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Dow Jones Futures: Hawkish Fed Chief Powell Wipes Out Market Rally; Tesla Leads Earnings Movers

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Dow Jones futures rose overnight, along with S&P 500 futures and Nasdaq futures, as Tesla (TSLA) headlined key earnings after the close. The stock market erased sharp intraday gains Wednesday while Treasury yields jumped after the Federal Reserve said it “expects” to raise interest rates soon with Fed chief Jerome Powell signaling that aggressive rate hikes and balance sheet cuts are coming.




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The major indexes closed off the very worst levels and didn’t undercut Monday’s lows, but it was another disappointing session for the unproven stock market rally attempt.

Microsoft (MSFT) had fueled market gains and optimism before the Fed decision. MSFT stock rebounded back above its 200-day moving average, even though it closed near session lows.

Tesla earnings comfortably beat views late Wednesday. Tesla stock was little changed in volatile overnight trade.

Meanwhile, Seagate Technology (STX), Lam Research (LRCX), Teradyne (TER), Intel (INTC), Silicon Motion Technology (SIMO), United Rentals (URI), Ameriprise Financial (AMP), Vertex Pharmaceuticals (VRTX), Edwards Lifesciences (EW) and ServiceNow (NOW) also reported earnings late Wednesday.

STX stock and ServiceNow were notable winners overnight, while Edwards, LRCX stock, Silicon Motion and especially Teradyne were losers.

Tesla stock and Microsoft are on IBD Leaderboard. Microsoft and NOW stock are on IBD Long-Term Leaders.

Fed Meeting

The Fed meeting ended Wednesday afternoon with policymakers signaling a March rate hike, saying “it will be soon be appropriate.” Asset purchases will wind down in early March, as planned, despite some speculation that bond buys could end in February.

Fed chief Jerome Powell followed up in his press conference, saying there’s “quite a bit of room” to raise rates without hurting the job market. He wouldn’t rule out raising rates at every meeting in 2022, starting in March.

Powell once again said the Fed could move soon and faster to cut its huge balance sheet than during the last cycle, saying the economy is stronger now. He stressed that the Fed has not made any decision about speed or timing of any balance sheet cuts, but said they will come after the first rate hike.

Powell didn’t say anything surprising, but he sounded like a Fed chief focused on fighting high inflation, not bending over backward to soothe jittery markets.

The 10-year Treasury yield rose 7 basis points to 1.85, mostly as Powell spoke. That’s slightly below the two-year high of 1.87% set on Jan. 19. The 2-year Treasury yield jumped 13 basis points to 1.15%, as the yield spread continues to narrow.

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Dow Jones Futures Today

Dow Jones futures climbed 0.2% vs. fair value. S&P 500 futures advanced 0.3%. Nasdaq 100 futures rose 0.6%.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

That’s especially true during market corrections and new rally attempts. Dow Jones futures have been more volatile, with regular-session action showing wild intraday swings.

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Stock Market Rally

The stock market rally rose solidly for much of the session, as Microsoft led the way. The major indexes hit session highs shortly after the Fed meeting announcement at 2 p.m. ET, but then soon pulled back, erasing gains and turning negative on Fed chief Powell’s hawkish comments.

The Dow Jones Industrial Average fell 0.5% in Wednesday’s stock market trading. The S&P 500 index retreated 0.15%. The Nasdaq composite closed just above break-even. The small-cap Russell 2000 tumbled 1.5%.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) also edged down 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) fell just over 1%, even with Microsoft stock a major component. NOW stock also is a key holding. The VanEck Vectors Semiconductor ETF (SMH) rose 1.4%. Intel and LRCX stock are notable SMH components.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) retreated 2.5% and ARK Genomics ETF (ARKG) 2.25%. Tesla stock remains the No. 1 holding across ARK Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) slumped 2.6% and Global X U.S. Infrastructure Development ETF (PAVE) fell 0.9%. U.S. Global Jets ETF (JETS) descended 0.7%. SPDR S&P Homebuilders ETF (XHB) gave up 2.4%. The Energy Select SPDR ETF (XLE) dipped 0.2% and the Financial Select SPDR ETF (XLF) edged up 0.3%. The Health Care Select Sector SPDR Fund (XLV) declined 0.5%.

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Tesla Earnings

Tesla earnings and revenue comfortably beat Wall Street views. CEO Elon Musk said supply chain issues were the “main limiting factor” for growth in 2021. Tesla navigated supply chain woes in 2021 better than most automakers, many of which saw noticeable production declines due to chip shortages and more.

Tesla continues to expect 50% deliveries growth annually over the next several years, easily beating that mark in 2021 with an 87% jump.

Musk on the earnings call the Austin and Berlin plants are nearly ready to begin customer deliveries. He said Tesla will pick locations for additional production facilities by year-end.

He also expects Tesla to achieve full self-driving robotaxis this year, a claim he’s made for several years.

Musk said there will be no Cybertruck or any other new models in 2022, confirming widespread reports. He said the Cybertruck “hopefully” will be out in 2023. That means it’ll be roughly three years between new Tesla vehicles, following the Model Y in early 2020.

