Dow Jones futures fell slightly early Thursday, along with S&P 500 futures and Nasdaq futures. The stock market rally boasted strong gains Wednesday, closing at session highs amid big news from China, the Russia-Ukraine war and a hawkish Federal Reserve.
J.B. Hunt Transport Services (JBHT), Costco Wholesale (COST) and Harmony Biosciences (HRMY) broke out Wednesday, at least intraday, while Rambus (RMBS) flirted with a buy point.
Nvidia stock, while well off highs, made a strong move toward a very aggressive entry.
Fed Rate Hike
The Fed raised interest rates by a quarter point on Wednesday as the central bank seeks to rein in soaring inflation while navigating a slew of economic uncertainties. Policymakers also signaled they will hike rates six more times in 2022, while also planning to reduce the Fed’s massive balance sheet soon.
The Fed policy announcement noted Russia’s Ukraine invasion is “likely to create additional upward pressure on inflation and weigh on economic activity.”
Fed chief Jerome Powell, in his post-meeting news conference, said the central bank plans to raise rates steadily over 2022. But he again stressed that policymakers will be “nimble,” signaling faster or slower action as conditions warrant.
The 10-year Treasury jumped to 2.24%, intraday, the highest since May 2019, but pared gains during Fed chief Powell comments. The 10-year yield settled for a gain of 3 basis points to 2.19%. The two-year yield jumped 7 basis points to 1.93%. Meanwhile, the 30-year Treasury yield fell 6 basis points to 2.45%.
The flattening yield curve signals concerns about economic growth going forward. Fed chief Powell said the risk of recession over the next year “is not particularly elevated.”
Russia’s Ukraine Invasion
President Volodymyr Zelenskyy addressed the U.S. Congress virtually on Wednesday, urging more support. President Joe Biden signed into law $13.6 billion in military and humanitarian aid for Ukraine, with the U.S. and allies reportedly sending more advanced anti-aircraft systems.
Earlier, Zelenskyy described Russia-Ukraine peace talks as “more realistic.” Russia signaled a neutral Ukraine with an army could be acceptable.
But Russia President Vladimir Putin gave a televised address Wednesday where he repeated many of his truth-challenged claims about Russia’s “special operation” in Ukraine. He also called for “self-purification,” which could be a signal for purges at home.
Biden, speaking on Russia’s Ukraine invasion, said Putin is a “war criminal.”
Amid heavy Ukraine invasion losses, Russia is pulling more troops and equipment from various places, including from the Far East and occupied parts of Georgia.
China Stocks Soar On Bullish Comments
On March 16, Beijing signaled support for Chinese companies listed in the U.S., suggesting that it’s working with U.S. regulators to address auditing concerns, easing delisting fears. It also announced that a crackdown on internet giants will end “as soon as possible.” U.S.-listed Chinese stocks surged Wednesday, but only recouped part of the massive losses in the past couple of weeks, let alone the long slides over the past year.
The KraneShares CSI China Internet ETF (KWEB), which holds many of the big internets such as Alibaba (BABA), skyrocketed 39% to 30.92. But KWEB is still down 7.6% so far this month and far below its Feb. 17, 2021, peak of 104.94.
China lockdowns on Shenzhen and elsewhere remain a major concern.
Meanwhile, South Korea reported 621,328 new coronavirus cases, more than 1% of the total population in a single day. Vietnam infections also are soaring.
Nvidia (NVDA) and JBHT stock are on IBD Leaderboard. J.B. Hunt and COST stock are on SwingTrader and the IBD 50. J.B. Hunt also was Wednesday’s IBD Stock Of The Day.
The video embedded in this article covered Wednesday’s bullish market action and highlighted HRMY stock, Nvidia and J.B. Hunt.
Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures dipped 0.2% and Nasdaq 100 futures lost 0.15%.
The 10-year Treasury yield fell 6 basis points to 2.13%.
Crude oil prices rose more than 1% overnight.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally on Wednesday started off strong, largely erased gains on the Fed rate hike and hawkish signals before rebounding again.
The Dow Jones Industrial Average rose 1.55% in Wednesday’s stock market trading. The S&P 500 index popped 2.2%. The Nasdaq composite soared 3.8%, its best percentage gains since November 2020. The small-cap Russell 2000 leapt 3.1%.
U.S. crude oil futures fell 1.5% to $95.04 a barrel. Crude prices topped $130 on March 5.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rallied 2.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) leapt 4.2%. The VanEck Vectors Semiconductor ETF (SMH) surged 5.3%. NVDA stock is a major SMH component.
