Futures await the Fed;  That is what matters

Futures await the Fed; That is what matters

Dow Jones futures were little changed overnight, along with S&P 500 and Nasdaq futures, as the Fed meeting announcement took center stage. Major indexes fell on Tuesday as the Federal Reserve began its two-day policy meeting.




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Tesla stock briefly issued an aggressive buy signal, despite other signs of weaker-than-expected weakness You’re here (TSLA) application in China. It comes in the middle of a big Ford engine (F) warning about supply costs, as well as unfinished vehicles. Ford shares plunged 12%, with General Engines (GM) down 5.6% despite an electric vehicle supply agreement with Hertz (HTZ).

In addition to Tesla, chipmakers On semiconductor (On and Leprechaun (PI) show strength with Neurocrine Biosciences (NBIX) and lithium giant (m²).

Apple (AAPL) rose for a second consecutive session. Apple stock remains below key levels. Meanwhile, other megacap tech stocks Microsoft (MSFT) and parent company of Google Alphabet (GOOGL) are at a 52-week low.

NBIX stock is on the IBD ranking. TSLA and On Semiconductor stocks, also known as Onsemi, are on the IBD 50. ON stocks are on the IBD Big Cap 20. Impinj is Tuesday’s IBD Stock Of The Day.

The video embedded in this article discusses Tuesday’s market action and analyzes Neurocrine Biosciences, Wolfspeed (WOLF) and PI shares.

Fed meeting

Policymakers appear locked on a third consecutive Fed rate hike of 75 basis points, with an announcement expected at 2 p.m. ET on Wednesday. Markets see a small chance of a huge full point upside.

The key is what the Fed sees now. The quarterly projections will show where the central bank will see the federal funds rate at the end of 2023 and under what economic conditions. Fed Chief Jerome Powell in his August 26 speech in Jackson Hole made it clear that the Fed was willing to risk recession in order to keep inflation under control.

Powell will speak at 2:30 p.m. ET, possibly giving some hints about near-term Fed rate hikes. Currently, markets are betting on a fourth move of 75 basis points in November, followed by 50 basis points in December. This would push the year-end federal funds rate to 4.25%-4.5% from 2.25%-2.5% currently. Ahead of the August consumer price index on September 14, markets were looking for 3.75% to 4% at the end of 2022.

Dow Jones Futures Today

Dow Jones futures were about flat to fair value. S&P 500 and Nasdaq 100 futures remained unchanged.

The 10-year Treasury yield fell 2 basis points to 3.55%.

Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.


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Stock market tuesday

The stock market fell on Tuesday ahead of the Fed meeting announcement. A late afternoon bounce faded into the close.

The Dow Jones Industrial Average fell 1% in trading on Tuesday. The S&P 500 index lost 1.1%. The Nasdaq composite fell 0.95%. Small cap Russell 2000 lost 1.4%.

Apple stock, a member of the Dow Jones, S&P 500 and Nasdaq composite, rose 1.6% to 156.90. AAPL stock hit its 21-day resistance and remains below its 50- and 200-day lines after last week’s big downside reversal. But a decisive move above the 50 and 200 day lines could offer fresh early entry.

U.S. crude in October fell 1.5% to $84.45 a barrel. November crude oil futures, now the near-month contract, slid 1.7% to $83.94.

The 10-year Treasury yield jumped 8 basis points to 3.57%, a new 11-year high.

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Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.3%. The iShares Expanded Tech-Software Sector ETF (IGV) slipped 1.5%. ETF VanEck Vectors Semiconductor (SMH) fell 1.4%.

The SPDR S&P Metals & Mining ETF (XME) fell 2.7%. ETF Energy Select SPDR (XLE) fell 0.7% and ETF Financial Select SPDR (XLF) 1.5%. The Health Care Select Sector SPDR Fund (XLV) fell 1.2%.

Reflecting more speculative stocks, ARK Innovation ETF (ARKK) was down 2.5% and ARK Genomics ETF (ARKG) was down 1.6%. TSLA stock is a major holding in Ark Invest ETFs.


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IP action

Impinj shares fell 2.5% to 89.66 on Tuesday. Shares of the tracking chipmaker are finding support at the 21-day and 10-week lines. PI stock is working on further consolidation which should provide a suitable base by Friday’s close with a buy point of 99.10. Investors could use 93.46, just above the short-term highs, as an early entry which is still near the 10-week line.

