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market drop due to Fed rate hike and Powell’s comments; Tesla continues to fall. These stocks shine

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Dow futures rose slightly in extended trading, along with S&P 500 futures and Nasdaq futures. The stock market rally reversed lower on Wednesday after the Fed posted a 5.1% gain as Fed Chair Jerome Powell called for “significantly more evidence” that inflation is under control.




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But stocks pared losses in contrasting measures as investors also reflect on Powell’s other comments and hope for rate hikes to begin in 2023. Tesla (TSLA) in reaching the lowest levels of the bear market amid concerns about the demand for electric vehicles. apple (AAPL) fell below the 50-day moving average.

But solar stocks have been strong, with the Invesco Solar ETF (tan) flashing a buying opportunity, eg Enphase energy (ENPH), SolarEdge Technologies (SEDG), First Solar (FSLR) And the Matrix techniques (I see) Everything rose.

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Fed rate hike, peak rate

The central bank raised the federal funds rate by 50 basis points, to 4.25%-4.5% on Wednesday afternoon, as expected. But policy makers, in the new quarterly forecast, now, too See peak rate of 5.1%Up from 4.6% at the Federal Reserve’s September meeting. Fed Chair Powell has stated in recent weeks that the peak rate is likely to head higher. But 5.1% was higher than market expectations, especially after Tuesday’s relatively weak inflation report.

Fed President Paul Hokisch, Deutsch

The full effects of this year’s rate hike are yet to be felt, “but we have more to do,” said Powell, who was speaking shortly after the Fed’s meeting announcement and outlook. The Fed chief noted a “welcome decline” in price gains in the last two CPI reports, but said policymakers needed “significantly more evidence.” Have confidence that inflation is on a sustainable downward path.”

Powell did not rule out further stepping down in raising rates to just a quarter of a point in February. He stressed the importance of determining where the federal funds rate peaks and how long it stays high. Notably, Powell does not see any rate cuts in 2023.

But he also said, “Our policy is to get to a very good place now.”

Markets are putting a 73% chance of a quarter-point rate hike, to a range of 4.5%-4.75%, up from 60% on Tuesday. Notably, investors expect another quarter-point rally in late March, but now see a good chance of not moving at all.

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The Fed continues to see a slowdown in growth in 2023, not an actual recession.

The major indices, which all rose modestly with the Fed meeting announcement and Powell’s speech, turned lower in choppy trading. For the second consecutive session, the S&P 500 moved above the 200-day moving average but closed below that key level.

Investors should be careful about adding exposure in the current market, with indices volatile and near key levels.

Dow jones futures today

Dow futures rose 0.1% against fair value. S&P 500 futures rose 0.2% and Nasdaq 100 futures rose 0.15%.

Remember to work in overnight Dow Jones futures contracts and elsewhere that does not necessarily translate into actual trading in the next regular session Stock market session.

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Stock market rise

The stock market rallied ahead of the Fed meeting announcement, then reversed lower in a choppy move the rest of the session.

The Dow Jones Industrial Average fell 0.4% on Wednesday Stock market trading. The S&P 500 lost 0.6%. The Nasdaq Composite lost 0.8%. Small-cap Russell 2000 gave up 0.7%.

Apple stock fell 1.55% to 143.21, again below its 50-day moving average.

US crude oil prices rose 2.5 percent to $77.28 a barrel.

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The 10-year Treasury yield closed flat at 3.5%.

between the The best mutual fundsThe Innovator IBD 50 ETF (fifty(down 0.4%, while the Innovator IBD Breakout Opportunities ETF)fit) decreased by 0.1%. iShares Expanded Technology and Software ETF (IGV) lost 0.2%. VanEck Vectors Semiconductor Corporation (SMH) decreased by 1.7%.

