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Dow Jones Futures Fall Ahead Of Fed Rate Hike, Powell Comments; Tesla Stock Continues To Drop

Dow Jones futures traded narrowly lower early Wednesday, setting up in a holding pattern ahead of this afternoon’s Federal Reserve interest rate decision, followed by a press conference with Fed Chair Jerome Powell. Best Buy (BBY) dropped more than 3% after a Bank of America downgrade.


Fed Decision, Powell Comments

The Fed’s two-day policy meeting concludes Wednesday, with an interest rate decision due out at 2 p.m. ET following by comments from Fed chief Powell at 2:30 p.m.

The Fed has signaled that it will step down the pace of rate hikes this meeting, with widespread expectations of a half-point rate hike to a range of 4.25% to 4.5%. However, it’s unclear how much Tuesday’s more moderate-than-expected November CPI inflation report could potentially affect the Fed’s rate-hike outlook. It may not make much of a difference, but investors will be carefully parsing Jerome Powell’s comments, following signals that the Fed could be shifting its stance on inflation.

According to the CME’s FedWatch tool, traders place a 79% chance of a 50-basis-point rate hike.

Early Tuesday, REV Group (REVG) and Weber (WEBR) reported their quarterly earnings results. REVG stock rallied more than 3%, while Weber shares lost less than 1%. Other earnings report this week include Darden Restaurants (DRI) and Lennar (LEN).

Best Buy shares declined more than 3% after Bank of America downgraded the stock from neutral to underperform, with a new price target at 69, down from 80. Delta Air Lines (DAL) jumped more than 4% after raising its fourth-quarter guidance and issuing an upbeat outlook for fiscal-year 2022 and 2023.

Electric-vehicle giant Tesla (TSLA) traded down 1.5% Wednesday. Dow Jones tech leaders Apple (AAPL) and Microsoft (MSFT) were mixed ahead of today’s stock market open.

Allegro Microsystems (ALGM), IBD Leaderboard stock Dexcom (DXCM), KLA (KLAC) and United Rentals (URI) — as well as Dow Jones names Caterpillar (CAT), Home Depot (HD) and UnitedHealth Group (UNH) — are among the top stocks to buy and watch.

Dexcom and Trane are IBD Leaderboard stocks. UnitedHealth was featured in this week’s Stocks Near A Buy Zone column. Allegro was a recent IBD 50 Stocks To Watch pick. Caterpillar, United Rentals and Dexcom were recent IBD Stock Of The Day companies.

IBD’s latest newsletter MarketDiem gives you actionable ideas for stocks, options and crypto right in your inbox

Dow Jones Today: Oil Prices, Treasury Yields

Ahead of Wednesday’s opening bell, Dow Jones futures dipped a fraction below fair value, while S&P 500 futures were down 0.1%. Tech-heavy Nasdaq 100 futures moved down 0.15% in morning action, with Charter Communications (CHTR) diving more than 8% to the bottom of the index. A handful of analysts cut their price target on Charter after the company increased its 2023 capital spending guidance on Tuesday.

Among exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) fell 0.15% and the SPDR S&P 500 ETF (SPY) moved down 0.2% early Wednesday.

The 10-year U.S. Treasury yield was little changed at 3.51% Wednesday morning ahead of the Fed rate decision. The 10-year Treasury yield dived Tuesday on cool CPI inflation data.

Meanwhile, U.S. oil prices rose around 1% Wednesday morning, after both the International Energy Agency and the Organization for Petroleum Exporting Countries forecast a rebound in demand over the coming year. West Texas Intermediate futures settled Tuesday at $75.39 a barrel.

Stock Market Rally

The stock market ended with moderate gains Tuesday, but the major stock indexes closed far from their intraday highs. The Nasdaq composite rose 1%, the S&P 500 added 0.7%, and the Dow Jones Industrial Average climbed 0.3%.

