Stock market declines after an oversold bounce; Federal Reserve decision looms

Stock market indices pared early losses in the first half of Tuesday’s session, as defeated buyers kept their powder dry ahead of Wednesday’s Fed rate decision. Ford Motor (F) Shares are having a rough day, dropping more than 9% after warning of rising costs and not being able to find parts.


The Dow Jones Industrial Average is trading 1.1% lower at this hour, worse than the S&P 500’s 1.0% loss. The Nasdaq Composite is down just 0.6% while the Russell 2000 Small Business Index leads the downside, posting a 1.2% loss.

Volume on the NYSE and Nasdaq are close to the same level of participation as this time Monday morning.

US Treasury yields continued to slide, lifting the 10-year bond above the 3.5% psychological level. The two-year mark is close to 4% and could reach that milestone before tomorrow’s Fed event. Hot inflation numbers out of Japan and Germany last night are driving the latest rise in yields.

Asian markets rallied overnight while most European bourses fell about 1% in the afternoon sessions.

West Texas Intermediate crude fell more than 2% to $83.61 a barrel, giving up yesterday’s bullish gains.

Bitcoin holds over $19,000 after trading around $700 from a 21-month low in June on Monday.

What do you expect from the Fed

The odds of a 75 basis point increase have risen to 82% on the CME FedWatch tool, while 18% are looking for a full percentage point increase.

US stock market overview today

index Code price win/loss % change
Dow Jones (0 DJIA) 30585.94 -433.74 -1.40
Standard & Poor’s 500 (0S&P5) 3846.19 -53.70 -1.38
Nasdaq (0NDQC) 11410.82 -124.20 -1.08
Contact 2000 (IWM) 177.39 -3.13 -1.73
defect 50 (fifty fifty) 26.56 -0.50 -1.85
Last update: 10:42 AM ET 9/20/2022

All eyes will be focused squarely on the Fed’s “point chart” after the release, looking for policy shifts in the path of projected interest rate increases through 2023. This tool aggregates interest rate projections by individual conservatives rather than providing a broad consensus.

Most Fed watchers expect an initial commitment to raise 50 basis points in November. Anything above or below this level can lead to volatility and have an immediate impact on stock prices.

Chairman Jerome Powell has to express his 100% commitment to fighting inflation after his hawkish Volcker at Jackson Hole in August. However, he may be worried about the speed of stock market losses since that time, and no federal banker wants to be burdened by a market crash.

As a result, he could inject some conciliatory comments about the need for stable and balanced markets, without dampening the rate hike. Of course, he’s running a fine line after a stock rebound in midsummer, which was fueled by poorly worded comments at the July press conference.

Ford was affected by shortages in supplies and rising costs

Ford warned after the closing bell on Monday that supplier costs linked to inflation are about $1 billion more than expected. In addition, the automaker noted that continued supply shortages will force up to 45,000 partially built vehicles out of business until they are completed and sent to dealers.

Shares are trading down 9.3% at this hour General motors (GM) is selling Sympathy, now down 4.7%.

Ford’s stock broke its 200-day moving average in March and reversed that resistance level in mid-August, according to IBD MarketSmith. Stocks fell below the 50-day line today. However, a healthy RSI of 89 highlights the strong performance compared to the struggling S&P 500.

Additionally, Ford is expected to post a staggering 30% annual profit growth in 2022. The company reported 27% year-over-year sales growth in August, compared to a meager 4.8% increase in the auto industry.

Winners and losers in the stock market

Dow component nike (NKE) dropped nearly 3.5% after Barclays lowered the apparel and sports giant’s rating from overweight to overweight. This former stock market leader is struggling to hold the July low of 99.53.

Las Vegas Sands (LVS) bucks the downside tide, rising more than 4.7% on news that China is taking steps to ease entry for foreigners.

LVS stock rose again above 40.08 buying points for a flat base for 38 days. Fundamentals are very weak but the RS rating has risen to 90, in response to a rally that has made its shares shy of a six-month high.

Oil explorer and producer continental resources (CLR) is building a mug with a handle with 72.80 purchase points. The Relative Strength Line reached its highest level over the past week, but remained far from its 52-week high. CLR shares are trading down 0.7% at noon.

Follow Alan Farley on Twitter at @msttrader.

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