Dow Jones futures were little changed overnight, as were S&P 500 and Nasdaq futures. The attempted stock market rally struggled to steer Wednesday as Fed chief Jerome Powell spoke. Major indices shrugged off strong initial losses but then gave up decent gains to close slightly lower.
Fed Chief Powell, speaking before the Senate Banking Committee on Wednesday, reiterated that the central bank is “strongly committed” to aggressively fighting inflation. But it gave mixed signals on recession risks.
Crude oil futures, copper prices and Treasury yields fell significantly on Wednesday, although they closed at their worst levels.
Healthcare names are currently among the most resilient sectors. Bristol Myers Squibb (BMY), UnitedHealth (A H), Eli Lily (THERE IS), Vertex Pharmaceuticals (VRTX) and Harmony Biosciences (HRMY) are in or near shopping areas. All of them have lines of force relative to the vertices.
During this time, the You’re here (TSLA) The Shanghai factory would close again, but this time for equipment upgrades. Tesla stock fell back below a key level after surging on Tuesday.
Electric vehicle inventories in China have been recovering strongly for several weeks. start Li-Auto (LI) rose modestly on Wednesday to a record high. EV and battery giant BYD (BYDDF) forged a handle on a daily chart.
The UNH stock and the other four medical stocks here are all on IBD 50, as well as the LI stock. Vertex, Eli Lilly and BMY stocks are also listed on the IBD Big Cap 20.
LLY stock is on IBD Leaderboard and SwingTrader. Bristol Myers Squibb was the IBD stock of the day on Wednesday.
The video embedded in this article discusses Wednesday’s market action and analyzes UNH, Bristol Myers Squibb and Halozyme (HALO).
Dow Jones Futures Today
Dow Jones futures were flat relative to fair value, oscillating between slim gains and modest losses. S&P 500 and Nasdaq 100 futures fell slightly.
Crude oil prices fell 2%.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Fed chief Powell on recession risks
“At the Fed, we understand the difficulties caused by high inflation,” Fed chief Powell said in his prepared remarks. “We are firmly committed to bringing inflation down, and we are moving quickly to do so.”
Powell said the United States was “well positioned” to handle tougher Fed policy. He later said that recession risks “are not particularly high right now.” But he also said a soft landing for the economy is “much more difficult” now.
In recent months, Powell has applauded Wall Street with comments downplaying recession risks, only for stocks to sell in the next session. Investors may feel that he is not telling the whole truth or simply doubt his forecasts.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally opened solidly lower, quickly rebounded higher as evidenced by Fed chief Powell, but then closed with small losses.
The Dow Jones Industrial Average fell 0.15% in trading on Wednesday. The S&P 500 index fell 0.1%. The Nasdaq composite fell 0.15%. The small-cap Russell 2000 fell 0.2%
U.S. crude oil prices fell 3% to $106.19 a barrel, but after falling more than 6% at one point.
The 10-year Treasury yield fell 15 basis points to 3.16%, but rebounded off the 21-day moving average.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell just over 4%, reflecting losses in energy and commodities stocks. The Innovator IBD Breakout Opportunities (BOUT) ETF slid 1.7%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.2%. ETF VanEck Vectors Semiconductor (SMH) slipped 1.2%.
The SPDR S&P Metals & Mining ETF (XME) fell 3.8% and the Global X US Infrastructure Development ETF (PAVE) fell 0.6%. The US Global Jets ETF (JETS) rose 0.5%. The SPDR S&P Homebuilders ETF (XHB) climbed 0.7%. ETF Energy Select SPDR (XLE) lost 4% and ETF Financial Select SPDR (XLF) fell 0.2%. The Health Care Select Sector SPDR Fund (XLV), of which UNH shares make up a large portion along with Eli Lilly, Bristol Myers and Vertex, added 1.4%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) climbed 1.5% and ARK Genomics ETF (ARKG) climbed 2.85%. TSLA stock is a major holding in Ark Invest ETFs.
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Stocks to Watch
VRTX stock rose 0.8% to 272.31, breaking a trendline for early entry, with 279.23 as another aggressive buy zone. The official buy point is 292.85.
