The Dow Jones turned higher Wednesday, with the S&P 500 and especially the Nasdaq composite leading the way. Federal Reserve chief Jerome Powell told Congress that policymakers will move aggressively to fight inflation, but said the US economy is “well positioned” to handle rate hikes. Treasury yields and crude oil prices fell significantly.
Vertex Pharmaceuticals (VRTX) and Bristol Myers Squibb (BMY) reclaimed their 50-day lines Tuesday, while United Therapeutics (UTHR) is in a buy range. All three pharma stocks have relative strength lines at highs.
meanwhile, Tesla (TSLA) and Google parent alphabet (GOOGL) remain two megacaps that have yet to undercut their late May lows. That’s not market leadership, but it’s a nugget of strength.
UTHR stock is on SwingTrader. Google stock is on IBD Long-Term Leaders. Vertex and BMY stock are on the IBD 50 and IBD Big Cap 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 was set to begin at 9:30 am ET, right at the opening bell.
In his prepared remarks, Powell reaffirmed the central bank’s commitment to taming inflation, which hit a 40-year high in May according to the consumer price index.
“At the Fed, we understand the hardship high inflation is causing,” Powell said in his remarks. “We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so.”
But he said the US can handle big rate hikes, minimizing recession risks. “The American economy is very strong and well positioned to handle tighter monetary policy.”
On Wednesday, Citigroup sees a 50-50 chance that the US will sink into a recession. The most likely recession would be a mild “garden variety” downturn, but there are “hard landing” and “stagflation” risks.
The Fed raised rates by 75 basis points on June 15, the biggest hike in 28 years. After the Fed meeting announcement, Powell said policymakers could hike rates by 50 basis points or 75 in late July. Markets have almost entirely priced in another move of 75 basis points.
Dow Jones Today
The Dow Jones rose 0.2% after falling more than 1% soon after the open. The S&P 500 climbed 0.5%. The Nasdaq composite jumped 1%.
US crude oil prices fell nearly 6%, trading below $103 a barrel and pointing crude futures toward their first monthly decline since November. Oil markets are increasingly worried about a recession dampening 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 tumbled 3%.
The 10-year Treasury yield plunged to 3.16% from Tuesday’s 3.31%.
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Stocks To Watch
Vertex stock rebounded above its 50-day line on Tuesday following a strong move Friday. The biotech giant has a 292.85 buy point, but investors could use 279.23 as an early entry. A downward-sloping trendline might offer a slightly lower entry.
Vertex stock rose 1% Wednesday morning.
BMY stock popped back above its 50-day line on Tuesday, arguably offering an early entry. Bristol stock technically is a few weeks into a new base, but also arguably is in a consolidation going back to early April. Shares edged up Wednesday morning.
UTHR stock jumped 4.3% Tuesday to 228.84, bouncing from the 21-day line and breaking a short downtrend. United Thera stock is still just in range from a 218.48 buy point. UTHR stock fell slightly Wednesday.
Tesla stock leapt 9.3% to 711.11 on Tuesday, just above its 21-day moving average. But it’s still below its fast-falling 50-day line, with its 200-day average well above that. Last week, TSLA stock fell as low as 626.08, but held above an 11-month low of 620.57 on May 24. Shares rose 3% Wednesday.
Google stock gained 4.1% to 2,230.88 on Tuesday, just below its 21-day line. It’s not too far from its fast-falling 50-day line, but the 200-day line is a long way off. Last week, GOOGL stock fell to just above 2,100, modestly above the May 24 low of 2,037.69. Shares climbed 1% early Wednesday.
Market Rally Tuesday
The Dow Jones Industrial Average rose 2.15% in Tuesday’s stock market trading. The S&P 500 index popped 2.45%. The Nasdaq composite jumped 2.5%. The small-cap Russell 2000 advanced 1.8%.
Tuesday’s strong gains were nice, but markets have numerous one-day or short-lived rallies in the midst of sharp downtrends. Wednesday’s big decline in Dow futures suggests that the new stock market rally attempt is running into trouble already.
Assuming the major indexes don’t undercut last week’s lows, investors could look for a follow-through day to confirm the new rally attempt.
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What To Do Now
Investors should remain on the sidelines, waiting for a confirmed market uptrend. Even then, investors should be cautious. A relative lack of good stocks in position to buy would likely be one of them.
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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