SPDR S&P Metals & Mining ETF (XME) edged up 0.5% and Global X U.S. Infrastructure Development ETF (PAVE) advanced 1.8%. U.S. Global Jets ETF (JETS) ascended 5%. SPDR S&P Homebuilders ETF (XHB) popped 2.1%. The Energy Select SPDR ETF (XLE) dipped 0.5% and the Financial Select SPDR ETF (XLF) climbed 2.8%. The Health Care Select Sector SPDR Fund (XLV) added 1.2%
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) spiked 10.4% and ARK Genomics ETF (ARKG) 8%.
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J.B. Hunt Stock
JBHT stock shot up 9.6% to 218.06, blasting out of a flat base with a 208.97 buy point, according to MarketSmith analysis. Volume was well above average. The relative strength line for JBHT stock had already been hitting new highs before Wednesday’s breakout.
J.B. Hunt is teaming up with BNSF Railway, owned by Warren Buffett’s Berkshire Hathaway (BRKB), to boost intermodal shipments.
Meanwhile, other shipping firms showed strong action Wednesday. Old Dominion Freight Line (ODFL) popped 4.7%, right on a trendline early entry. UPS (UPS) popped 3.5%, offering an early entry as it jumped above its 50-day line and a trendline. Union Pacific (UNP) rose within a buy zone. And Danaos (DAC) officially broke out, up 7.6%, as oceangoing shipping stocks continue to soar.
Costco stock edged up 0.2% to 543.39. Intraday, COST stock climbed to 551.62, briefly clearing a 545.39 buy point from a cup-with-handle base.
HRMY stock popped 8.9% to 47.72, back above a 45.99 cup-base buy point and hitting a 52-week high. Harmony stock had pulled back from the buy point recently after running up. The handle-like pause makes HRMY stock look less extended.
RMBS stock rose 4.9% to 29.01, back above a 28.32 cup-with-handle buy point that’s technically no longer valid after shares plunged Friday. Shares of the chip technology firm right at the March 3 short-term high that marks the top of a new handle. Investors could use 29.11 as a buy point now.
Nvidia stock popped 6.6% to 244.96, reclaiming its 21-day line and closing just below its 50-day line. Getting above the 50-day line, which roughly corresponds to a trendline, could serve as an aggressive entry in the chipmaker.
Nvidia rival Advanced Micro Devices jumped 5.5%, just above its 200-day line. But it’s still below its fast-falling 50-day line.
Market Rally Analysis
The stock market rally attempt had another wild day, but closed with strong gains at session highs. The S&P 500 index, Dow Jones Industrial Average and Nasdaq composite popped above their 21-day exponential moving averages, closing above that key level for the first time since Feb. 9.
The small-cap Russell 2000 also reclaimed its 21-day line.
Volume rose on both the Nasdaq and NYSE vs. the prior session, another positive signal.
This is an important day to read The Big Picture.
But is this a short-term bounce or something more meaningful?
The 21-day line is a key step, but the major indexes have poked above that level a couple of times in 2022 only to immediately reverse lower. There are still plenty of hurdles ahead for the major indexes, including the early March highs as well as the 50-day and 200-day lines.
This market remains at the mercy of the latest headline, lifting or sinking the major indexes.
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Who Will Lead?
Assume for the moment that the market is about to have a sustained uptrend for several weeks or months. Which sectors will lead?
Commodity plays have been the clear market leaders during the correction, but is that trend over?
Defense stocks continued to give up gains from Russia’s Ukraine invasion.
Health insurers tried to break out but then backed off. Will defensive growth stocks lead in a risk-on environment?
Shipping firms still look strong. Oceangoing shippers have been leaders for a long time, with DAC stock breaking out after flashing earlier buy signals. Meanwhile, “dry” shippers such as J.B. Hunt, Old Dominion, Union Pacific and UPS are stepping up.
Travel stocks are trying to bounce back again. However, the charts for Expedia (EXPE) and Marriott (MAR), two of the stronger names, still look damaged.
Beaten-down highly valued growth stocks were big winners Wednesday. But will aggressive growth really lead if interest rates continue to trend higher?
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What To Do Now
Wednesday’s market action was positive. But don’t get too excited.
It’s still unclear if the market is changing its character or if this is a bull trap. And it’s unclear which stocks and sectors will be leaders in any sustained uptrend. For that reason, investors looking to add exposure could do so by buying a broad-market ETF such as SPY or QQQ.
This is not a time to rapidly ramp up exposure. If this market has a strong run, you’ll have plenty of opportunities to make gains. If this latest bounce quickly reverses, you’ll be glad your exposure is light.
Definitely work on your watchlists. You want to be ready to take advantage of buying opportunities.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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