Musk also said Tesla is not currently working on a $25,000 fully autonomous vehicle.

Musk said Tesla will deliver some vehicles, presumably Model Y crossovers, with 4680 battery packs. But it’s unclear if that means Tesla has solved technical hurdles with mass producing 4680 battery cells, or if it’s just installing a couple of 4680 packs as a quasi-demonstration.

Tesla stock was essentially flat overnight, but after falling and rising solidly at various points. Shares rose 2.1% to 937.41 on Wednesday, after hitting 987.69 intraday. TSLA stock is in a consolidation with a 1,243.49 buy point, but it could offer various earlier entries.

Other Earnings

Lam Research earnings narrowly beat, but the chip-gear giant missed on sales and gave weak guidance. LRCX stock fell solidly.

Teradyne earnings beat views, but the chip-equipment maker guided well below consensus for Q1, citing a “slower technology transition in one of our major end markets.” TER stock crashed.

Intel earnings topped views, but INTC stock fell modestly overnight on weak profit guidance.

Seagate earnings slightly topped views, with the memory play raising 2022 sales guidance. STX stock jumped in extended trade.

ServiceNow earnings exceeded forecasts. NOW stock leapt in late action.

Edwards Lifesciences earnings and revenue missed views, while guidance also was light. EW stock sank.

Ameriprise earnings topped views and the financial firm announced a $3 billion stock buyback. AMP stock was not active.

Vertex earnings easily beat with the biotech guiding higher. VRTX stock climbed slightly overnight.

United Rentals earnings topped consensus. URI stock rose modestly in extended action.

Silicon Motion earnings exceeded estimates, but SIMO stock fell solidly overnight.

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Market Rally Analysis

The stock market fell into a correction in 2022 in no small part due to Fed tightening fears. So it’s not a shock to see the nascent rally attempt erase hefty gains following hawkish Fed comments, but it is disappointing.

The Nasdaq, up more than 3% intraday to just above the 14,000 level, retreated but did eke out a gain thanks to Microsoft and Tesla. The S&P 500 index hit resistance around the 200-day line, moving from a 2.2% intraday gain to a slim loss.

Even at session highs, none of the major indexes has even approached the 10-day moving average.

Investors can still look for a follow-through day to confirm the new stock market rally attempt. A follow-through day, which involves strong price gains on one or more of the major indexes in higher volume than in the prior session, signals big institutions are willing to support the new uptrend.

But while off their Monday lows, the major indexes are all down for the week, hardly the sign of a powerful new rally.

The 200-Day Average: The Last Line Of Support?

What To Do Now

The whipsaw action of the past few days has offered powerful bounces in short periods, but also big sell-offs. Without a crystal ball, it’s hard to pick safe entries for stocks or ETFs.

Microsoft stock arguably offered an entry as a Long-Term Leader from the 200-day line, though the close wasn’t inspiring. Most tech stocks look heavily damaged after near-vertical dives. Highly valued growth stocks are especially weak, though Tesla stock has avoided breaking down.

Energy stocks are clear leaders, despite pullbacks Wednesday. Many are already extended with crude oil prices surging to multiyear highs.

Among shipping stocks, Matson (MATX) broke out of a base while Zim Integrated Shipping (ZIM) reclaimed a prior buy point after triggering the 7%-8% sell rule on Monday. More broadly, a number of shipping stocks on land also look interesting.

Financials have struggled in recent weeks, but haven’t broken down. Still, a flattening yield curve isn’t good for banks’ lending margins.

Definitely work on your watchlists, trying to find stocks that are setting up potential entries. Keep in mind that earnings season remains in full force, with a little fruit peddler by the name of Apple reporting Thursday night.

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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Asia shares brace for hawkish Fed, Ukraine tensions

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TV camera men wait for the opening of market in front of a large screen showing stock prices at the Tokyo Stock Exchange in Tokyo, Japan October 2, 2020. REUTERS/Kim Kyung-Hoon

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  • Asian stock markets :
  • Nikkei off 0.6%, Wall St futures try to bounce
  • Fed expected to sound hawkish on March rate hike
  • Markets wary of possible Russian attack on Ukraine
  • Dollar generally firm, oil moving higher again

SYDNEY, Jan 24 (Reuters) – Asian share markets slipped on Monday as investors braced for a Federal Reserve meeting at which it is expected to confirm it will soon start draining the massive lake of liquidity that has supercharged growth stocks in recent years.

Adding to the caution were concerns about a possible Russian attack on Ukraine with the U.S. State Department pulling out family members of its embassy staff in Kyiv.

The New York Times reported President Joe Biden was considering sending thousands of U.S. troops to NATO allies in Europe along with warships and aircraft. read more

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That might be one reason EUROSTOXX 50 futures slipped 0.5%, while FTSE futures fell 0.4%.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) eased 0.8% and Japan’s Nikkei (.N225) 0.6%. Chinese blue chips (.CSI300) fell 0.4%, getting little traction from a recent easing in policy by Beijing.

