Dow Jones Futures: Hawkish Fed Chief Powell Wipes Out Market Rally;
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.
X
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 0.4% vs. fair value. S&P 500 futures advanced 0.5%. Nasdaq 100 futures rose 0.8%.
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…
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