Dow Jones Dives 480 Points As Investors Fear Fed Rate Hikes Into 2023
Dow Jones futures were higher ahead of Tuesday’s open after the Dow Jones Industrial Average sold off more than 480 points Monday. Tesla stock dived after multiple reports said Tesla is planning to cut its EV production in China, as demand seems to be faltering.
The EV giant refuted the reports, calling the claims that it’s cutting its China production untrue. Still, investors left the stock down more than 6% and near the day’s lows.
More Fed Rate Hikes Into 2023?
The stock market headed south Monday, as stronger-than-expected economic data sparked fears that the Federal Reserve will continue to aggressively raise interest rates into next year due to a strong labor market. Early Monday, the ISM services report came in better than expected, with a 56.5 reading in November vs. a 54.4 in October. The ISM services is a barometer of U.S. business conditions in the service sector; a reading above 50 indicates expansion and a sub-50 reading is contraction.
Monday’s economic data came directly on the heels of Friday’s strong jobs report that showed employers added 263,000 payroll positions while the unemployment rate held at 3.7% and wages jumped.
According to Nick Timiraos at the Wall Street Journal, “Federal Reserve officials have signaled plans to raise their benchmark interest rate by 0.5 percentage points at their meeting next week, but elevated wage pressures could lead them to continue lifting it to higher levels than investors currently expect.”
Timiraos continued, “policymakers expect price pressures to ease meaningfully next year, but brisk wage growth or higher inflation in labor-intensive service sectors of the economy could lead more of them to support raising their benchmark rate next year above the 5% currently anticipated by investors.”
The 10-year Treasury yield jumped to 3.59% Monday, rebounding from last week’s sharp losses.
Stock Market Today
On Monday, the Dow Jones Industrial Average lost 1.4%, or 482 points, and the S&P 500 dropped 1.8%. The tech-heavy Nasdaq composite sold off 1.9%. Among exchange traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) moved down 1.7% and the SPDR S&P 500 (SPY) fell 1.8%.
Dexcom is an IBD Leaderboard stock. Caterpillar and Home Depot were featured in this week’s Stocks Near A Buy Zone column. Celsius was a recent IBD 50 Stocks To Watch pick and a New America stock. Caterpillar was Thursday’s Stock Of The Day.
Dow Jones Futures Today: Oil Prices
Ahead of Tuesday’s opening bell, Dow Jones futures rose 0.2% vs. fair value, while S&P 500 futures gained 0.25%. The tech-heavy Nasdaq 100 futures were up 0.3% vs. fair value. Remember that overnight action in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
U.S. oil prices reversed from early gains to fall more than 3%. West Texas Intermediate futures traded just above $77 a barrel. Crude oil prices initially rose after the European Union sanctions on Russian crude oil went into full effect.
What To Do In The Stock Market Rally
Now is an important time to read IBD’s The Big Picture column with the stock market trend back in a “confirmed uptrend.”
While it’s certainly true that the S&P 500 and Nasdaq composite are still in confirmed uptrends, the crop of actionable stocks has been disappointing. It hasn’t been easy increasing exposure.
When it comes to new buys, what kind of feedback are you getting? Are new buys making progress from buy points? In this case, it’s OK to give them some room. But don’t be afraid to take partial profits if a gain hits at least 10%. If new buys go the wrong way, cut losses when the stock is 3% to 4% down, instead of waiting for the 7% rule to trigger.
Light, flexible trading is the best course of action for now. If the uptrend starts to gain traction again, there will be plenty of opportunities to increase exposure. And don’t be afraid to look for early entries, rather than waiting for a stock to hit a conventional buy point.
Dow Jones Stocks To Buy And Watch: Caterpillar, Chevron, Home Depot
Energy giant Chevron fell 2.5% Monday, falling further below its 182.50 buy point in a consolidation base.
Home improvement retailer Home Depot ended Monday about 4% below a cup base’s 333.08 buy point following the stock’s 2.4% decline.
Top Stocks To Buy And Watch: Celsius, Chubb, Dexcom, KLA
Energy-drink maker Celsius dropped 3.5% Monday, snapping a three-day win streak. Shares are trying to break out past a cup base’s 118.29 buy point, but are about 4% below the entry, according to IBD MarketSmith pattern recognition.
Insurance giant Chubb is trading just below a cup-with-handle’s 216.10 buy point Monday after the session’s 1.7% loss. The 5% buy area tops out at 226.91.
New IBD Long-Term Leader KLA continues to hold just below a cup-with-handle’s 392.60 buy point amid a three-day losing streak, as shares dipped 0.25% Monday. The RS line continues to hold right at new highs, a sign of stock market leadership.
Tesla stock skidded 6.4% Monday, snapping a three-day win streak and giving up the entirety of last week’s gains.
In recent weeks, the stock hit its lowest level since Nov. 23, 2020, reaching a new 52-week low price at 166.19. Since then, the stock has rebounded but remains sharply below its 50- and 200-day moving average lines. Shares are around 55% off their 52-week high.
Dow Jones Leaders: Apple, Microsoft
Among Dow Jones stocks, Apple shares declined 0.8% Monday, but are still holding above their 50-day line. The stock is more than 20% off its 52-week high.
Microsoft faltered 1.2% Monday, as shares continue to hold above the 50-day line. The software giant remains about 27% off its 52-week high.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.
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