Dow Jones futures changed slightly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rise turned sharply negative Wednesday on high-profile Federal Reserve comments, closing at session lows. Microsoft (MSFT), Google shares, AMD and Nvidia are coming under increasing pressure, while even Apple and Tesla shares are starting to show pressure. Commodity stocks, cyclical and financial stocks are still doing well, but the weight is on the downside.
Once again, government bonds drove market action. The 10-year Treasury Department topped 1.7% for the first time in nine months following the publication of the December minutes of the Fed meeting.
Fed Minutes Hawkish
Politicians signaled that Fed rate hikes could come faster than expected as the central bank showed real concern about inflation at its December meeting.
At the December meeting, politicians agreed to accelerate the bond cut, reducing monthly purchases of assets by $ 30 billion a month. That means new bond purchases end in mid-March, setting the stage for actual Fed tightening. In particular, some members wanted to start reducing the Fed’s balance sheet “at some point” after the first rate hike. In fact, “many participants judged that the appropriate pace of balance drainage was likely to be faster than it was during the previous normalization episode.”
That’s a big change of tone from Fed chief Jerome Powell right after the December political meeting. While saying politicians were starting to talk about cutting the balance, he also assured Wall Street that he would take a “careful, methodical approach.”
The next Fed meeting is on 25-26. January.
The 10-year government bond yield rose 4 basis points to 1.705% and hit 1.71% during the day. It peaked in October and November to reach its highest level since early April. The key government interest rate has risen by 19 basis points for the week.
Meanwhile, the two-year government bond yield, which is more closely linked to the Fed action, rose 7 basis points on Wednesday to 0.83%, the highest since March 2020. This means that the government bond yield has actually narrowed slightly on Wednesday. This is not good news for the banks’ traditional loan card, long-term loan model.
Apple, Tesla retire
Among megacaps, Apple (AAPL) and Tesla (TSLA) no longer withdraws from growth sales. AAPL shares fell 2.66% on Wednesday, but may still form a three-week tight pattern after this week. Tesla stock is still rising modestly this week after rising higher Monday on blowout deliveries, but has fallen below a buy point.
Microsoft stock, Google parent Alphabet (GOOGL), Advanced micro-devices (AMD), Nvidia (NVDA) and Facebook parent Meta platforms (FB) everyone looks damaged. Microsoft shares and Google lost further ground from their 50-day lines along with Nvidia. AMD stock fell below this key level. The FB stock fell below its 50-day and 200-day lines on Wednesday, while also undercutting an aggressive trend line.
Software and other highly valued stocks already hit in recent days and weeks continued to struggle. Computer vision chip maker Ambarella (AMBA) crashed 19% on Wednesday after dropping 5.1% on Tuesday.
data dog (DDOG) rose in the night’s trade on a deal with Amazon‘s (AMZN) Amazon Web Services. But DDOG has fallen 18% so far this week.
Nucor (NUE) and Signature Bank (SBNY) broke out while Cheniere energy (LNG) cleared a trend line item. Everyone is in leading groups and sectors right now. But even these stocks came from heights as the broader market came under pressure. The SBNY stock closed below its buy point while the LNG stock closed positively.
Nucor and LNG shares joined the IBD Leaderboard, which also boasts Tesla, Microsoft, Google, Nvidia and AMD. NUE stock is on SwingTrader and was Wednesday’s IBD Stock Of The Day. Microsoft and GOOGL shares are IBD long-term leaders. Tesla shares and AMD are at IBD 50.
The video embedded in this article discusses an important market day and analyzes SBNY shares, Nucor and Reliance Steel (RS).
Dow Jones Futures today
Dow Jones futures were just below fair value. The S&P 500 futures and Nasdaq 100 futures were slightly changed.
The 10-year government interest rate fell 1 basis point to 1.69%. Futures on crude oil fell 1 pct.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze powerful stocks in the stock market rally on IBD Live
Stock market rally
The stock market rise started with the large indices diverging again, but they all went south after 1 p.m. 14.00 ET Fed minutes and closed at the worst levels of the day.
The Dow Jones Industrial Average fell 1.1% in Wednesday’s stock market trading, after trading higher for most of the session. The S&P 500 index fell 1.9%. The Nasdaq composite fell 3.3 percent. Small-cap Russell 2000 fell 3.4 percent.
US crude oil prices rose 1.1% to $ 77.85 per barrel. barrel, which reduced profits from over $ 78. Natural gas prices also rose.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 4.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 2.3%. iShares Expanded Tech-Software Sector ETF (IGV) fell 4.9 percent. MSFT shares are a large IGV holding. VanEck Vectors Semiconductor ETF (SMH) fell 3.4%, while AMD and Nvidia shares major components.
The SPDR S&P Metals & Mining ETF (XME) rose 0.1%, with the Nucor share being a component. The Global X US Infrastructure Development ETF (PAVE) turned lower to close down 1.2%. US Global Jets ETF (JETS) fell 1.7 percent. SPDR S&P Homebuilders ETF (XHB) slipped 2.7 pct. Energy Select SPDR ETF (XLE) closed just below the breakeven, and Financial Select SPDR ETF (XLF) fell 1.2%. Health Care Select Sector SPDR Fund (XLV) fell 0.7 pct.
As a result of more speculative history stocks, the ARK Innovation ETF (ARKK) and the ARK Genomics ETF (ARKG) both fell 7.1% to 52-week lows. The Tesla share remains No. 1 across ARK Invest’s ETFs.
Five best Chinese stocks to see now
Analysis of market rally
So much for the divergent market upswing. The Dow Jones and S&P 500 fell solidly on Wednesday. Nasdaq, after reducing losses to just holding its 50-day line on Tuesday, fell below this key level on Wednesday.
Microsoft and Google stocks underpinned their lowest December, as the damage in growth is no longer limited to those with conspicuous valuations. AMD shares and Nvidia have both seen another 50-day / 10-week line rebound fizzle, and they are also reaching their lowest December. Meanwhile, the carnage continues in software stocks and virtually all highly valued growth names.
Tesla shares fell 5.35% to 1,088.12. That’s still a 3% increase for the week. But after touching 1,208 on Tuesday morning, it is back below a buy point of 1,119.10. Apple stock fell 2.7% on Wednesday but is still above its 21-day line.
While Tesla and Apple shares still look relatively solid, Microsoft, Google, AMD and Nvidia also saw it at the end of last year.
Russell 2000 tumbled back below its 200-day line.
The S&P 500 and Dow Jones are still just below the top levels. Real economic names are doing relatively well. It includes steel producers such as Nucor shares and energy stocks such as LNG. Financial items like Signature Bank hold on to recent gains or move higher.
Treasury rates will remain front-and-center for stock market growth for at least the next few days.
Time The Market With IBD’s ETF Market Strategy
What should I do now
There are stocks and sectors working right now. Investors who came on board this week have generally seen progress. But Tuesday’s divergent market turned into broader, sharper sales on Wednesday. More of the same would likely sink resilient sectors. Alternatively, rotation back to growth would not be a surprise and could be bad news for financial or cyclical.
On the other hand, you need to be wary of one-day gains in growth stocks, especially the hardest hit. The software sector and many highly valued names are in significant corrections. A one-day pop within a downward trend would not be surprising. Investors stuck with big losses in tech stocks might want to use any setback as a chance to get out rather than any opportunity to recharge.
Overall, investors should take a more defensive approach in the short term. Do not let winners become losers, or losers become sharp losses.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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