Premarket: Apple is red

From the Wall Street Journal’s "Stock Futures Slip as Investors Reassess Fed Comments" posted early Thursday:

U.S. stock futures fell, with technology stocks on track to lead losses after the opening bell, as investors assessed the implications of Fed’s most aggressive tightening of monetary policy in more than two decades...

The pullback came one day after major U.S. stock indexes soared, with the Dow climbing more than 900 points, its biggest one-day gain since 2020. On Wednesday, central bank officials approved a half-percentage-point interest rate increase, lifting the federal-funds rate to a target range between 0.75% and 1%. But it was Fed Chairman Jerome Powell’s comments that energized markets after he said officials weren’t actively considering raising rates by three-fourths of a percentage point, or 75 basis points, at its June meeting.

Mr. Powell’s comments offered relief to investors who had become increasingly fearful that the Fed could raise interest rates too far, too fast and eventually tip the economy into a recession.

But by Thursday, investor optimism had begun to wane. Even with a larger interest-rate increase off the table in the coming months, investors are still facing the most aggressive tightening of U.S. monetary policy since 2000—the last time the central bank last raised rates by a half-point. Many investors are now questioning how high the Fed might raise rates over the next two years and how that might ripple across the economy and corporate profits.

On Thursday morning, those jitters were seen across the market. In premarket trading in New York, growth stocks were particularly hard hit. Chip makers Advanced Micro Devices, Nvidia and NXP Semiconductors each lost more than 1.6%. Megacap technology stocks also pulled back, with Tesla falling 1.6% and Netflix declining 1.5%.

Charts: Yahoo!Finance sees a bearish double-price-crosses-moving-average pattern. Max pain has fallen to $160 below call peaks at $165, $170 and $175.

11 Comments

  1. Jerry Doyle said:
    I was puzzled yesterday by the markets’ seemingly joyous reaction and embraced of the Fed’s .50 basis point rate increase and by the knowledge that the Fed intended to do more of these (.50) successive rate increases to come. I assume too much focus was on the .75 so that when .75 was removed everyone just started partying.

    The Fed seems intent on an aggressive path to increase rates even though much inflation globally and domestically already is being addressed by the economic slowdown in growth. Just released in the news is the fact Labor productivity fell 7.5% in the first quarter, the fastest rate since 1947. The supply chain problems gradually are improving and we saw yesterday where used car prices are beginning to fall. Other evidence of a slowing economy abound.

    This Fed has gotten it wrong previously telling us that inflation was “transitory” when everyone was scratching their heads over the clear knowledge that inflation was settling into the economy. Many pleaded a year ago to increase rates, but the Fed was asleep at the wheel. They told us inflation was transitory to it no longer was transitory. Then they told us we had high inflation a year after we had been telling them this fact. Now this same Fed is on an aggressive rate increase path to slow economic growth when signs abound that economic growth already is slowing. The Fed has been so far behind the curve that it comes across as amateurish. I would feel much better if we were discussing .25 basis points instead of .50. At least the Fed saw enough light on the issue to take .75 off the table.

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    May 5, 2022
    • Robert Paul Leitao said:
      Jerry: The 50 basis point increase in the Fed Funds rates leaves policy in an accommodative stance. Yes. The market had a relief rally yesterday because 75 basis point increases are apparently off the proverbial table. The Fed is likely to continue with rate increases until it reaches a neutral stance which is considered at this time to be in the range of 2.4% to 2.5% on the Fed Funds rate. Until rates reach a neutral stance, policy continues to promote economic growth. The market knows that and responded positively to the news. Today the market’s dealing with a bit of a hangover from yesterday’s unbridled celebration.

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      May 5, 2022
      • Jerry Doyle said:
        @Robert Paul Leitao: “…. Today the market’s dealing with a bit of a hangover from yesterday’s unbridled celebration.”

        Poppycock Robert Paul! Markets digested overnight the Fed’s “aggressive” planned rate hikes of .50 basis points realizing that those rate hikes are excessive. That is what the markets are reacting to now, and that reaction is far beyond a “bit of a hangover from yesterday’s unbridled celebration.” Stocks have given all gains from yesterday and “more.”

        To reiterate succinctly my previous comments, a lack of confidence in this Fed exists among investors that the Fed has gotten it wrong in the past and continues to get it wrong now. It perplexes many investors why Chair Powell yesterday locked himself into saying .50 basis point rate hikes successively was coming, going forward. This is what the markets digested overnight and are reacting to now.

        Evidence (data) is flowing in that the economy already is slowing. We now have a Fed planning aggressive rate hikes going forward. Chair Powell should have avoided denoting specific rate hikes to come, said nothing until more definitive evidence existed to prove such aggressive rate hikes are called for in future meetings. This is the same behavior exhibited way last year when investors, economists, analysts and the common folk on the street shouted: “Inflation is NOT transitory.”

        The Fed and the executive branch trotted out one WH senior leader after another last year to say inflation is “transitory.” They wouldn’t listen to the push back and they are not listening now. It is obvious these are not the smartest people in the room. The economy already is slowing.

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        May 5, 2022
        • Robert Paul Leitao said:
          Jerry: You and I will just disagree. In my view, the lack of Fed action in raising rates last year when it insisted inflation was “transitory” and choosing not to take action to raise rates only to belatedly change the stance and admit inflation is “persistent” has led us to this point. Only recently has the Fed moved from QE (quantitative easing) and it’s waiting until June to begin in very small steps to unwind its enormous $9 trillion balance sheet. In my view, this is likely to lead to higher interest rates and a longer tightening cycle. In general, I expect market multiples to decline and interest bearing asset classes such as bonds to compete for investor dollars. For equity investors it’s now caveat emptor. I suggest to everyone to perform deep research before entering the market today. I’ll be watching from the sidelines. In my view, Apple is a blue chip with strong fundamentals. I’d be very wary of any speculative equities especially at this time as interest rates rise and the Fed is no longer buying instruments such as mortgage-backed securities and treasuries to push interest rates lower.

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          May 5, 2022
  2. And then Ming the Merciless started tweeting, the equivalent of « when E. F. Hutton talks, people listen. » Oddly, that scandalous old brokerage from San Francisco keeps coming back for more too.
    $6/share, a big plateau in the charts for many shares, created & erased like a distant memory. Tells me many traders have no idea of the underlying value of some shares.

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    May 5, 2022
  3. Steven Philips said:
    Just when I thought it was safe to go back in the water…! 🙂

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    May 5, 2022
  4. Michael Goldfeder said:
    The bigger question is whether or not Warren is back in the market buying more Apple? We know Apple most certainly is at these prices.

    The market goes up. The market goes down. On the exact same news. Hence the saying: “The trend is your friend.”

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    May 5, 2022
  5. Daniel Epstein said:
    I am always surprised by how much the interest rate direction discussion creates so much disruption in the market. Seemingly regardless of where interest rates are currently at historically. Also given people’s foul mood about the world situation overall it is much more a daily risk on risk off situation than would seem comfortable for most investors. It is amazing how many commentators talk breathlessly about stocks which have been cut in half and then expect those stocks who have only been cut 10% or 15% are due for the same treatment before we get an all clear. The day traders are in control at the moment. People who are looking for certainty will most likely be left behind when all the smoke clears. A few months ago the mantra was cash is trash. Now people are saying cash is the best of a bad lot.

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    May 5, 2022

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