Dow Jones Futures Fall;  Fed Chief Powell testifies that recession fears are rising

Dow Jones Futures Fall; Fed Chief Powell testifies that recession fears are rising

Dow Jones futures declined sharply early Wednesday, along with S&P 500 futures and Nasdaq futures, setting off a fresh stock market rally to erase Tuesday’s strong gains. Treasury yields and crude oil prices also fell significantly. Federal Reserve Chairman Jerome Powell will testify before Congress amid growing concerns that a Fed rate hike will push the economy into recession.


Vertex Pharmaceuticals (VRTX) and Bristol-Myers Squibbo (BMY) reclaimed its 50-day lines on Tuesday, while United Therapeutics (UTHR) is in the buying range. The relative strength of all three pharma stocks is at higher levels.

During this, Tesla (TSLA) and Google Guardian Alphabet (GOOGL) there are still two megacaps that have yet to close their lows at the end of May. It’s not market leadership, but it’s a nugget of strength.

UTHR stock is on swing trader. Google stock is on the IBD long-term leaders. Vertex and BMY stocks are at IBD 50 and IBD Big Cap at 20.

Fed Chief Powell testifies

Fed chief Powell will testify before the Senate Banking Committee on Wednesday, followed by the House Financial Services Committee on Thursday. The hearing begins at 9:30 am, right at the opening bell. The Federal Reserve may issue Powell’s prepared remarks earlier.

Powell will likely reaffirm the central bank’s commitment to containing inflation, according to the Consumer Price Index, which hit a 40-year high in May. As a result of that surprising CPI inflation report, the Fed raised rates by 75 basis points on June 15, the biggest increase in 28 years. After the Fed meeting announcement, Powell said policymakers could raise rates by 50 basis points, or 75, by the end of July. In another move of 75 basis points, the market has almost completely paid the price.

On June 15, Powell said a soft landing was still possible, but markets decided a day later that the Fed’s aggressive anti-inflation drug made the prospect of at least a mild recession. Will Powell try to placate investors on economic growth?

On Wednesday, Citigroup sees a 50-50 chance that the US will plunge into recession. The most likely downturn would be a mild “garden kind” recession, but there are “hard landings” and “stagflation” risks.

dow jones futures today

Dow Jones futures fell 1.4% versus fair value. S&P 500 futures retreated 1.5%. Nasdaq 100 futures lost 1.4%.

US crude oil prices fell more than 6%, trading below $105 a barrel and marking its first monthly decline since November. Oil markets are worried about the slowdown in oil demand. Meanwhile, President Joe Biden called on Congress to suspend the federal gasoline tax of 18.4 cents per gallon for three months.

Copper prices have fallen by more than 3%. The 10-year Treasury yield fell to 3.16% from Tuesday’s 3.31%.

Remember that premarket action in Dow futures and elsewhere is not necessarily the case in actual trading in the next regular stock market session.

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stock to watch

Vertex stock broke above its 50-day line on Tuesday after a strong move on Friday. The biotech giant has a buy point of 292.85, but investors can use 279.23 as an opening entry. A downward sloping trend line could provide a slightly lower entry.

BMY stock bounced back above its 50-day line on Tuesday, arguably offering an early entry. Bristol stock is technically a few weeks into a new base, but is arguably also in a consolidation in early April.

UTHR stock jumped 4.3% to 228.84 on Tuesday, bouncing off the 21-day line and breaking a minor downtrend. The stock of United Thera is still in the range of buy point of 218.48.

Tesla stock jumped 9.3% to 711.11 on Tuesday, just above its 21-day moving average. But it is still below a sharply falling 50-day line, with the 200-day average well above it. Last week, TSLA stock fell as low as 626.08 but remained above an 11-month low of 620.57 on May 24. Shares fell 1% on Wednesday morning.

Google stock rose 4.1% to 2,230.88 on Tuesday, just below its 21-day line. It is not too far from the 50-day line falling sharply, but the 200-day line. Last week, GOOGL stock fell above 2,100, up marginally from its May 24 low of 2,037.69. Shares were down 1% early Wednesday.

market rally analysis

The Dow Jones Industrial Average rose 2.15 percent in stock market trading on Tuesday. The S&P 500 index rose 2.45%. The Nasdaq Composite jumped 2.5%. The small-cap Russell 2000 advanced 1.8%.

Tuesday’s strong gains were good, but there are several one-day or short-term rallies in the markets amid sharp declines. Wednesday’s big drop in Dow futures is a sign that the new attempt to rally in the stock market is already in trouble.

Assuming that the major indices do not break past week’s lows, investors may look for a follow-up day to confirm a fresh rally attempt.

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What should we do now

Investors should stay on the sidelines, waiting for confirmation of the bullish trend in the market. Still, investors should be cautious. The relative scarcity of good stocks in a position to buy could be one of them.

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

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

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