Tuesday’s The Big Picture column commented, “But the stock market flashed a clear message Tuesday: It’s still worried about a recession next year. Inflation is still way too high for the Fed, which is still dealing with an extremely tight labor market and low unemployment. The Fed wants to see some softness in the labor market to help it fight inflation.”

Now is an important time to read IBD’s The Big Picture column amid the ongoing stock market volatility.

Five Dow Jones Stocks To Buy And Watch Now

Dow Jones Stocks To Buy And Watch: Caterpillar, Home Depot, UnitedHealth

Dow Jones member Caterpillar continues to drift further away from a cup base’s 238 buy point, according to IBD MarketSmith pattern recognition, in the wake of Tuesday’s 1% rise. CAT stock shows a solid 95 out of a perfect 99 IBD Composite Rating, per the IBD Stock Checkup. CAT stock dipped  0.2% Wednesday. 

Home improvement retailer Home Depot ended Tuesday in buy range above a cup-with-handle base’s 329.77 buy point following the day’s breakout. HD stock traded a fraction lower Wednesday morning.

Health care giant UnitedHealth Group is tracing a flat base that features a 558.20 buy point. Shares are just 3% away from the latest entry. UNH stock shed 0.2% early Wednesday.

4 Top Growth Stocks To Watch In The Current Stock Market Rally

Top Stocks To Buy And Watch: Allegro, Dexcom, KLA, United Rentals

Allegro Microsystems ended Tuesday in buy range past a cup-with-handle’s 32.07 buy point following the day’s 1.5% gain. ALGM stock traded up 0.5% Wednesday.

IBD Leaderboard stock Dexcom is trying to break out past a 123.46 buy point in a flat base and is just below the entry amid Tuesday’s 2.4% rally. Dexcom stock was flat early Wednesday.

Chip leader KLA is at the top of the 5% buy range past a cup-with-handle’s 392.60 entry after Tuesday’s 2% advance. The 5% chase zone goes up to 412.23. Bullishly, the relative strength line continues to make new highs in the ongoing market volatility. KLA shares were flat premarket Wednesday.

United Rentals is trying to break out past a 368.04 buy point in a cup-with-handle pattern, according to IBD MarketSmith analysis. Shares topped the entry Tuesday before closing just below it. URI stock was inactive Wednesday.

Stocks To Buy And Watch

These are seven top stocks to buy and watch in today’s stock market, including three Dow Jones leaders.

Company Name Symbol Correct Buy Point Type Of Base
Allegro Microsystems (ALGM) 32.07 Cup with handle
Dexcom (DXCM) 123.46 Flat base
KLA (KLAC) 392.60 Cup with handle
United Rentals (URI) 368.04 Cup with handle
Caterpillar (CAT) 238.00 Cup
Home Depot (HD) 329.77 Cup with handle
UnitedHealth (UNH) 558.20 Flat base
Source: IBD Data As Of Dec. 13, 2022

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

Tesla Stock

Tesla stock skidded 4.1% Tuesday, falling sharply for a second straight day and hitting a new 52-week low. Shares traded 1.5% lower Wednesday morning, threatening to extend a losing streak to three days. Early Wednesday, Goldman Sachs cut its price target from 305 to 235, citing softer demand.

On Tuesday, TSLA stock hit its lowest level since Nov. 18, 2020, reaching a new 52-week low price at 156.91. Shares closed about 60% off their 52-week high.

Dow Jones Leaders: Apple, Microsoft

Among Dow Jones stocks, Apple shares rallied 0.7% Tuesday, just above its key 50-day line. The 50-day line, which had been a key support level, has switched into an area of resistance to monitor. The stock is about 20% off its 52-week high. Apple stock traded down 0.2% Wednesday.

Microsoft jumped 1.75% Tuesday, as shares now test their long-term 200-day line. The software giant remains around 25% off its 52-week high. Microsoft shares rose 0.1% early Wednesday.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.


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