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The Dow Jones Industrial Average slid while the Nasdaq dived after a senior Fed official made hawkish comments. Twitter (TWTR) popped again on the news that Tesla (TSLA) CEO Elon Musk is joining its board. Donald Trump SPAC Digital World Acquisition (DWAC), a rival social media player, plummeted.
UnitedHealth (UNH) was a top blue chip, while Apple (AAPL) lagged on the Dow. Meanwhile, three notable stocks are crafting bases despite the negative action. Raymond James Financial (RJF), KnowBe4 (KNBE) and Caterpillar (CAT) are names worthy of consideration for one’s watchlist.
X
Volume was up on both the New York Stock Exchange and the Nasdaq according to early data, a negative on a down day. Volatility popped, with the Cboe Volatility Index, or VIX, rising about 13%.
Meanwhile, the yield on the benchmark 10-year Treasury note spiked 14 basis points to 2.55%. Oil retreated, with West Texas Intermediate crude dipping 3% to just over $100 per barrel.
Stocks were hit after Federal Reserve Governor Lael Brainard said the Fed could start cutting its balance sheet as soon as May. She also said a reduction could happen at “a rapid pace” amid spiraling inflation.
She made her comments in a speech on household inflation experiences at the Federal Reserve Bank of Minneapolis.
“Currently, inflation is much too high and is subject to upside risks. The (Federal Open Market Committee) is prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted,” she said.
In addition, she said they are committed to “bringing inflation back down to its 2% target.”
Brainard is seen as one of the more dovish members of the FOMC, so her robust language underlines how the Fed has rising inflation firmly in its sights. It comes ahead of the release of March FOMC meeting minutes on Wednesday.
The Nasdaq took a dive, ending the session down 2.3%. Marvell Technology (MRVL) was one of the worst laggards as it gave up more than 6%.
The S&P 500 also slid, falling 1.3%. Monolithic Power Systems (MPWR) lagged, falling over 7%.
U.S. Stock Market Today Overview | ||||
|---|---|---|---|---|
| Index | Symbol | Price | Gain/Loss | % Change |
| Dow Jones | (0DJIA) | 34642.36 | -279.52 | -0.80 |
| S&P 500 | (0S&P5) | 4525.33 | -57.31 | -1.25 |
| Nasdaq | (0NDQC ) | 14204.17 | -328.38 | -2.26 |
| Russell 2000 | (IWM) | 203.11 | -4.80 | -2.31 |
| IBD 50 | (FFTY) | 37.76 | -1.49 | -3.80 |
Last Update: 4:12 PM ET 4/5/2022 | ||||
A slight majority of the S&P sectors finished in the red. Health care and utilities were the best performers, with consumer staples also rising. Technology and consumer discretionary were the worst laggards.
Small caps also struggled, with the Russell 2000 falling 2.3%.
But it was growth stocks that felt the full fury of the bears. The Innovator IBD 50 ETF (FFTY), a bellwether for growth stocks, plunged 3.8%.
The Dow Jones Industrial Average fared better than the other major indexes but still fell 0.8%
UnitedHealth was the Dow stock that fared best, closing up 1.5%.
Apple stock was among the weakest on the Dow Jones today. It fell nearly 2%, losing ground on its latest buy point of 176.75.
But it was Boeing (BA) that fared worst of all. It closed the day down 4.5%.
Twitter continued to make progress following Monday’s parabolic move. It ended the day up 2%.
It was boosted by the news that Elon Musk is to join the company’s board of directors after he snapped up a 9.2% stake in the firm, becoming its biggest shareholder in the process.
CEO Parag Agrawal said in a tweet that the billionaire will “bring great value to our board.”
“Looking forward to working with Parag & Twitter board to make significant improvements to Twitter in coming months!” Musk replied.
He already seems to be trying to shake things up, and has started a Twitter poll to ask users if they want an edit button.
Twitter’s gain resulted in pain for Digital World Acquisition. A key property for the company will be the social media app Truth Social. It was launched as a rival to Twitter as Trump, who has been banned by Twitter, and many critics say it restricts free speech. But if Musk pushes to address this, then it undercuts the appeal of Truth Social.
The stock was smacked nearly 16% lower, and it has now lost almost a quarter of its value so far this week. DWAC was also smashed lower Monday on reports that head of technology Josh Adams and product development chief Billy Boozer have both stepped down.
Spirit Airlines (SAVE) soared more than 22% after the New York Times reported it is subject to a takeover bid.
JetBlue is said to have offered $3.6 billion to acquire the ultra-low-cost carrier.
This comes despite Spirit moving to merge with Frontier Airlines (ULCC). The budget carriers announced in February that they are coming together in a $6.6 billion deal.
Spirit CEO Ted Christie said at the time that the merger with Frontier will create “an aggressive ultra-low-fare competitor” that would increase competition and result in “more consumer-friendly fares.”
The boards of both airlines approved the deal, which is expected to close in the second half of 2022.
JetBlue stock ended the session down 7%. Frontier stock rose nearly 4%.
‘Rapid’ Fed Shift Hits Market Rally; How Musk Stole Trump’s Thunder
A tough day can still be of use for stocks that are building bases.
Investment bank stock Raymond James Financial has now formed a cup-with-handle base, according to MarketSmith analysis. It is shooting for a 114.10 buy point.
The stock boasts excellent earnings performance. It posted EPS gains of 42% to 122% in the past four quarters. Revenue also has been spiking.
IBD 50 stock KnowBe4 is forming a double-bottom base with an ideal entry point of 26.10.
Earnings are still in the single digits for the IPO stock. Institutions are starting to get behind the cybersecurity play, with its Accumulation/Distribution Rating coming in at a solid B+.
Caterpillar is forming a cup-with-handle base amid a much longer consolidation. A potential near-term catalyst is the fact that it reports earnings April 28. Analysts expect $2.34 a share in earnings, which would be a decline from a year ago.
An approach highlighted by Investor’s Business Daily is to use options as a strategy to reduce risk around earnings. It’s a way to capitalize on the upside potential of a stock’s move around earnings, while reducing the risk.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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