Reflecting more speculative stories, the ARK Innovation ETF (ARK)ark(gave up 1% and the ARK Genomics ETF)ARKG) 0.7%. Tesla stock is a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) decreased by 0.9%. SPDR S&P Homebuilders ETF (XHB) sank 0.5%. Energy Defined Fund SPDR ETF (xle(Down 0.6% and Financial Select SPDR ETF)XLF) 1.25%. SPDR Health Care Sector Selection Fund (XLV) increased by 0.2%.

solar stock

The Invesco Solar ETF rose 1.8% to 82.61 on Wednesday. The TAN ETF has a buy point of 84.28 cups with the handle, but investors could have gotten in early from the 21-day moving average.

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Right now, solar stocks are generally moving higher together, so TAN is a good way to play up the sector’s upside with less risk to individual stocks.

Enphase Energy, First Solar, and SEDG stocks are the three largest constituents, accounting for nearly a third of TAN’s weight.

ENPH stock has now extended slightly from its buy point, according to MarketSmith analysis. The SEDG stock has also been extended from the grip insert. FSLR stock is rebounding from the 10-week line, providing a new buying opportunity.

Array Technologies is also a component of TAN. ARRY stock jumped 8.3% to 23.55, just below the 23.60 buy point cup with handle. But the shares are 12.7% higher than the 21-day line and 26% higher than the 50-day line, which makes buying ARRY shares riskier, especially in the current market.


Tesla vs. BYD: Which burgeoning EV giant is the best one to buy?

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Tesla stock

TSLA stock fell 2.6% to 156.80 on Wednesday. Shares are now down 12.4% for the week, extending to two-year lows. Tesla stock peaked at 414.46 in November 2021.

On Wednesday, Goldman Sachs lowered its target for TSLA’s share price and lowered its forecast for Tesla’s fourth-quarter deliveries. Morgan Stanley sees Tesla stock as a top pick for 2023, but warns that “Brakes squeak on demand on electric vehicles” Inclusive.

If I covered the TSLA and just looked at the chart, it would just go away.


Top five Chinese stocks to watch now


Market rally analysis

The past two days are a great example of not being the news, but rather the market’s reaction to the news.

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On Tuesday, a cooler-than-expected CPI inflation report sent stocks off the open, but they quickly pared gains.

On Wednesday afternoon, the central bank raised its forecast for the Fed’s highest rate more than expected. Fed Chair Powell made it clear that inflation needs to fall much more, although he also offered more pessimistic signals. The major indices were sold off hard, but then pared losses, briefly turning positive before fading again.

The S&P 500, above its 200-day line for the second consecutive session, failed to close above that key level, this time reversing lower. But it found support at the 21-day line, which closes the gap with the 200-day mark.

Dow Jones and Nasdaq also successfully tested their 21-day lines. The Russell 2000, which has become a lagging indicator, has pulled back towards the 50-day line.

Despite the disappointment since Tuesday’s opening highs, all major indices are up about 1.6% for the week, while the Russell 2000 is up 1%.

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The stock market often has a second day reaction to Fed meetings, especially with so much volatility.


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What are you doing now

A stock market rally gives no reason to add exposure. Previously, indices would at least have a solid session to attract investors, then cut them off with steady losses over the next several sessions.

But for now, the major indices are unable to make gains.

If you are buying aggressively, there is a good chance that you will buy outright at the highest price in the near term. If you buy at weakness, you could be jumping on a sinking ship.

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It is best to wait for the major indices to show signs of a sustained rally in the market. This would include the S&P 500 crossing the 200-day line, and then all major indexes breaking above their December 1 highs. Even in this positive scenario, investors should add exposure carefully.

Read The Big Picture Every day to keep up with the market trend, stocks and leading sectors.

Please follow Ed Carson on Twitter at @employee For stock market updates and more.