However , Wall Street futures bounced after last week’s drubbing, with the S&P 500 futures up 0.7% and Nasdaq futures 0.8%.

Edgy markets are now even pricing in a small chance the Fed hikes rates this week, though the overwhelming expectation is for a first move to 0.25% in March and three more to 1.0% by year end.

“With inflation eye-wateringly high, the Fed is on course to steadily remove the ultra-accommodative monetary policy that has been a key prop to stock prices for over a decade now,” said Oliver Allen, a market economist at Capital Economics.

The prospect of higher borrowing costs and more attractive bond yields took a toll on tech stocks with their lofty valuations, leaving the Nasdaq down 12% so far this year and the S&P 500 nearly 8%.

The rout was exacerbated by a slide in Netflix , which tumbled almost 22%, shedding $44 billion in market value.

Such was the scale of the losses that Treasuries actually rallied late last week on speculation the bonfire of market wealth might scare the Fed into being less hawkish, a variation of the old Greenspan put.

However, Allen noted that even with the recent drop the S&P 500 was still 40% above where it ended 2019, and the Nasdaq 60%.

“Investors may not be able to rely on a so-called ‘Fed put’ this time around, given that the central bank’s tightening cycle has not even begun, and that the strength of the U.S. economy suggests that much tighter policy is warranted.”

Indeed, the first reading of U.S. gross domestic product for the December quarter is due this week and forecast to show growth running at an annualised 5.4% before Omicron put its foot on the brakes.

Earnings season is also well under way and companies reporting this week include IBM , Microsoft (MSFT.O), Johnson & Johnson , Intel , Tesla (TSLA.O), Apple (AAPL.O) and Caterpillar .

Around a fifth of the S&P 500 are expected to provide quarterly updates this week.

While Treasuries did bounce late last week, 10-year yields are still up 22 basis points on the month so far at 1.77% and not far from levels last seen in early 2020.

That rise has generally supported the U.S. dollar, which added 0.5% on a basket of currencies last week and last stood at 85.647 . The euro was stuck at $1.1324 , having failed to sustain a recent rally to near $1.1500.

“The risk is the Fed’s statement portrays an urgency to act soon, likely in March, in the face of very high inflation,” said Joseph Capurso, CBA’s head of international economics.

“That could even encourage markets to price a risk of a 50 basis point rate hike in March and, under that scenario, we expect a knee-jerk reaction above its 4 January high of 96.46.”

The Japanese yen tends to benefit from safe haven flows as stocks crumble, keeping the dollar at 113.84 and uncomfortably close to last week’s low of 113.47.

Gold held up at $1,835 an ounce , having hit a six-week peak of $1,842 last week.

Oil prices were rising again having climbed for five weeks in a row to a seven-year peak on expectations demand will stay strong and supplies limited.

Brent added 83 cents to $88.72 a barrel, while U.S. crude rose 77 cents to $85.91.

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Reporting by Wayne Cole; Editing by Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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Asian shares slip on Fed officials’ hawkish policy stance

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An electronic stock quotation board is displayed inside a conference hall in Tokyo, Japan November 1, 2021. REUTERS/Issei Kato

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  • MSCI Asia ex-Japan falls after Fed officials strike hawkish tones
  • Bank of Korea hikes benchmark rate 25bps to 1.25%
  • Yen catch bid amid risk-off mood, gold firms

TOKYO, Jan 14 (Reuters) – Asian shares took a beating on Friday after a fresh salvo of hawkish remarks from Federal Reserve officials solidified expectations that U.S. interest rates could rise as soon as March, leaving markets braced for tighter monetary conditions.

Fed Governor Lael Brainard became the latest and most senior U.S. central banker on Thursday to signal that rates will rise in March to combat inflation. read more

Equity markets turned deeply red, with MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) shedding 0.9% in mid-afternoon trade, while Australia (.AXJO) lost 1.1% and Japan’s Nikkei (.N225) gave up 1.3%.

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South Korean shares (.KS11) dropped 1.4% after the country’s central bank raised its benchmark rate 25 basis points to 1.25% on Friday, as expected, taking it back to where it was before the pandemic as it seeks to restrain consumer price rises. read more

China’s blue-chip index (.CSI300) declined 0.5% and Hong Kong’s Hang Seng index (.HIS) was off 0.9%.

“Everyone is really nervous right now. It’s because everything is potentially going to come under pressure from aggressive Fed policy,” said Kyle Rodda, a market analyst at IG in Melbourne.

“There’s the hope that it’ll be a slow and painless handoff to normal policy,” he added. “But that’s not necessarily assured with the Fed taking inflation so seriously.”

Fed Governor Christopher Waller, who has repeatedly called for a more aggressive response to high inflation, later on Thursday said a rapid-fire series of four or five U.S. rate hikes could be warranted if inflation doesn’t recede.

U.S. inflation as measured by the consumer price index surged 7.0% in December, posting its biggest year-on-year increase in nearly four decades, data on Wednesday showed. read more

INFLATED ASSETS

In the bond market, yields on 10-year U.S. Treasury notes were at 1.720%, settling well off Monday’s two-year highs, signalling investors’ preference for the safety of government debt over volatile technology and growth stocks.

