The Dow Jones Industrial Average fell late as recession fears mounted after the Federal Reserve meeting. Tesla (TSLA) CEO Elon Musk has verbally blasted a mass recall. coin base (COIN) and Riot Blockchain (RIOT) fell even as Bitcoin rallied. Eli Lilli (LLY) decided to upgrade.
Meanwhile, a trio of stocks showed impressive relative strength near buy points. JM Smucker (SJM), Eastern bank stocks (EBC) and HealthEquity (HQY) all impressed.
Volume was mixed, rising on the Nasdaq but slipping on the New York Stock Exchange, according to early data.
The yield on the benchmark 10-year government bond rose 19 basis points to 3.7%. West Texas Intermediate Crude Oil rose 0.7% to close at $83.53 a barrel.
Stocks hit amid recession fears
Dow Jones and other stocks are suffering from a hangover after Wednesday’s Federal Reserve meeting. The Federal Open Market Committee, headed by Fed Chair Jerome Powell, hiked rates by 75 basis points.
The dot plot also projected that the Fed’s interest rate would hit 4.6% next year before the tightening comes to an end.
Nomura’s senior US economist Rob Dent said the Fed’s latest move “really underscores the likelihood” of a recession within the next 12 months.
“Global equities are struggling as the world assumes that rising interest rates will trigger a much earlier and potentially severe global recession,” said Edward Moya, senior market analyst at Oanda, in a note to clients. “The Fed has managed to persuade markets that they will remain aggressive in fighting inflation, with many expecting another 75 basis point rate hike in November.”
Dow Jones Gains, Nasdaq Falls, Small Caps Dive
The Dow Jones fell late, closing down 0.4%. The Nasdaq struggled the most among the indices, losing 1.4%. The S&P 500 also lagged, falling 0.8%.
S&P 500 sectors were mostly negative. Healthcare and communications services were the only winners, while financials and consumer discretionary struggled the most.
Small caps were also attacked by the bears, with the Russell 2000 ending the day 2% lower.
Innovator IBD 50 ETF (FFTY), a pioneer for growth stocks, fell 2.6%.
Inside Dow Jones: Merck shines, American Express lags behind
Merck was the best performer on the Dow Jones today as it returned 3.5%. However, it remains rooted below the key 50-day moving average.
American Express stock lagged the venerable average, falling 3.8%. It is now below all of its major moving averages.
The other worst performers were Boeing (BA), which fell 3.2%, and Goldman Sachs (GS), which lost 2.4%.
Elon Musk Upset About Recall; Tesla stock slides
Tesla stock plummeted after NHTSA released a safety recall report for 1,096,762 Tesla vehicles. The issue affects Tesla’s automatic window reversing system.
CEO Elon Musk took to Twitter to criticize the recall.
“The terminology is outdated and inaccurate”, he tweeted on Thursday. “This is a tiny over-the-air software update. To the best of our knowledge, there were no injuries.”
Tesla warehouse down 4.1% losing ground on a short consolidation pattern with an entry at 314.74.
Despite this, the longer-term performance of Tesla stock remains strong.
Revenue has grown an average of 173% over the past three quarters, well above CAN SLIM’s requirements. Annual results are also impressive, with a three-year EPS growth rate of 197%.
bitcoin rallies; Coinbase stock plummets
Coinbase fell hard even as Bitcoin resisted on Thursday. Coinbase ended the session down 7% despite low volume.
The stock took a hit following a Wall Street Journal report on an alleged new speculative crypto trading venture.
The company, which last month lowered its full-year guidance, lost ground on all major moving averages. COIN shares are down about 75% year-to-date.
Bitcoin fought back from lows and is above $19,000 after gaining 4.8% on Thursday.
However, other cryptocurrency games have had problems. Grayscale Bitcoin Trust (GBTC) is up 0.4% on bitcoin mining Riot Blockchain (RIOT) slipped 0.5%.
Eli Lilly Stock Pops
Pharma game Eli Lilly shone after UBS upgraded it from neutral to buy. It closed the session up 4.9%.
Analyst Colin Bristow said in a research note that the company’s new weight-loss treatment could be “the greatest drug of all time.” He estimated that peak annual sales could reach $25 billion.
Bristow also insisted that LLY shares are now “the most attractive name” in UBS’s large-cap coverage.
The line of relative strength is pulling up as the stock has formed a flat base with an ideal entry point of 335.43 according to MarketSmith.
Outside of the Dow Jones: These 3 stocks are flexing their muscles
JM Smucker saw his relative strength reach new heights. This is because according to MarketSmith analysis, a cup-with-henkel entry is 150.
Packaged groceries are among the top 9% of stocks in terms of trailing 12-month price performance. It’s a double threat, as it offers investors a strong 2.9% dividend yield.
Eastern Bankshares also saw its RS line reach new heights. It is near a cup and handle buy point of 21.55.
EBC is in the top 7% of stocks tracked in terms of earnings performance. It’s flat so far in 2022, which is better than most stocks in this choppy year.
Finally, HealthEquity was up more than 2%. It is in the buy zone of a consolidation pattern with a buy point of 72.80. In terms of price performance over the last 12 months, it is in the top 5% of stocks.
Its RS line is trading at recent highs, an encouraging sign. There has also been a lot of money behind the Health Savings Account recently, with its impressive B+ Accumulation Distribution rating.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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