‘Tej’ Powell Slams Stocks; What do we do now

Dow Jones futures edged higher after hours, along with S&P 500 futures and Nasdaq futures. crowdstrike (CRWD) delayed earnings while AI play SoundHound declined.


The stock market rally pared serious losses after Fed chief Jerome Powell said policymakers are “ready to increase the pace of rate hikes”. The S&P 500 knifed through its 21-day moving average and slid below its 50-day line.

Tesla (TSLA) declined below a key level, but there could still be constructive action. tech titans Apple (AAPL), Microsoft (MSFT) and Google Guardian Alphabet (GOOGL), which was a modest winner, gave up those gains on Tuesday.

Many candidates fared reasonably well, although others suffered somewhat higher losses. Delta Airlines (DAL), new relic (NEWR) and Canadian Solar (CSIQ) flaunted buy signals as their respective groups performed well.

Investors should be careful about making new purchases in very short periods of time and may wish to reduce overall risk to some extent.

The video embedded with this article discusses Tuesday’s market action and analyzes DAL stock, Canadian Solar and Freeport-McMoRan.

DAL stock is on the IBD Big Cap 20. New Relic was Tuesday’s IBD Stock of the Day.

Fed Chief Powell

Citing strong economic data, Fed chief Jerome Powell said “the final level of rates is likely to be higher than previously estimated.” Markets were already pricing in higher rates than the Fed’s forecast of a peak rate of around 5.1% in late 2022.

But Powell also signaled that he is prepared to accelerate Fed rate hikes again. “If the totality of the data were to indicate that a faster tightening is warranted, we would be prepared to increase the pace of rate increases.”

That puts further pressure on Friday’s February jobs report as well as next week’s CPI inflation report.

The probability of a 50-basis-point Fed rate hike on March 22 rose to 70.5% from 31% on Monday and 24% a week ago.

prime income

CRWD shares rallied strongly after CrowdStrike missed earnings and the cyber security play gave bullish guidance. CrowdStrike stock fell 2.1% to 124.93 in Tuesday’s session, having risen sharply over the past two months but is still well below the 200-day line. Okta (OKTA), Palo Alto Networks (PANW) and fortinet (FTNT) is looking strong.

soundhound ai (SOUN) fell sharply on a smaller-than-expected Q4 loss and revenue growth that was underwhelming. AI Play gave in-line revenue guidance for 2023. SOUN’s stock rose 2.15% to 3.33 on Tuesday. SoundHound stock is trading at a 5.04 buy point from a consolidation that mostly formed above the 200-day line.

dow jones futures today

Dow Jones futures leaned higher versus fair value. S&P 500 futures and Nasdaq 100 futures closed with gains.

The 10-year Treasury yield rose 2 basis points to 3.99%.

Investors will find the ADP employment report at 8:15 a.m. ET, providing an estimate of private payrolls in February. But ADP reports have an uneven record of predicting the Labor Department’s jobs report. The February jobs report is due on Friday.

The JOLTS survey will reveal job openings as of 10 a.m. ET Jan.

Remember that overnight action 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 actionable stocks in Stock Market Rally on IBD Live

stock market rally

The stock market rally began Tuesday slightly higher, but fell sharply on Fed chief Powell’s flamboyant testimony at 10 a.m. ET.

The Dow Jones Industrial Average fell 1.7% in Tuesday’s stock market trading. The S&P 500 index lost 1.5 percent. The Nasdaq Composite gave up 1.25%. The small-cap Russell 2000 retreated 1.2%.

Apple stock fell 1.45%, essentially erasing Monday’s gains. Intraday Monday, AAPL stock rose to 156.30, almost clearing a handle buy point. Microsoft sank 1.1%, more than Monday’s 0.6% advance. Apple and Microsoft stocks are Dow Jones, S&P 500 and Nasdaq components.

S&P 500 and Nasdaq giant GOOGL stock slipped 1.4% back to its 50-day line.

The 10-year Treasury yield actually fell 1 basis point to 3.97%. But yields have risen for shorter-term Treasuries, which are more closely tied to Fed policy. The 2-year yield rose 12 basis points to 5.01%. The six-month T-bill yield rose 17 basis points to 5.29%.