A Reuters report that Bank of Japan policymakers are debating how soon they can start an eventual interest rate hike helped drive up the yen and Japanese government bond (JGB) yields. read more

The five-year JGB yield hit -0.015%, its highest since January 2016, when the BOJ adopted negative rates.

The yen, which traditionally has drawn demand from flights to safety, last traded at 113.70 after hitting its strongest against the greenback in 3-1/2 weeks.

Separate data showed Japan’s wholesale inflation rose 8.5% year-on-year in December, accelerating at the second fastest pace on record, a sign higher raw material and fuel costs are squeezing corporate margins. read more

IG’s Rodda said markets were facing a more persistent risk of growing demand for safe-havens, especially around key events involving U.S. central bank policy and U.S. data.

“This is a problem because every asset has arguably been inflated by loose monetary policy,” he added.

“Every asset will have to correct to reflect higher or tighter monetary policy.”

The dollar index was down 0.1% at 94.638 after hitting a two-month low, pushed down by strength in the euro, which made a new two-month high at $1.1482 .

In commodity markets, gold was 0.3% firmer at $1,827 an ounce but still below its January peak at $1,831.

Oil futures remained soft on expectations that Washington may soon act to cool prices that remain above $80 per barrel, while movement curbs in China to rein in COVID-19 outbreaks weighed on fuel demand.

Brent was nearly flat at $84.49 a barrel, while U.S. crude lost 18 cents to $81.95.

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Editing by Shri Navaratnam and Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.

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Shares, bonds brace for high U.S. inflation, hawkish Fed

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Monitors displaying the stock index prices and Japanese yen exchange rate against the U.S. dollar are seen after the New Year ceremony marking the opening of trading in 2022 at the Tokyo Stock Exchange (TSE), amid the coronavirus disease (COVID-19) pandemic, in Tokyo, Japan January 4, 2022. REUTERS/Issei Kato

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  • Asian stock markets :
  • China shares flat, S&P futures steady
  • Bond yields stay high ahead of U.S. CPI report
  • Core inflation seen rising again, cementing Fed hike

SYDNEY, Jan 10 (Reuters) – Major share markets were muted on Monday as investors count down to another U.S. inflation reading that could well set the seal on an early rate hike from the Federal Reserve, lifting bond yields and punishing tech stocks.

The explosion in coronavirus cases globally also threatens to crimp consumer spending and growth just as the Fed is considering turning off the liquidity spigots, tough timing for markets addicted to endless cheap money.

That made for cautious trading with S&P 500 futures off 0.1% and Nasdaq futures up 0.1%. EUROSTOXX 50 futures and FTSE futures both edged up 0.2%.

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MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 0.2%, while South Korea (.KS11) lost 1.0%.

Chinese blue chips (.CSI300) were little changed as recent policy easing was balanced by lingering concerns over the property sector. read more

Analysts fear the U.S. consumer price report on Wednesday will show core inflation climbing to its highest in decades at 5.4% and usher in a rate rise as soon as March.

While the December payrolls number did miss forecasts, the drop in the jobless rate to just 3.9% and strength in wages suggested the economy was running short of workers.

“It was consistent with the Fed’s evolving view that the labour market is getting close to or is already at maximum employment with wage pressures building,” said analysts at NatWest Markets.

“This should add to speculation about a March hike, and we have pulled our expectation for the Fed’s lift-off to occur in March instead of June.”

A raft of Fed officials will be out to offer their latest thinking this week, including Chair Jerome Powell and Governor Lael Brainard who face confirmation hearings.

Markets quickly shifted to reflect the risks with futures implying a greater than 70% chance of a rise to 0.25% in March and at least two more hikes by year end.

Technology and growth stocks tumbled as investors switched to banks and energy firms, while bonds took a beating.

Yields on 10-year U.S. Treasury notes were near highs last seen in early 2020 at 1.765%, having shot up 25 basis points last week in their biggest move since late 2019. The next chart target is the 1.95/1.97% area. U/S

“We think that the increase in long-dated Treasury yields has further to run,” said Nicholas Farr, an economist at Capital Economics.

“Markets may still be underestimating how far the federal funds rate will rise in the next few years, so our forecast is for the 10-year yield to rise by around another 50bp, to 2.25%, by the end of 2023.”

The Fed’s hawkish shift has tended to benefit the U.S. dollar, though it ran into profit taking on Friday after the payrolls report failed to meet the market’s lofty expectations.

The dollar index was flat at 95.764 , after falling 0.5% on Friday, but has support at 95.568.

The euro bounced to $1.1354 , leaving it near the top of the recent $1.1184/1.1382 trading range. The Japanese yen got a break from its recent bear run to stand at 115.64 , as the dollar faded from last week’s 116.34 peak.

In commodity markets, gold was a shade firmer at $1,795 an ounce but short of its January top at $1,831.

Oil prices held steady, having climbed 5% last week helped in part by supply disruptions from the unrest in Kazakhstan and outages in Libya.

Brent added 7 cents to $81.82 a barrel, while U.S. crude stood unchanged at $78.90.