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Stock, bond and cryptocurrency investors remain on edge after a rough year for the markets

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This version is for personal, non-commercial use only. Distribution and use of this material is subject to our Subscriber Agreement and copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.

https://www.wsj.com/articles/stock-bond-and-crypto-investors-remain-on-edge-after-brutal-year-for-markets-11672403124

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Dow Jones losses are heading towards the closing bell as US stocks approach their worst year since 2008

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US stocks were trimming losses heading towards the closing bell on Friday, but were still on track to post their worst annual loss since 2008, as the harvest of tax losses combined with concern over the outlook for US corporate and consumer earnings took its toll.

How are stock indices traded?
  • Dow Jones Industrial Average
    DJIA,
    -0.22%

    It fell about 182 points, or 0.6%, to 33,039 points.

  • S&P 500 index
    SPX,
    -0.25%

    It fell nearly 26 points, or 0.7%, to about 3,824.

  • The Nasdaq Composite Index fell 72 points, or 0.7%, to about 10,406 points.

Stocks posted their biggest gains of the month on Thursday, with the Dow Jones rising 345 points, or 1.05%, to 33,221 as major stock indexes rebounded after losses incurred earlier in the week that pushed the Nasdaq Composite to a new closing low for the year. . The S&P 500 was on track on Friday to wrap up its fourth consecutive losing week, the longest streak of weekly losses since May, according to FactSet data.

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What drives the markets

US stocks traded lower on Friday afternoon, on pace to close the last trading session of 2022 with weekly and monthly losses.

Stocks and bonds have been crushed this year as the Federal Reserve raised its benchmark interest rate more aggressively than many expected, as it sought to crush the worst inflation in four decades. The S&P 500 is on track to end the year with a loss of nearly 20%, its worst annual performance since 2008.

“Investors were on edge,” Mark Heppenstahl, chief investment officer at Penn Mutual Asset Management, said in a phone interview Friday. “It seems as if being able to bring prices down might be a little easier given how bad the year has been.”

Stock indices have fallen in recent weeks as the recent rally inspired by hopes in the Fed’s policy focus faded in December after the central bank indicated it would likely wait until 2024 to cut interest rates.

On the last day of the trading year, the markets were also hit by selling to capture losses that could be written off from tax bills, a practice known as tax harvesting, according to Kim Forrest, chief investment officer at Bouquet Capital Partners. .

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Forrest added that an uncertain outlook for 2023 has also weighed in, as investors worry about the strength of corporate earnings, the US economy and consumer as the fourth-quarter earnings season approaches early next year.

“I think the Fed, and then earnings in mid-January — they’ll set the tone for the next six months. Until then, it’s anyone’s guess.”

The US central bank has raised its benchmark interest rate by more than four percentage points since the start of the year, pushing borrowing costs to their highest levels since 2007.

The timing of the first Fed rate cut will likely have a significant impact on markets, according to Forrest, but the outlook remains uncertain, even as the Fed tries to signal that it plans to keep interest rates higher for longer.

On the economic data front, the Chicago PMI for December, the latest major data release for the year, Came stronger than expected. Climbing to 44.9 from 37.2 in the previous month. Readings below 50 indicate contraction.

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In the coming year, Heppenstahl said, “we are likely to shift toward concerns about economic growth rather than inflation.” “I think the decline in growth will eventually lead to an even greater drop in inflation.”

Read: Stock market investors face 3 recession scenarios in 2023

Eric Sterner, chief information officer at Apollon Wealth Management, said in a phone interview on Friday that he expects the US to fall into a recession next year and that the stock market could see a new bottom as companies likely review their earnings. “I think the earnings outlook for 2023 is still very high,” he said.

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were all on pace Friday afternoon posting weekly losses of around 1%, according to FactSet data, at last check. For the month, the Dow was down about 5%, the S&P 500 was down about 7% and the Nasdaq was about to crash down about 10%.

Read: Value stocks are outperforming growth stocks in 2022 by a large margin historically

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As for bonds, Treasury yields rose on Friday as the US sovereign debt market was set to post its worst year since at least the 1970s.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.879%

It rose about four basis points on Friday at 3.88%, according to FactSet data, in the latest check. Ten-year yields jumped about 2.34 percentage points this year through Thursday, on track for the biggest annual gain ever based on data going back to 1977, according to market data from Dow Jones.

