 3%. The Nasdaq composite rose 3.2%. The small-cap Russell 2000 jumped 2.7%.
U.S. crude oil prices jumped 5.3% to $107.81 a barrel. The European Union, as expected, has offered to phase out Russian crude oil imports over a six-month period. There is no final agreement yet.
The 10-year Treasury yield fell 4 basis points to 2.92%, after rising above 3% intraday again.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 3.3%. The iShares Expanded Tech-Software Sector ETF (IGV) jumped 3%. The VanEck Vectors Semiconductor ETF (SMH) gained 3.4%.
The SPDR S&P Metals & Mining ETF (XME) gained 2.9% and the Global X US Infrastructure Development ETF (PAVE) climbed 3.3%. The US Global Jets ETF (JETS) climbed 1.3% even as crude oil prices soared. The SPDR S&P Homebuilders ETF (XHB) climbed 3.3%. ETF Energy Select SPDR (XLE) rose 4.15%, with XOM stock being a major component. The Financial Select SPDR ETF (XLF) gained 3.1%. SPDR healthcare sector fund (XLV) rose 2.2%
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) jumped 5.1% and ARK Genomics ETF (ARKG) 4.35%, both rebounding from steep intraday losses. TSLA stock remains the No. 1 position among Ark Invest ETFs.
Five best Chinese stocks to watch now
Exxon stock rose 4% to 91.70, off a buy point of 89.90 cup with handle in above average volume. The relative strength line is at a new high, a bullish sign. The RS line is the blue line in the tables provided.
While oil prices are high, refining margins widen considerably. This is good news for an integrated oil giant like Exxon Mobil.
Cheniere Energy’s stock jumped 4.2% to 145.89, briefly exceeding a fixed base buy point of 149.52 intraday. But LNG stock is exploitable from a bounce off the 50-day line and the breakout of a shallow downtrend.
The RS line is at a new high.
Cheniere Energy on Wednesday announced a significant loss in the first quarter. But revenue jumped 142%, crushing views and the fifth consecutive quarter of accelerating growth. Meanwhile, while crude oil and natural gas prices in the United States have risen sharply, electricity prices continue to soar in Europe. This is good news for the liquefied natural gas specialist Cheniere Energy.
Apple stock jumped 4.1% to 166.02 on Wednesday, crossing above the 200-day moving average and closing just above its 50-day line. Crossing above the 50-day line also broke a short downtrend, providing an early entry for AAPL stocks. The official buy point is 183.04, although investors can use 179.71 as another early entry for tech titan Dow Jones.
The RS line is at a new high on a weekly chart. This reflects the strong performance of Apple stock against the S&P 500 index. The RS line is the blue line in the tables provided.
Tesla also recovered its 200- and 50-day lines, jumping 4.6% to 952.62 on Wednesday. The electric vehicle giant has potential buying spots, although the chart isn’t easy to watch. Nor is Tesla stock close to an obvious early entry.
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Market rally analysis
The attempted stock market rally received a big boost on Wednesday afternoon as Fed chief Powell eased rate hike fears slightly.
With such an important Fed meeting and so many cross-currents for investors to consider, it wouldn’t be surprising to see a Fed reaction on day two that returns much of Wednesday’s gains.
Still, investors can now be on the lookout for a follow-up day to confirm the new uptrend. A trailing day – at least a few days after a new rally attempt – involves a significant price gain on one or more of the major indices in higher volume than the previous session. This suggests that major institutions are betting that the new market rally has legs. Confirmed uptrends don’t always work, but they are a strong signal.
The energy sector still looks strong, with Exxon and LNG stocks among the many in the buy zones or settling. Fertilizer makers rebounded from key support. Some steelmakers are also holding around their 50-day lines. Some wood products and construction companies are showing bullish action, as well as some pharmaceutical and biotechnology stocks. Airlines and a few other travel games may be coming together. Defense companies that were hanging around key support in new bases took strong action on Wednesday. Lithium coins such as ALB stocks suddenly seem white-hot again.
A few good market days and a number of stocks would look good. But a few bad days would probably break more cards.
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What to do now
The stock market rally has not been confirmed, but looks promising. Aggressive investors could have purchased, for example, XOM stocks or a broad market ETF to gain some exposure. But if you jump in early, you have to be prepared to come back just as fast, if not faster.
There is nothing wrong with waiting for a confirmed market recovery. This is especially true now, with few stocks in position at the moment. Even when there is a tracking day, increase exposure slowly.
If this market rally has legs, you will have plenty of opportunities to build your exposure and make big gains. If the bullish momentum falters in the next few days, you’ll be happy that your exposure is light.
For now, get your watchlists in shape, paying particular attention to stocks that are close to being actionable.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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