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Editing by Shri Navaratnam

Our Standards: The Thomson Reuters Trust Principles.

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Bitcoin tumbles nearly 9% and other cryptos plunge as hawkish Fed minutes whack risky assets | Currency News | Financial and Business News

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Bitcoin slumped Wednesday and into Thursday.

Jirapong Manustrong/Getty Images

  • Bitcoin fell as much as 9% Thursday after the Federal Reserve released “hawkish” minutes Wednesday.
  • Ethereum, cardano, binance coin, solana and other cryptocurrencies were also deeply in the red.
  • The Fed is planning to cut back its support for the economy, spelling trouble for risky assets.

Bitcoin fell as much as 9% Thursday and the broader cryptocurrency market was a sea of red, after minutes revealed the Federal Reserve could soon start rapidly cutting back its support for the economy.

The world’s biggest cryptocurrency by market value was down 7.3% over the 24 hours to 11.10 a.m. ET on the Coinbase exchange, trading at $42,928. Earlier Thursday, it was as low as $42,433. The sharp drop put bitcoin more than 35% below a record high of close to $69,000 touched in November.

Ethereum, the second-biggest token, had plunged more than 10% to $3,395. Solana had tumbled roughly 11%, and binance coin and XRP were both about 4% lower.

The crypto sell-off began Wednesday after the Fed released “hawkish” minutes from its December meeting, which showed the US central bank could tighten monetary policy faster than previously expected.

In December, the US central bank said it would speed up reductions in its bond purchases and signaled that interest rates would rise in 2022 as it grapples with the strongest inflation in 39 years.

Yet the minutes released Wednesday show policymakers could well go even further and faster than that, and the central bank could even start selling the bonds it bought during the coronavirus crisis.

“It may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated,” they said.

Read more: 9 crypto experts told us their investing outlooks for 2022, from bitcoin price predictions to high-conviction altcoin picks and what’s next for regulation

The reaction in the markets was swift. Bond yields shot up and cryptocurrencies and technology stocks — two asset classes that have benefited the most from the Fed’s ultra-loose monetary policy — got trashed. The tech-heavy Nasdaq 100 index was up 0.66% Thursday as it recovered some ground.

Analysts said higher bond yields make cryptocurrencies and unprofitable tech companies look less attractive. Instead, investors are pivoting towards companies that can benefit from economic growth and deliver good returns as inflation stays hot.

“We see bitcoin behave closer to a small-cap tech stock,” said Sean Farrell, head of digital asset strategy at Fundstrat.

Jeffrey Halley, senior market analyst at Oanda, said the “buy everything trade” is on its last legs. “Young pups … nurtured at the central bank pool of eternal [quantitative easing], will have to learn the meaning of the term ‘two-way price volatility,'” he said.

Marcus Sotiriou, analyst at digital asset broker GlobalBlock, said high levels of borrowing in crypto markets had worsened the sell-off. He said there was a “significant amount of leverage being wiped out of the market.”

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Bitcoin (BTC) slides 7%, cryptocurrencies drop on hawkish Fed minutes

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A representations of virtual currency Bitcoin is seen in front of a stock graph in this illustration taken May 19, 2021.

Dado Ruvic | Reuters

Bitcoin and other cryptocurrencies fell sharply on Thursday as hawkish minutes from the Federal Reserve’s December meeting hit global risk assets.

Bitcoin was trading at just below $43,200 at 2:59 a.m. ET on Thursday, down nearly 7% from the 24 hours previous, according to CoinDesk data. It fell as low as $42,503.88 in the last 24 hours, the lowest level in more than a month.

Other cryptocurrencies fell too. Ether dropped nearly 10% to $3,452.58

The crypto sell-off comes after stocks fell on Wednesday following the release of minutes from the Fed’s December meeting in which the central bank indicated it would dial back its supportive monetary policy, including reducing the amount of bonds it holds.

The Fed also indicated that it may have to raise interest rates sooner than expected.

Meanwhile, the benchmark 10-year Treasury yield ticked above 1.7% on Wednesday.

Growth assets such as technology stocks tend to be hit when rates rise, as future earnings becomes less attractive to investors when yields are higher. That sentiment has filtered through to cryptocurrencies, which are seen as risker assets.

“Overall, I think the global markets have shown weakness in light of the recent Fed moves to raise interest rates. Hence, I do think the drop yesterday is quite correlated. We’ve seen U.S. markets fall yesterday and as a result, all other risk asset classes fared equally poorly including crypto,” said Vijay Ayyar, vice president of corporate development and international at cryptocurrency exchange Luno.

“Specifically with regard to Bitcoin and crypto, the last 4 weeks have seen some weak price action owing to a lack of interest/demand, holiday season and potentially similar factors.”

Shares in Asia-Pacific market also dropped on Thursday.

— CNBC’s Eustance Huang contributed to this report.

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Hawkish Fed minutes weigh on riskier assets

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A trader works on the floor of the New York Stock Exchange (NYSE) at the start of trading on Monday following Friday’s steep decline in global stocks over fears of the new omicron Covid variant on December 20, 2021 in New York City.