Meanwhile, the US dollar rose on Powell’s flamboyant testimony and generally higher Treasury yields, hitting their highest level since late November.

US crude oil prices fell 3.6% to $77.58 per barrel. Crude oil was under pressure on Fed rate hike concerns, a stronger dollar and weaker imports from China. Copper prices declined by 2.8% due to similar reasons.


Among growth ETFs, the Innovator IBD 50 ETF (FFTY) was down 0.6%. The iShares Extended Tech-Software Sector ETF (IGV) gave up 1.%, with MSFT stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) retreated 1.2%.

Reflecting more-speculative story stocks, the ARK Innovations ETF (ARKK) shed 1.7% and the ARK Genomics ETF (ARKG) shed 1.1%. Tesla stock remains a major holding in Arc Invest’s ETF.

The SPDR S&P Metals & Mining ETF (XME) fell 2.85%. The US Global Jets ETF (JETS) climbed 0.65%, with DAL stock notable. The SPDR S&P Homebuilders ETF (XHB) went down 1%. The Energy Select SPDR ETF (XLE) fell 1.7% and the Financials Select SPDR ETF (XLF) fell 2.6%. The Health Care Select Sector SPDR Fund (XLV) fell 1.6%.

Five Best Chinese Stocks to Watch Now

Tesla stock

Tesla stock fell 3.15% to 187.71, below its 21-day moving average and its lowest in a month. The EV giant has an aggressive buy point of 217.75 but investors should probably wait for a decisive move above the 200-day line. The 200-day line is near 220 and is trending lower. An extended pause would bring the 200-day line down into recent consolidation and allow the 50-day line to hold.

On Tuesday, China EV registration data showed Tesla sales growth for the second straight week. But Tesla’s China deliveries are still on a declining pace in the first quarter versus Q4, despite the big price cut.

Market Rally Analysis

The stock market rally did not respond well to Fed chief Jerome Powell’s aggressive statements and the prospect of a faster rate hike and higher rates.

The S&P 500 fell below its 21-day moving average and declined below its 50-day line. The Nasdaq Composite fell through its 21-day line.

The Dow Jones, which hit resistance at the 50-day line on Monday, fell hard on Tuesday.

Tuesday’s loss followed a typically negative Monday session. Large-cap indexes erased gains on the day, but held up relatively well for Apple stock, Google and Microsoft. But losers outnumber winners almost 2-to-1.

The Russell 2000, which fell below its 21-day line on Monday, fell just above its 50-day line on Tuesday. The small-cap index posted its worst close since late January.

Most of the major stocks declined along with the overall market. There has been quite a comeback in stocks that looked promising on Monday morning.

Miners such as FCX stock faltered on Tuesday on concerns about a stronger dollar and China’s economy. But the major stocks in general haven’t suffered much yet.

Broadly speaking, DAL stock and other airline plays look healthy, along with many travel names. CSIQ stock is hovering at buy point and several solar names are trying to shine. NEWR stock is consolidating nicely. Tesla stock could use a longer pause, but is still doing relatively well.

With the 10-year Treasury yield nearing 4%, short-term rates above 5% and the dollar trending up, it’s understandable that the stock market rally is having some trouble.

Friday’s jobs report and next week’s CPI inflation report could put a lock on expectations of a half-point Fed rate hike this month. As Tuesday’s selloff showed, it’s the market reaction that matters, not the news.

The S&P 500 is barely holding the 50-day line and isn’t far from testing its 200-day once again. The Nasdaq and Russell 2000 can easily break below key levels as well. On the upside, a move above Monday’s intraday high would break short-term trendlines for the S&P 500, Nasdaq and Russell.

Tim the market with IBD’s ETF market strategy

What do we do now

Just when the stock market rally seems to be picking up pace again, negative news drags it back down. Is this a short term break within a trading range or the start of something more serious? It won’t take much to trigger severe weakness or renewed strength.

So investors have to be prepared and ready to act.

It is best to hold off on buying until there is more clarity. In any case, many stocks didn’t flash new buy signals on Tuesday. Instead, investors can consider exiting or trimming recent positions if they are not working out.

Keep working on your watch list. The rangebound market is difficult to play, but several new bases and bullish pullbacks are also taking shape.

Read The Big Picture every day to keep up with market direction and the leading stocks and sectors.

Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and much more.

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