Dow Jones, Nasdaq Reverse Higher After Surprise Fed Decision; Defensive Sectors Outperform

Dow Jones, Nasdaq Reverse Higher After Surprise Fed Decision; Defensive Sectors Outperform

The Dow Jones Industrial Average reversed higher during late-afternoon trading in today’s stock market and closed at intraday highs. Meanwhile, the Nasdaq and S&P 500 showed similar action. Stocks were sharply higher following a Fed’s policy decision, which was revealed at 2 p.m. ET on Wednesday.


Dow Jones Today

At the close, the Dow Jones was up 1.1%. The Nasdaq composite rose 2.1% after erasing losses of over 0.7%. The S&P 500 gained 1.6%. Meanwhile, the Russell 2000 reversed its earlier losses to a 1.6% gain. Early data showed volume was higher on the Nasdaq and on the NYSE vs. the close on Tuesday.

Stocks rose across the board after the Federal Reserve announced on Wednesday that it will speed up its exit from the extraordinary policies it adopted early in the pandemic. Asset purchases will now decrease by $30 billion per month and likely come to an end in March.

This was a surprise divergence from the Fed’s prior plans. On Nov. 3, the Federal Reserve announced it would gradually taper asset purchases from the $120 billion monthly pace. According to IBD’s Economy column, “Though Fed policy signals were much more hawkish than in September, they were still somewhat more aggressive than stock market investors were expecting.”

U.S. Stock Market Today Overview

% Change
Dow Jones
S&P 500
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Russell 2000
IBD 50

Last Update: 4:20 PM ET 12/15/2021

After the Fed policy news, the 10-year Treasury yield rose to 1.46% but still remains not far off its 12-week lows. Among S&P sectors, the defensive utilities sector was among top performers with a rise of over 1.7%. Technology rose midday and closed with a 2.8% gain. The energy sector led on the downside with a loss of around 0.3%.

These Health Care Stocks Flourish

On Wednesday, health care stocks were leading the Dow. UnitedHealth Group (UNH), Amgen (AMGN) and Merck (MRK) rose over 2% each.

UnitedHealth has been a powerful breakout stock in recent weeks. Shares topped a 431.46 flat base entry in October and have since climbed higher. The stock is over 12% extended from the proper entry and features a rising RS line and Relative Strength Rating of 93.

Cisco Systems (CSCO) also led the upside among blue chip names. Shares gained over 3.5% in afternoon trading and traded above a 58.73 double-bottom buy point. The stock remains inside the 5% buy zone, which tops out at 61.66. Volume since the breakout on Dec. 10 has been low, however, a sign of potential weakness.

Nike (NKE) and Chevron (CVX) led on the downside with losses of over 0.5% each.

Nike is expected to report earnings on Monday after the market closes. According to IBD data, analysts expect the firm to earn 63 cents a share on revenue of $11.2 billion. This would represent a year-over-year EPS decline of 19% while sales are roughly the same as they were in the same period a year ago.

Shares of Nike continued to fall below the bottom edge of its current flat base. Shares also crossed below their 50-day line, a sign of weakness.

Earlier this week, Nike announced it acquired RTFKT, a company that uses gaming engines, nonfungible tokens, blockchain technologies, and augmented reality to create its footwear designs and digital artifacts. The move suggests Nike is betting on the metaverse being a key part in the future of retail.

These IBD 50 Stocks Struggle

The Innovator IBD 50 ETF (FFTY), a growth-heavy index, erased losses and reversed 2.4% higher though still below the 50-day, 21-day and long-term 200-day moving average. The market has certainly been tough on growth stocks in recent weeks.

Stocks weighing on the index included Roblox (RBLX), which gapped down and fell over 9% in heavy volume. The recent IPO stock is now seeking support at the 50-day moving average. Shares erased a prior 36% gain from a Nov. 9 breakout. The stock is now in the 7% to 8% sell zone and has triggered multiple sell signals.

Early Wednesday, the video gaming platform released November user growth metrics that were slightly lower than expected. Roblox reported daily active users rose 35% from a year ago to 49.4 million in November, while hours engaged jumped 32% to 3.6 billion. It also estimated November revenue at $184 million to $187 million, up 84% to 87% from a year earlier.

Other stocks leading the downside in the IBD 50 included decking, railing and fencing products maker Trex (TREX) and Covid-19 play Regeneron (REGN), which lost over 1% each.

Follow Rachel Fox on Twitter at @rachelgfox for more Dow Jones and stock market commentary.


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