Spencer Platt | Getty Images

LONDON — Global markets turned lower on Thursday as persistent inflationary pressure and fears of a faster-than-expected rise in U.S. interest rates weighed on riskier assets.

Shares in Asia-Pacific fell sharply on Thursday, following in the footsteps of the U.S. overnight. The tech-heavy Nasdaq dropped more than 3% to notch its biggest one-day loss since February, while the Dow Jones Industrial Average registered its first decline of 2022.

European stocks, meanwhile, opened lower on Thursday, extending the global slump. The pan-European Stoxx 600 dropped around 1.4% during early morning deals, with major bourses and all sectors in negative territory.

Tech stocks led the losses, down around 3%, with German software company Nemetschek falling over 6%.

It comes at a time when market participants are already deeply concerned about the rapid global spread of the highly infectious omicron Covid variant, with several countries reporting record daily infections in the last 24 hours.

In Japan, the Nikkei 225 dipped roughly 2.9% as the dash to get out of tech stocks continued to hit high-profile companies. Japan’s Sony Group was last seen trading down 6.8%.

Australian stocks also saw heavy losses as the S&P/ASX 200 fell 2.7%. In mainland China, the Shanghai composite declined 0.25% while the Shenzhen component slipped 0.1%.

MSCI’s broadest index of Asia-Pacific shares outside Japan traded 1.3% lower.

‘Lingering concerns’ about the Fed

The losses come after minutes from the Federal Reserve’s key December meeting were released on Wednesday. The summary showed the central bank discussed reducing its balance sheet in another move to aggressively dial back its pandemic-era easy monetary policy.

The Fed’s plan to reduce the number of Treasurys and mortgage-backed securities it holds comes as it is already tapering its bond purchases and is set to hike interest rates after the taper concludes.

“We don’t have any more information about what the Fed is thinking than we did several weeks ago,” Brian Nick, chief investment strategist at Nuveen, told CNBC’s “Squawk Box Europe” on Thursday.

“I think at that time what we understood was the Fed on average expected to raise rates three times in 2022, I don’t think anything about that outlook has changed or they have gotten incrementally more hawkish since then. But I do think that maybe investors are, now that we are in the new year, focusing more on that,” Nick said.

“We didn’t see that much of a reaction after the meeting itself, we are seeing one now in terms of the steeper yield curve, a little bit of a stronger dollar but I think just lingering concerns about the Fed may be starting to move a little bit too quickly in shrinking its balance sheet and overtightening this year,” he added.

“If those concerns creep in, and right now I think they are concerns, not alarm, you could see valuations pressured across the board in the equity market which would tend to favor lower valued, more cheaply valued companies.”

The 10-year U.S. Treasury yield topped 1.7% following the release of the minutes. On Thursday, it was trading at 1.7317% around 3:35 a.m. ET. Yields move inversely to prices.

Elsewhere, oil prices lost ground on Thursday morning. International benchmark Brent crude futures traded at $80.32 a barrel, around 0.6% lower, while U.S. West Texas Intermediate futures stood at $77.38, down almost 0.65%.

Bitcoin and other cryptocurrencies also dropped on Thursday. Bitcoin was trading at just below $43,200 at 2:59 a.m. ET, down nearly 7% from the 24 hours previous, according to CoinDesk data. It fell as low as $42,503.88 in the last 24 hours, the lowest level in more than a month.

Other cryptocurrencies fell too. Ether dropped nearly 10% to $3,452.58

— CNBC’s Eustance Huang, Jeff Cox & Arjun Kharpal contributed to this report.

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Dow Jones Futures: Hawkish Fed Stuns Wall Street; Tesla, Microsoft, Google Break Key Levels

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Dow Jones futures tilted lower overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally turned sharply negative Wednesday on hawkish Federal Reserve comments, closing at session lows. Microsoft (MSFT), Google stock, AMD and Nvidia are coming under increasing pressure, while even Apple and Tesla stock are starting to show strain. Commodity, cyclical and financial stocks are still faring well, but the weight is to the downside.




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Once again, Treasury yields drove the market action. The 10-year Treasury topped 1.7% for the first time in nine months following the release of the December Fed meeting minutes.

Fed Minutes Hawkish

Policymakers signaled that Fed rate hikes could come sooner than expected, as the central bank showed real concern about inflation at the December meeting.

At the December meeting, policymakers agreed speed up the bond taper, reducing monthly asset purchases by $30 billion a month. That means new bond buys will end by mid-March, setting the stage for actual Fed tightening. Notably, 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 sheet runoff would likely be faster than it was during the previous normalization episode.”

That’s a big shift in tone from Fed chief Jerome Powell right after the December policy meeting. While he said policymakers were starting to talk about cutting the balance sheet, he also assured Wall Street that he would take a “careful, methodical approach.”

The next Fed meeting is on Jan. 25-26.

The 10-year Treasury yield rose 4 basis points to 1.705%, hitting 1.71% intraday. That cleared the October and November peaks to hit its highest level since early April. The benchmark Treasury yield is up 19 basis points for the week.