LLY stock gained 3.1% to 306.69, rebounding from the 50-day line in above-average volume while closing just at a short trendline. Investors could buy stocks here or use Wednesday’s high at 309.65 as an aggressive entry. Eli Lilly stock is working on further consolidation.
HRMY stock rose 4.6% to 47.82, surpassing a buy point of 47.21 cup with handle, according to MarketSmith analysis. The volume, however, was much lower than normal.
UnitedHealth stock gained nearly 2% to 489.68 on Wednesday, after Tuesday’s high of 6.25%. UNH stock is still within the range of a descending trend line. But investors might view the consolidation as a double bottom basis with a buy point of 507.35.
Bristol Myers shares edged up 0.1% to 76.55 after recovering to their 50-day line on Tuesday. It can be said that BMY stock is showing an early entry. The drug giant is on track to have a flat base after this week with a buy point of 78.71. But investors might view BMY shares as being in a messy flat bottom since early April.
Tesla’s Shanghai factory will suspend production for a few weeks around the start of July, Reuters reported on Wednesday. This will allow Tesla to upgrade its equipment and perhaps ultimately increase the factory’s production capacity. In the short term, this will hamper Tesla’s efforts to rebound to record production levels, although factories in Berlin and Austin are expected to slowly expand.
From March 28 to April 18, Tesla Shanghai was closed due to the city’s strict lockdown. From April 19 to early June, the plant operated at partial capacity. This will likely reduce global second-quarter production by well over 50,000. Tesla will release second-quarter production and delivery numbers in early July.
Meanwhile, Morgan Stanley cut its TSLA share price target to 1200 from 1300, citing weaker second-quarter deliveries and margins. He maintained an overweight rating.
Tesla stock fell 0.4% to 708.26, just below its 21-day moving average after climbing 9.35% on Tuesday. TSLA stock has some distance to reach its 50 and 200 day moving averages.
Electric vehicle stocks in China
Li shares climbed 2.9% to 36.80, just below December’s 52-week high of 37.45. Technically, the stock has a buy point of 37.55, but it has been rising for weeks and may need a long break. Li Auto on Tuesday unveiled the L9, a new hybrid SUV with deliveries beginning in August. It’s more expensive than the current Li One hybrid.
BYD stock fell 0.9% to 38.30. On a daily chart, BYDDF now has a cup buy point with a handle of 39.81. The handle entry has been there before on a weekly chart. BYD will start selling in Australia in the third quarter and begin shipments of the Seal, which has similar specs to a Model 3 but for $10,000. BYD sales of electric vehicles and plug-in hybrids will easily exceed Tesla’s sales of all electric vehicles in the second quarter. The Chinese giant could soon supply batteries to Tesla, although the American electric vehicle giant has not confirmed this.
Tesla vs. BYD: Which rising EV giant is the best buy?
Market rally analysis
After an encouraging morning rally, it was a little disappointing to see the major indices closing lower on Wednesday. But a pullback was no surprise after Tuesday’s big rebound in light volume. encouraging to see major indexes rebounding from early losses for modest gains.
Still, this is not a confirmed market rally. Wednesday marked the third day of an attempted market rally for the S&P 500 and Nasdaq composite, so investors can start looking for a follow-up day. The Dow Jones is only two days away from its attempted rally.
Even if there is a confirmed rally soon, skepticism would be in order. Several confirmed uptrends quickly faltered in the current bear market. And there’s not much to buy.
Some drug stocks and other medical stocks such as Bristol Myers and UnitedHealth are doing relatively well, but otherwise they are slim picks.
Energy stocks weakened again while metals and mining stocks were hammered.
Much of Wednesday’s gains came from beaten technicians.
Markets are shifting from focusing on runaway inflation to risks of recession and vice versa.
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What to do now
Investors have to wait for a trailing day to pull out of the sidelines. At this point, investors could tiptoe back into the market, via a few stocks or large ETFs. But don’t rush into the market.
For now, stay engaged with the market action and work on your watchlists. Focus on stocks with strong relative strength and trading above or near key moving averages. Few stock charts will look pretty in today’s market environment.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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