The Dow Jones Industrial Average posted small losses in the first half of Thursday’s session after two Fed governors warned that the current data did not justify a pause in interest rate hikes. Semiconductor stocks and FAANG stocks led a strong rally in the big tech space. Walmart (WMT) eased anxiety in the retail sector with a strong quarter. Recent reports of optimism about the debt ceiling may be wildly inaccurate.
FOMC voting member Lori Logan poured cold water on hopes of a pause in rates, as he spoke of a rate hike in June. Governor Philip Jefferson followed up less than an hour later, warning that inflation “remains very high.”
CME FedWatch’s odds of a June hike have risen from 28% earlier to 45% on the news. It only hit 11% a week ago.
The S&P Regional Bank ETF (KRE) traded flat through midday after a strong pre-market rally. backquest (PACW) rebounded nearly 9% in busy trading.
Semiconductor and FAANG lead big technology to the top
Netflix (NFLX) rose over 9% after announcing the ad-supported tier had reached 5 million monthly active users globally. The stock erupted from the base of a cup with a generously sized handle. It is just above the buy range of 349.90 buy points.
Also part of the FAANG Five Fabulous Collection, apple (AAPL), Amazon.com (AMZN) f the alphabet (GOOG) all gained more than 1%. Meta platforms (META) The trend was downward, up only 0.2% in this hour.
The PHLX semiconductor sector index rose 2.8% in the first half of the session, with every stock on the IBD 50 list buoyed by buy points.
blue chip from Broadcom (AVGO) was trading in the buy territory, up 2.3%. AVGO stock is up within four points of its all-time high in 2021 of 677.76.
rambus (RMBS) stock rose more than 9% after Jefferies upgraded the tranche stock to a buy-from-hold. The company also raised the price target to 65.
Axcelis Technologies (ACLS) extended above the overbought area of a key buy point, consolidation of 136.48. ACLS climbed 5.2%.
in the software sector, synopsys (SPNS) erupted from a flat base of considerable size. The chip design software company beat estimates for the April quarter and raised its forecast for the full fiscal year. The shares are in a buy zone of 392.89 buy points, which rises to 412.53.
Progressives want Biden to abandon debt ceiling talks
Stock indices took a break from debt ceiling concerns this week after both sides indicated constructive talks. But there is still a huge gap and all the happy chatter in the world cannot hide deep divisions that could lead to crisis as the month approaches.
According to Jake Sherman at the respected political daily Punchbowl News, the progressive wings of the House and Senate could revolt against a debt ceiling agreement that includes concessions to Republicans, and demand that the president invoke the Fourteenth Amendment.
“There is a growing sense within the Senate Democratic Caucus that Biden may have made a huge mistake by entering into direct negotiations with McCarthy. And based on our conversations with them, many Senate Democrats seem to deny that they are, in this scenario, swallowing a deal leaning toward the Republicans. In the House of Representatives – all to avoid default.
Sherman also noted that Sens. Bernie Sanders and Elizabeth Warren could lead an insurrection against any deal. As Warren warned in a statement to Punchbowl, “We’ve got to find a way to save our economy and our good name around the world. Plan A is for Republicans to raise the debt limit in a clean bill. Plan B is to move to the Fourteenth Amendment.”
However, invoking the Fourteenth Amendment is likely to lead to a sell-off in the stock market because many constitutional scholars believe the Supreme Court will overturn it. Further delays could also lead to the US pushing up its debt default dates.
Dow Jones by the numbers
The Dow Jones Industrial Average traded 0.2% lower in the first half while the S&P 500 added 0.4%. The Russell 2000 index of small companies rose just 0.3% as it tested Wednesday’s advance above the 50-day moving average.
Big Tech showed an outperformance again, lifting the Nasdaq 100 by 1.3%. The Nasdaq Composite rose 1.1% as buyers chose to ignore the hawkish federation.
Growth stocks outperformed, with Semiconductor lifting the Innovator IBD 50 ETF (FFTY) 1.4%.
Volume on the New York Stock Exchange and Nasdaq rose moderately above first-half levels on Wednesday. European and Asian markets were generally trading higher.
The 10-year Treasury yield rose to a two-month high, climbing April resistance above 3.60%. Bitcoin has been stuck in a trading range between $27K and $30K.
Weekly jobless claims fell to 242,000, below the consensus of 259,000. Continuing claims decreased to 1.799 million. The four-week moving average of continuing claims fell by 15,000 to 1.812 million. Taken together, these metrics point to continued malaise in the labor market, despite multiple interest rate increases.
April existing home sales of 4.28 million missed estimates of 4.30 million. March was revised down to 4.43 million from 4.44 million. April new home sales will be released on Tuesday morning.
Dow Jones Market Drivers
Dow Jones component Wal-Mart beat estimates for the highest and last quarter for the quarter ended in April, reporting earnings of $1.47 per share on a 7.6% increase in revenue to $152.3 billion. The retail giant cut its EPS guidance for the second quarter but raised its forecast for the fiscal year above the analyst consensus. WMT stock pared gains to 0.4%.
Also in Dow Jones, Cisco systems (CSCO) stock fell just 0.1% after beating fiscal third-quarter earnings and sales expectations. The networking giant earned $1 per share on healthy revenue growth of 13.5% year over year to $14.57 billion. However, some shareholders reached out when the company warned of “long sales cycles” and a 23% drop in total product orders.
Ali Baba (BABA) sold up 3.8% after beating the fiscal fourth-quarter earnings estimates and the Direct Earnings report. BABA stock climbed in the 21- and 200-day lines on Wednesday and fell below those levels in early trading.
BTIG Research has upgraded the IBD 50 ingredient Dynatrace (DT) to buy from neutral, with a price target of 57.
Analyst Gray Powell noted, “DT removed all buy-side targets in print. Growth appears to be stabilizing despite overall headwinds and ongoing customer cloud optimization initiatives.”
DT stock traded up 4.1% on the news and moved up the 48.10 buy point of the three-month cup base. JPMorgan, Wells Fargo and other companies have raised their price targets on Dynatrace.
monastery (DE) wraps up a busy earnings week on Friday morning.
A once-sleepy agricultural equipment giant has turned into a tech game as you develop a fleet of autonomous farming and harvesting vehicles. DE stock has been declining since hitting an all-time high above 400 in November. 2023 earnings are expected to grow at a healthy 31%. DE shares rose 0.2%.
Follow Alan Farley on Twitter at @msttrader.
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