Dow futures tilted higher overnight, along with S&P 500 futures and Nasdaq futures. The stock market correction had a mixed session on Tuesday, as Treasury yields continued to rise sharply. Investors are focused on the announcement of the Federal Reserve’s meeting on Wednesday, where policymakers are set to approve either a very large or a very large increase in the Fed rate.
Quanta Services (PWR), the health (HQY), Cheniere Energy (liquefied natural gas) , dollar tree (DLTR) and Lee Otto (LI) are the stocks to watch. They all show strong relative lines of strength, even if stock prices are struggling to hold up.
LNG Inventory is on IBD Leaderboard. PWR stock is on the leaderboard’s watch list and on the IBD Big Cap 20. The Li Auto stock is listed on IBD 50. HealthEquity was Tuesday’s stock IBD.
The video included in the article discusses market action and analyzes Cheniere Energy, Li Auto and DLTR stocks.
Meanwhile, Tesla (TSLA) reversed modestly higher after moving towards the May 24 low of 620.54. Tesla stock closed up 2.4% at 662.67, but is far from its November peak of 1,243.49. The National Highway Traffic Safety Administration is likely to release collision data that includes driver assistance systems within the next few days, noting the high number of autopilot accidents in Tesla.
The Fed’s two-day meeting ends on Wednesday with an announcement at 2 p.m. ET, followed by Fed Chairman Jerome Powell’s press conference. In the wake of Friday’s heated CPI report which showed inflation reached a 40-year high of 8.6%, speculation grew that Fed policymakers would raise interest rates by 75 basis points on Wednesday, not just 50 basis points.
The Fed doesn’t like to be surprised, and Powell said after the Fed’s May meeting that 75 basis points were off the table. The central bank could still raise rates by 50 basis points, with Powell then indicating that 75 basis points are on the table for July and September.
But after Fed officials apparently leaked to the Wall Street Journal on Monday that a rate hike is being considered, markets are seeing a 75 basis point move as highly likely.
Dow jones futures contracts today
Dow futures rose 0.2% against stocks. fair value. S&P 500 futures rose 0.15%. Nasdaq 100 futures rose 0.3%.
Bitcoin price is trading below $22,000, up slightly from Monday night’s 18-month low under $21,000.
Remember that overnight action in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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stock market tuesday
The stock market traded mixed in the Tuesday session, with light on volume ahead of the Fed’s meeting announcement on Wednesday.
The Dow Jones Industrial Average was down 0.5% in stock market trading on Tuesday. The S&P 500 fell 0.4%. The Nasdaq Composite Index rose 0.2%. Small Russell 2000 sank 0.4%.
The 10-year Treasury yield jumped 12 basis points to 3.48%, after massive moves in recent days. The two-year yield jumped 15 basis points to 3.43%, the 30-year Treasury yield rose 6 basis points to 3.43%, but is now lower than the 10-year yield and even with a two-year yield. If the two-year yield moves above the 10-year yield, the curve will be inverted from the two-year yield to the 30-year yield. A bullish and flat yield curve reflects the risks of stagflation, with the potential for a recession rising as inflation rises and Fed interest rates rise.
US crude oil prices fell to close down 1.7% to $118.93 a barrel.
Natural gas prices fell by 16%. The Freeport LNG terminal, which was shut down due to a fire on June 8, will not reopen for 90 days and not be fully operational until late in the year. This means fewer exports of natural gas.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) is up 0.8%, while the Innovator IBD Breakout Opportunities ETF (BOUT) is down 0.6%. The iShares Expanded Tech-Software ETF (IGV) Index jumped 0.6%. VanEck Vectors Semiconductor Index (SMH) advanced 0.7%.
The SPDR S&P Metals & Mining ETF (XME) was down 1.3% and the US Global X Infrastructure Development Index (PAVE) fell 0.7%. The US Global Jets ETF (JETS) has given up 1%. The SPDR S&P Home Builder Index (XHB) is down 0.8%. The Energy Select SPDR ETF (XLE) is up 0.2% and the Financial Select SPDR ETF (XLF) is down 0.9%. The SPDR Fund (XLV) has given up on the healthcare sector (XLV) by nearly 1%.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) rose 1.1% and the ARK Genomics ETF (ARKG) rose 1.3%. Tesla stock continues to lead across ETFs on Ark Invest.
Top 5 Chinese stocks to watch right now
stock to watch
Quanta Services stock fell 1.8% to 123.55 on Tuesday, just above the 50-day streak. The stock PWR is located in a cup base with a handle with 138.56 pts.
HealthEquity stock rose 5.9% to 68.42 on Tuesday, rebounding from the 50-day line, breaking some short-term levels and breaking the trend line. In a better market, Tuesday’s move could have provided an early entry. At this point, HQY stock is now extended from this entry. It is approaching 72.80 official buy points from the base of Fenjan. HealthEquity nearly doubled as of early December after a long slump, while earnings trended lower for several quarters.
LNG stocks rose 2.2% to 130.40, still below the 50-day moving average. Cheniere stock pared its consolidation lows on Monday, likely setting the stage for a double bottom base at 146.45 buying points. Cheniere Energy, with its LNG export terminal, should take advantage of the problems of the Freeport LNG terminal, which is lowering domestic gas prices and raising global LNG prices.
DLTR stock rose 0.65% to 156.02, hitting resistance at the 50-day line. The Dollar Tree stock has 166.45 cups with a buy point handle, according to MarketSmith analysis. Stocks fell and rebounded in the second half of May at first targeting (TGT) Earnings misses and warnings, Dollar Tree’s strong earnings and guidance follow.
Li Auto stock rose nearly 11% to 32.22, hitting its best level since Jan. 3. 3. Stocks jumped from 18.82 on May 9, rebounding above the 200-day line on June 6. LI stock is racing upwards on the right side of deep consolidation, with a potential of 37.55 buying points. But stocks can use a long handle or even a separate base within deep consolidation to allow the major averages to catch up, especially the 50 day line. Li Auto sees rise with shares of other electric car companies in China New (NIO), Exping (XPEV) and BYD (BYDDF), As the headwinds of the Covid virus wan, local governments expand subsidies for electric vehicles. All automakers have new models in the coming weeks, as Li Auto will unveil a new hybrid SUV later this month. More broadly, US-listed Chinese stocks, including Internet, have risen in recent weeks.
The Dow Jones, S&P 500 and Nasdaq Composite all jumped lower on Monday, but closed mixed. Russell 2000 cut its lowest in May, marking its worst level since November 2020. The small business index is below pre-Covid highs.
Given the massive Fed meeting on Wednesday afternoon, the low-volume market move on Tuesday is not meaningful.
Whether the Fed raises rates by 50 basis points or 75 basis points on Wednesday, the macroeconomic climate is not favorable for the market, and may not be favorable for some time to come. Recession risks are high, while inflation will remain high for the foreseeable future.
However, what really matters is the reaction to the news. The stock market may rebound after Wednesday’s rate hike and Powell’s comments, but that won’t signal a change of character per se. Investors need to see a follow-up day to confirm any bullish attempt. Even then, a confirmed uptrend could be another rally in a short-term bear market.
At the moment, the Nasdaq Composite and S&P 500 are in bearish markets, while the Dow is in a sharp correction.
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What are you doing now
The bear market is not a time for courage. Investors should be on the sidelines. The only exceptions may be long-term winners or some positions in the energy sector, but even here investors should consider taking at least partial profits.
For now, investors should work on their watch lists, reviewing past trades and historical bear markets.
Read the big picture every day to stay in sync with market trend, stocks and leading sectors.
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