The relative strength line is right at the top, a bullish sign for PI stock as it outperforms the S&P 500 Index.

In stock

Semiconductor’s stock fell 2.4% to 68.48 after rising 1.8% on Monday. Shares of the electric vehicle-focused chipmaker closed just below their 21-day and 10-week lines.

The RS line for Onsemi stock is right around the highs.

After a breakout at the end of August from a collapsed long base, the ON stock could have a new shallow base at the end of next week. Investors could use 73.03 as an aggressive entry, which would also be back above the previous consolidation high.

NBIX Stock

Neurocrine stock fell 0.7% to 107.09, again finding support at the 21-day moving average. NBIX stock has a flat bottom with a buy point of 109.36, according to MarketSmith analysis. The flat base is just above an earlier consolidation, making it a base-on-base formation. Investors could use a move above Monday’s high of 108.71 as a slightly lower entry. The RS line for NBIX shares is at a new high.

Stock of m²

SQM stock fell 2.4% to 104.66, right at its 21-day line. Shares of the Chilean lithium and fertilizer giant attempted to break out of a messy cup-handle base earlier this month, but never closed above the buy point of 113.80. The good news is that the 50-day line is starting to catch up.

The RS line for the SQM stock is near the highs.

Tesla Stock

Tesla stock hit 313.33, slightly extending gains and breaking above a very aggressive buy point of 309.22. But the shares faded to end 0.1% at 308.73. TSLA stock is near a buy point of 314.74 from a short consolidation, within a much wider consolidation that could be a suitable base at the end of this week.

The RS line recently jumped just below the early April highs.

Buying TSLA stock, or any stock, in the current market environment would be extremely aggressive.

CEO Elon Musk tweeted on Tuesday about Optimus, the Tesla humanoid robot he may show off at the company’s AI Day on September 30. Most experts say a useful general-purpose humanoid robot is decades away. He also hinted at an improved smart-summon or auto-park feature, which has run into issues over the years.

However, Tesla’s sales in China are lagging behind expectations. Local sales are still expected to hit a record high in September as capacity in Shanghai increased further. But Tesla car insurance registrations have fallen over the past week, at a time when they typically rise sharply.

Tesla China’s wait times have fallen sharply in recent weeks as the electric vehicle giant resorted to a large insurance subsidy to fuel end-of-quarter sales. That could portend some real price drops later this year.


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Stock market analysis

Well, it’s a stock market correction. The S&P 500 and Dow Jones moved above last Friday’s lows on Tuesday, before paring losses somewhat.

The good news for Tuesday is that stocks did not rally on big news related to the Fed. This contrasts with Fed Chief Powell’s August 26 Jackson Hole speech or the September 14 CPI inflation report.

It’s no coincidence that the stock market is grappling with rising Treasury yields.

The bullish affair of the summer revolved around the Fed. First, the Fed was expected to slow rate hikes soon, then start cutting rates in 2023. Second, there was still hope that the Fed would scale back rate hikes and pause by the end of the year. ‘year.

But now the Fed is on track to hike rates aggressively through year end, with more scope in 2023. That means a lot more pain for the economy.

The current environment of low growth and high inflation has not been easy for businesses. Ford, fedex (FDX) and General Electric (GE) are among those who warned last week.

Selling Ford shares on Tuesday, after FDX and GE last week, shows investors didn’t expect meaningful earnings, which is disappointing. Expect many more warnings in the coming weeks.

Given the weakness of the past few weeks, it is possible that the market will rebound on Wednesday after the Fed meeting and Fed Chief Powell’s speech. Keep in mind that the market often changes course during the second day of reaction to a Fed meeting.

Until we know when the Fed might start to slow down and stop tightening, it’s hard to see the markets making any significant headway. It’s not hard to see the major indexes testing or surpassing their June lows.


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What to do now

The market correction is back in full force with the Fed poised to hike rates sharply again, with no end in sight. Companies are issuing stark warnings amid challenging macro conditions that are likely to worsen.

Investors should have little to no exposure and not make any new purchases. Wait until there is a confirmed uptrend, which would likely imply that the major indices are recovering to their 50-day moving averages. Even in this scenario, other technical hurdles, as well as the Fed and the economic backdrop, should cause investors to be cautious.

For now, investors should work on their watchlists, focusing on relative strength like NBIX, On Semi and Tesla stocks. Keep in mind that today’s relative winners may start to break down if the correction intensifies.

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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