Meanwhile, the two-year Treasury yield, more closely tied to Fed action, rose 7 basis points on Wednesday to 0.83%, the highest since March 2020. That means the Treasury yield spread actually narrowed slightly on Wednesday. That’s not good news for banks’ traditional borrow short, lend long model.

Apple, Tesla Pulling Back

Among megacaps, Apple (AAPL) and Tesla (TSLA) are no longer shrugging off the growth sell-off. AAPL stock sank 2.66% on Wednesday but could still form a three-weeks-tight pattern after this week. Tesla stock is still up modestly for the week after spiking higher Monday on blowout deliveries, but has dropped below a buy point.

Microsoft stock, Google parent Alphabet (GOOGL), Advanced Micro Devices (AMD), Nvidia (NVDA) and Facebook parent Meta Platforms (FB) all are looking damaged. Microsoft stock and Google lost further ground from their 50-day lines, along with Nvidia. AMD stock dropped below that key level. FB stock fell below its 50-day and 200-day lines on Wednesday, while also undercutting an aggressive trendline entry.

Software and other highly valued stocks, already battered in recent days and weeks, continued to struggle. Computer-vision-chip maker Ambarella (AMBA) crashed 19% on Wednesday after sinking 5.1% on Tuesday.

Datadog (DDOG) rose in overnight trade on a deal with Amazon‘s (AMZN) Amazon Web Services. But DDOG has plunged 18% so far this week.

Nucor (NUE) and Signature Bank (SBNY) broke out, while Cheniere Energy (LNG) cleared a trendline entry. All are in leading groups and sectors right now. But even these stocks came off highs as the broader market came under pressure. SBNY stock closed below its buy point while LNG stock barely closed positive.

Nucor and LNG stock joined 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 stock are IBD Long-Term Leaders. Tesla stock and AMD are on the IBD 50.

The video embedded in this article discusses an important market day and analyzes SBNY stock, Nucor and Reliance Steel (RS).

Dow Jones Futures Today

Dow Jones futures fell a fraction vs. fair value. S&P 500 futures and Nasdaq 100 futures lost 0.1%.

The 10-year Treasury yield was at 1.71%. Crude oil futures sank 1%.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Stock Market Rally

The stock market rally started with the major indexes diverging again, but they all went south after the 2 p.m. ET Fed minutes release and closed at their worst levels of the day.

The Dow Jones Industrial Average fell 1.1% in Wednesday’s stock market trading, after trading higher for much of the session. The S&P 500 index slumped 1.9%. The Nasdaq composite tumbled 3.3%. The small-cap Russell 2000 plunged 3.4%.

U.S. crude oil prices climbed 1.1% to $77.85 a barrel, paring gains from above $78. Natural gas prices also rose.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) tumbled 4.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 2.3%. The iShares Expanded Tech-Software Sector ETF (IGV) plunged 4.9%. MSFT stock is a major IGV holding. The VanEck Vectors Semiconductor ETF (SMH) fell 3.4%, with AMD and Nvidia stock major components.

SPDR S&P Metals & Mining ETF (XME) edged up 0.1%, with Nucor stock a component. Global X U.S. Infrastructure Development ETF (PAVE) reversed lower to close down 1.2%. U.S. Global Jets ETF (JETS) descended 1.7%. SPDR S&P Homebuilders ETF (XHB) skidded 2.7%. The Energy Select SPDR ETF (XLE) closed just below breakeven and the Financial Select SPDR ETF (XLF) dipped 1.2%. The Health Care Select Sector SPDR Fund (XLV) sank 0.7%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both plunged 7.1% to 52-week lows. Tesla stock remains the No. 1 holding across ARK Invest’s ETFs.

Five Best Chinese Stocks To Watch Now

Market Rally Analysis

So much for the divergent market rally. The Dow Jones and S&P 500 fell solidly on Wednesday. The Nasdaq, after paring losses to just hold its 50-day line on Tuesday, tumbled below that key level on Wednesday.

Microsoft and Google stock undercut their December lows, as the damage in growth is no longer limited to those with eye-watering valuations. AMD stock and Nvidia have both seen yet another 50-day/10-week line rebound fizzle, and are closing in on their December lows as well. Meanwhile, the carnage continues in software stocks and just about every highly valued growth name.

Tesla stock fell 5.35% to 1,088.12. It’s still up 3% for the week. But after touching 1,208 Tuesday morning, it’s back below a 1,119.10 buy point. Apple stock sank 2.7% on Wednesday, but is still above its 21-day line.

While Tesla and Apple stock still look relatively solid, so did Microsoft, Google, AMD and Nvidia at the end of last year.

The Russell 2000 tumbled back below its 200-day line.

The S&P 500 and Dow Jones are still just below highs. Real economy names are doing relatively well. That includes steelmakers like Nucor stock and energy stocks such as LNG. Financials such as Signature Bank are holding onto recent gains or moving higher.

Treasury yields will remain front-and-center for the stock market rally for at least the next few days.