Meanwhile, the yield on the two-year note
TMUBMUSD02Y,
4.423%

Up about 3.64 percentage points in 2022 through Thursday to 4.368%, 30-year return
TMUBMUSD30Y,
3.971%

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It jumped 2.03 percentage points over the same period to 3.922%. That marks the largest increase in a calendar year for each based on data going back to 1973, according to market data from Dow Jones.

Outside the US, European stocks capped their biggest percentage drop in a calendar year since 2018, with the Stoxx Europe 600
xxxp,
-1.27%
And the
It is an index of euro-denominated stocks, down 12.9%, according to market data from Dow Jones.

Read: A downturn in the US stock market is trailing these international ETFs as 2022 draws to a close

Companies in focus

Steve Goldstein contributed to this article.

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Fed’s reverse repo facility reaches $2.554 trillion by Reuters

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© Reuters. FILE PHOTO: The Federal Reserve Building in Washington, US, January 26, 2022. (Reuters)/Joshua Roberts/File Photo

Written by Michael S Derby

NEW YORK (Reuters) – A key facility used by the Federal Reserve to help control short-term interest rates saw record inflows on Friday, the last trading day of the year.

The New York Fed said its reverse repo facility took in $2.554 trillion in cash from money market funds and other eligible financial firms, beating the previous high seen on Sept. 30, when inflows totaled $2.426 trillion.

The cash rally was almost certainly tipping into record territory in the usual end-of-quarter pattern that could worsen further towards the end of the year. On those dates, for a variety of reasons, many financial firms prefer to deposit money in the central bank rather than in the private markets.

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The Fed’s reverse repo facility has been very active for some time. After seeing almost no absorption for a long time, money began to gravitate toward the central bank in the spring of 2021 and then grew steadily. Daily reverse repo usage has been steadily above the $2 trillion mark since June.

The reverse repo facility takes cash from qualified financial firms in what is an actual loan from the Federal Reserve. The current rate is 4.3%, a yield that is often better than rates for short-term private sector lending.

The reverse repo facility is designed to provide a soft floor for short-term rates and the federal funds target rate, and is the Fed’s primary tool for achieving its function and inflationary mandates. To mark the higher end of the range, the Fed is also pushing deposit-taking banks to deposit cash at the central bank, where the interest rate on reserve balances is now 4.4%.

The federal funds rate is currently set between 4.25% and 4.5% and is trading at 4.33% as of Friday, sandwiched between the reverse repo rate and interest on reserve balances.

There are no signs of shrinkage

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Even with the heavy use of reverse repo, Fed officials have always remained unconcerned about large outflows, even as some in financial markets worried about the potential for the Fed to drain the borrowing and lending lives of private money markets.

Fed officials also expected that as the central bank continues to raise interest rates with the goal of bringing down very high levels of inflation, the use of the reverse repo facility should decrease. But that hasn’t happened yet, and some in the markets now believe that the consistently high utilization of the Fed facility will be around for some time to come.

Research by the Federal Reserve Bank of New York indicated that banking regulation issues make demand for the Fed’s reverse repo instrument high. Meanwhile, the Kansas City Fed added its view that large inflows are related to limited private market investment opportunities and policy uncertainty.

Strong cash flows to the central bank may not have alarmed central banks, but they have driven their operations to an actual loss. The Federal Reserve finances itself through interest on the bonds it owns as well as the services it provides to the financial community. It usually makes a noticeable profit and by law returns it to the treasury.

Currently, the cost of paying interest on reverse repo agreements and reserve balances outweighs income. The Fed reported Thursday that as of Dec. 28, the accounting metric it uses to track losses was $18 billion. Many observers expect that the Fed’s plans to raise interest rates further and keep them at high levels will mean fairly large losses for the central bank over time, even if these losses will not affect the action of the Fed’s monetary policy.

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