The overnight performance of Dow Jones futures showed a slight rise, while S&P 500 futures and Nasdaq futures edged lower. The impending Federal Reserve meeting decision on Wednesday afternoon has investors on edge, with expectations of a hawkish Fed rate-cut.
Unraveling the Impact of Fed Rate Cuts on the Stock Market
Dow Jones Futures Today
Dow Jones futures witnessed a 0.1% increase compared to fair value. S&P 500 futures remained steady, and Nasdaq 100 futures tilted downward. It's important to note that overnight movements in Dow futures don't always translate directly into actual trading in the next regular stock market session.
This shows the complexity and uncertainty in the stock market, where various factors interact and influence each other.
Fed Meeting To Offer Hawkish Rate Cut?
The final Fed meeting of 2024 is set to end on Wednesday, with an announcement expected at 2 p.m. ET. Markets are anticipating a quarter-point rate cut, which would amount to 100 basis points in Fed rate cuts over three meetings. Given the solid economic growth and sticky inflation, investors are betting that the central bank will wrap up the dovish rate cut with semi-hawkish guidance.
The latest economic projections and policymakers' "dot plot" rate forecasts will play a crucial role, along with Fed chief Jerome Powell's comments. These factors will shape the market's perception and future directions.
Stock Market Rally
The stock market rally had a modestly down session, with the Nasdaq also experiencing ongoing weak breadth. The Dow Jones Industrial Average fell 0.6% in Tuesday's trading, marking its ninth straight decline and closing just below its 50-day line. The S&P 500 index gave up 0.4% while still holding the 21-day line. The Nasdaq composite slipped 0.3% after reaching a record high on Monday. The small-cap Russell 2000 slumped 1.2%, approaching the 50-day line.
These movements highlight the volatility and challenges in the stock market, as different indices and sectors respond differently to various economic and market conditions.
Nvidia Stock
Nvidia stock fell as low as 126.86 on Tuesday morning, triggering the 7%-8% sell rule for those who bought at the 140.76 buy point. However, shares came off the lows and closed down 1.2% to 130.39. It was the fourth straight decline and the eighth drop in nine sessions. NVDA stock is now 6.3% below its 10-week line.
Nvidia's fall was initially due to comments from Microsoft CEO Satya Nadella suggesting that his company is not chip supply constrained. Microsoft is one of Nvidia's biggest customers. Additionally, Nvidia faces concerns about Blackwell chip overheating and competition from in-house custom chips.
For longer-term investors, it's essential to have an exit strategy in place, even if they don't need to sell Nvidia immediately.
Tesla Stock
Tesla stock popped 3.6% to 479.86, extending its monthly gain to 39% after a 38% increase in November. Mizuho upgraded TSLA stock, raising its price target to 515. Tesla China EV sales remain strong, offsetting weakness elsewhere.
The company has begun to roll out Full Self-Driving v13 widely to FSD owners with HW4.0, with FSD 13.2.1. Optimism about self-driving has been a significant driver of TSLA stock in the past few months.
Tesla is 16.2% above its 10-day line and 55.2% above its 50-day. However, shares fell modestly in extended trade. Investors need to decide whether to take profits on the way up or wait for sell signals on the way down, depending on their investing style and market conditions.
What To Do Now
The stock market rally is facing some challenges aside from a few megacaps like Tesla. A split market is at a higher risk of turning into a broad decline or sector rotation. A slightly lower market trend is tough, with individual leaders showing enough strength to flash buy signals but facing market headwinds that make it difficult to sustain gains.
With the Fed rate outlook on the horizon, investors should be cautious in the very short term. If making new buys, they should be ready to exit quickly. However, there are several stocks forging bases or handles, trading tightly at their 21-day lines or pulling back to their 50-day lines. If the market revs higher, there could be buying opportunities.
Reading "The Big Picture" every day is crucial to staying in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.