Time The Market With IBD’s ETF Market Strategy

What To Do Now

There are stocks and sectors that are working right now. Investors who got on board this week have generally seen gains. But Tuesday’s divergent market turned into broader, sharper selling on Wednesday. More of the same would likely sink resilient sectors. Alternatively,  rotation back into growth wouldn’t be a surprise, and could be bad news for financials or cyclicals.

On the flip side, be wary of any one-day spikes 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 downtrend would not be surprising. Investors stuck with sharp losses in tech stocks may want to use any rebounds as a chance to get out rather than any opportunity to load up.

Overall, investors should be taking a more defensive approach in the short run. Don’t let winners turn into losers, or losers turn into 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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Wall St Week Ahead Hawkish Fed boosts value stocks’ appeal for some investors

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“Stock Exchange” is seen over an entrance to the New York Stock Exchange (NYSE) on Wall St. in New York City, U.S., March 29, 2021. REUTERS/Brendan McDermid/File Photo

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NEW YORK, Dec 3 (Reuters) – Some investors are preparing for a hawkish turn from the Federal Reserve by buying the cyclical, economically-sensitive names they gravitated to earlier this year, as expectations grow that the central bank is zeroing in on fighting inflation.

The gap between growth stocks and their value-focused counterparts, which include companies like banks, financials and energy firms, has fluctuated throughout the year, driven in part by bets on how quickly the Fed will normalize monetary policy.

In recent days, signs that the central bank will move faster than expected in the face of surging consumer prices have slammed the shares of growth and technology companies, which have also been roiled by broader market volatility stemming from concerns over the spreading Omicron variant of the coronavirus. read more

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At the same time, some investors have been ramping up bets on so-called value stocks, expecting them to perform better in an environment of tightening monetary policy. Such stocks surged earlier in 2021 as the U.S. economy reopened but faltered later as investors gravitated toward tech shares. read more

“The Fed brings the punch bowl and they are the ones that remove the punch bowl,” said Michael Antonelli, strategist at Baird. “Markets are quickly repricing their view of the future.”

Futures on the federal funds rate, which track short-term interest rate expectations, late Friday reflected a roughly 50% chance that the Fed will raise rates from its current near-zero level by May, CME’s Fed Watch tool showed. That compared with around 31% in early November.

Driving those bets are comments from Fed Chairman Jerome Powell, who earlier this week said the central bank will likely in its next meeting discuss speeding the unwind of its $120 billion-per-month government bond-buying program. read more

Powell also said the word “transitory” was no longer appropriate to describe the current high inflation rate.

Stronger-than-expected elements in Friday’s U.S. employment report reinforced the view of a more hawkish Fed and weighed on growth stocks. read more

Among the casualties was the Ark Innovation ETF (ARKK.P), which outperformed all other U.S. equity funds last year due to its outsized bets on so-called stay-at-home stocks. Shares of the fund tumbled 5.5% on Friday to a 13-month low amid steep declines in many of the stocks it holds. read more

The Russell 1000 Growth index is down 2.4% in the first three days of December, while its value-focused counterpart has risen by nearly 0.9%. The indexes are up 21.1% and 16.6%, year-to-date, respectively.

“The internals of the market are starting to reflect a faster rate hiking cycle and it’s the longer-duration growth stocks that are really selling off,” said Spenser Lerner, head of Multi Asset Solutions at Harbor Capital Advisors.

Higher yields – which can result from expectations of more aggressive Fed policy – can weigh even more on tech and growth stocks with lofty valuations, as they threaten to erode the value of their longer-term cash flows.

At the same time, value and cyclical shares tend to benefit from a stronger economy – often a prerequisite for the Fed to tighten monetary policy.

Lerner is focusing on high-quality, cyclical U.S. large-cap companies that do not trade at high valuations and will benefit from what he expects will be a continuing strengthening of the dollar as the Fed gets closer to raising rates.

Among the data points the Fed will be watching in the week ahead will be the release of consumer price index and core inflation readings next Friday. read more

Garrett Melson, portfolio strategist with Natixis Investment Managers Solutions, said Powell’s openness to accelerating the Fed’s tapering program will likely bring more volatility in the coming months as investors position for the possibility of rising rates. He is betting the faster removal of Fed support will lift shares of energy firms and financials.

Not everyone believes the Fed is getting set for rate increases in 2022. Burns McKinney, a senior portfolio manager at NFJ Investment Group, is betting the Fed will not rush to hike rates after unwinding its bond buying but instead gauge the strength of the economy without any monetary support before tightening policy in 2023.

Such an outcome could see the Fed allowing inflation to continue running hot for months, boosting the case for buying cyclical companies such as Lockheed Martin Corp (LMT.N) and Honeywell International Inc (HON.O), which have a history of growing their dividends and may benefit from the Democratic-led infrastructure deal that passed Congress in early November.

“If the Fed hadn’t retired the word ‘transitory,’ all the rest of us had,” McKinney said.

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Reporting by David Randall; Additional reporting by Ira Iosebashvili; Editing by Ira Iosebashvili and Sonya Hepinstall

Our Standards: The Thomson Reuters Trust Principles.

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