Dow Jones futures saw a notable increase overnight, along with the S&P 500 and Nasdaq futures, following a wave of market fluctuations triggered by the recent Federal Reserve rate adjustment.
Just after the Fed announced a significant 50 basis points cut on Wednesday afternoon, the stock market experienced an initial surge, with both the S&P 500 and Dow Jones achieving record highs. However, the enthusiasm faded, and the key indexes concluded the trading session slightly lower, despite Fed Chairman Jerome Powell hinting at further economic easing accompanied by a predicted soft landing for the economy.
The market reacted vigorously to the Fed’s announcements and Powell’s press conference. While Nvidia (NVDA) saw a dip below its 50-day moving average, Apple (AAPL) managed modest gains before encountering critical resistance levels. Tesla (TSLA) briefly approached an early entry point but ultimately closed lower. In contrast, stocks like Arista Networks (ANET) and DoorDash (DASH) remained within buy zones, indicating potential investment opportunities.
As for the broader market picture, Dow Jones futures were up approximately 0.2% versus fair value, with S&P 500 futures showing a 0.4% increase and Nasdaq 100 futures surging by 0.7%. The 10-year Treasury yield also experienced a slight rise, reaching around 3.72%.
The Fed’s latest move marks the first rate cut since the onset of the COVID-19 pandemic, a powerful half-point adjustment. Notably, Governor Michelle Bowman dissented, advocating for a smaller, quarter-point reduction. Prior to the announcement, market predictions indicated a 59% probability of the larger cut, alongside a 45% chance for the smaller option.
After Wednesday’s announcement, the Fed’s policymakers conveyed an expectation of an added 100 basis points in cuts for 2024, suggesting a continued easing of monetary policy. Powell’s comments reinforced a belief in sustained moderate economic growth, with the Fed aiming not to lag behind in its required interventions.
The stock market ended slightly lower following the Fed’s announcement, despite both the S&P 500 and Dow Jones climbing to record highs during intraday trading. The Dow Jones lost 0.25%, while the S&P 500 fell by 0.3%. The Nasdaq composite also saw a 0.3% decline. Despite previous robust rallies in anticipation of the Fed’s reduction, the market’s retraction was not entirely unexpected given the volatility surrounding the news.
Additionally, U.S. crude oil prices slightly dipped below $71 per barrel, reflecting broader energy market trends. As for the bond market, the 10-year Treasury yield climbed by 4 basis points, while the two-year yield adjusted upward by a single basis point.
In the realm of growth-focused ETFs, the Innovator IBD 50 ETF (FFTY) gained 0.5%, while the iShares Expanded Tech-Software Sector ETF (IGV) decreased by 0.9%. The VanEck Vectors Semiconductor ETF (SMH), heavily influenced by Nvidia, fell by 1.1%. Conversely, more speculative investments like the ARK Innovation ETF (ARKK) saw a slight rise, and the ARK Genomics ETF (ARKG) dipped marginally.
Investors should observe that NVIDIA’s stock dipped by 1.9%, remaining below its 50-day moving average after once again facing resistance. The stock has a notable buy point of 131.26 based on its recent performance.
Looking ahead, Tesla is gearing up for a busy October, including significant events such as Q3 delivery announcements, a much-anticipated robotaxi event, and third-quarter earnings reports. Meanwhile, Apple shares showed a 1.8% uptick, though they pulled back from a key 50-day line, indicating that investors are keeping a close watch on potential entry points.
Market watchers should remain aware that while some stocks are within buying zones, the overall market sentiment suggests a cautious approach amidst ongoing volatility. Investing strategies should be developed, and readiness to capitalize on actionable stocks is crucial as trends shift.
Stay informed by connecting with market experts on platforms like IBD Live for timely insights and directions in navigating the evolving stock landscape. Understanding these dynamics can empower investors to make strategic moves as they position themselves for future opportunities.