Dow Jones futures rose Wednesday morning ahead of the Federal Reserve’s interest rate decision, set at 2 p.m. ET, followed by Fed Chair Jerome Powell’s press conference.
General Mills (GIS) is an earnings booster on Wednesday, with stocks rising more than 2% in early morning trading after strong earnings results. Sell missed estimates. Homebuilders KB Home (KBH) and Lennar (LEN) will report after the close.
Micron technology (MU) fell more than 2% after Mizuho lowered its stock from buy to neutral.
Elsewhere, leader in electric vehicles Tesla (TSLA) was down 0.5% on Wednesday. Among the industrialists of Dow Jones, technical titans Apple (AAPL) and Microsoft (MSFT) were mixed ahead of today’s stock market opening.
Top stocks to watch amid recent market weakness include: Continental sources (CLR), Double Verify (DV), Vertex Pharmaceuticals (VRTX) — as well as Dow Jones stock Chevron (CVX) and Merck (MRK). Keep in mind that the new stock market correction is a good reason for investors to be largely, if not entirely, on the sidelines.
DoubleVerify is an IBD Leaderboard stock, but the position size has been trimmed during last week’s losses. Tesla was featured in the Stocks column near a buy zone this week.
Dow Jones Today: Treasury Yields, Oil Prices, Fed Meeting
Ahead of Wednesday’s opening bell, Dow Jones futures were up 0.5% relative to fair value, while S&P 500 futures were up 0.55%. Nasdaq 100 futures gained 0.5% above fair value in morning action. Remember that overnight activity in Dow Jones futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.
Of the exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) rose 0.55% and the SPDR S&P 500 ETF (SPY) rose 0.6% in early trading.
10-year government bond yields tapped lower to 3.54% on Wednesday, ahead of this week’s new high. Meanwhile, oil and natural gas prices rose in the US. Oil prices rose more than 2%, pushing West Texas Intermediate futures above $86 a barrel.
The two-day meeting of the Federal Reserve will conclude Wednesday with a rate decision at 2 p.m. ET and comments from Fed Chair Jerome Powell at 2:30 p.m. Markets show at 82% that the central bank will raise interest rates by 75 basis points and an 18% chance of a 100 basis points increase. Investors will be looking for hints about the pace of future rate hikes and how high the central bank will eventually go.
All told, markets expect the Federal Reserve’s key policy rate to end this year with a target range of 4% -4.25% or, more likely, 4.25% -4.5%. And that may not be all. According to CME Group’s FedWatch page, the odds are above 50% for another quarter-point increase to a range of 4.5%-4.75% in March or May.
Stock Market Correction
On Tuesday, the stock market again delivered a disappointing performance. The Dow Jones Industrial Average lost 1% while the S&P 500 fell 1.1%, both undercutting their Friday lows.
Tuesday’s The Big Picture column noted, “Amid expectations for an aggressive statement, the stock market may not be happy with what the Fed has to say on Wednesday. A tradable rally could eventually push the Nasdaq back to levels of 12,000. But it’s still a market under distribution, so a trip to the June lows could also be in the cards.”
To prepare for a new stock market rally, investors have to wait for a follow-up day. When the market is in a correction, look for at least one major index to try a bottom.
The first day the index closes counts higher as day 1 of its attempted rally. The action on Day 2 and Day 3 is irrelevant as long as the index does not fall below its latest low. If that low is undercut, the rally attempt is over and the market must try again.
On Day 4 and beyond, expect the Nasdaq or S&P 500 to rise sharply in volume higher than the previous session. That’s a follow-up day. It gives investors the green light to buy leading stocks that are past the appropriate buying points. It should align your portfolio and mindset with the stock market action by gradually allocating capital to leading stocks.
During the stock market correction, don’t hold back. Instead, create watchlists to find emerging stock market leadership by using the relative strength line. The RS line measures a stock’s price performance against the S&P 500. If the stock outperforms the broader market, the RS line slopes upward. If a stock falls short of the broad market, the line will point lower.
Five Dow Jones Stocks to Watch Now
Dow Jones Stocks to Watch: Chevron, Merck
Dow Jones stock Chevron fell 0.4% on Tuesday, still holding above the crucial support around the 50-day line. Stocks are trading about 6% off a cup with the last handle buy point at 166.93 – according to the IBD MarketSmith chart analysis – amid strong performance of energy stocks so far this year. The stock climbed 1.3% early Wednesday.
CVX stocks show a strong 97 out of a perfect 99 IBD Composite Rating, according to the IBD Stock Checkup. Investors can use the IBD Composite Rating to easily measure the quality of a stock’s fundamental and technical statistics.
Drug giant Merck is also trying to fight the downward trend in the stock market. Stocks are building a flat base with a buy point of 95.82, but they are stuck below their 50-day line and near their recent lows. Merck shares were unchanged early Wednesday.
3 top growth stocks to buy and watchrent Stock Market Correction
Top stocks to watch: Continental, DoubleVerify, Vertex
Oil explorer and producer Continental Resources is building a handle cup with a buy point of 72.80, according to IBD MarketSmith chart analysis. The relative strength line hit a recent high last week, but remains slightly outside its 52-week high. The CLR share rose a fraction on Wednesday.
IBD Leaderboard Shares DoubleVerify remains below the 28.07 buy point in a low after Tuesday’s loss of 1.35%. DV shares were flat on Wednesday morning.
Vertex Pharmaceuticals remains below the 50-day line despite Tuesday’s 0.6% gain. The stock held up well during ongoing market weakness, as evidenced by an RS line approaching new highs. There is no new foundation yet, but the stock’s resilience makes it a great idea to watch. Vertex shares were unchanged on Wednesday.
Join IBD experts as they analyze leading stocks in the current stock market correction on IBD Live
Tesla stock traded a fraction lower Tuesday as it approaches a buy point of 314.74 from a short base. In the meantime, keep an eye out for additional buying points if the stock could rise further to the right of its larger consolidation, which stretches back to January. The stock fell 0.5% on Wednesday morning.
Bullish, the stock’s RS line is at its highest level since April. Shares are about 25% off their 52-week high.
Dow Jones Leaders: Apple, Microsoft
Among Dow Jones stocks, Apple shares rose 1.6% on Tuesday, contributing to Monday’s gains. Last week, the stock closed at its lowest level since July 18. Apple shares were down 0.3% on Wednesday morning.
Microsoft lost 0.85% on Tuesday and hit another 52-week low. The software giant is about 30% off its 52-week high. Microsoft shares gained 0.3% on Wednesday.
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more information on growth stocks and the Dow Jones Industrial Average.
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