After peaking at 32,009 just two weeks ago, the Dow Jones Industrial Average has tanked more than 1,460 points, or 4.5%. But it is trying to bounce off session lows. Stocks today got hammered by confusion over comments on financial markets by the head of the U.S. central bank.
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Bitcoin, which recently surpassed $52,000, fell more than 4% to $43,038. Ethereum, another digital currency growing in popularity, fell nearly 3.7%.
Federal Reserve Chair Jerome Powell noted that he’s concerned about potential dislocation in the financial markets but did not make any suggestion that it’s time to immediately rethink policy on the cost of lending.
“There’s a growing worry that the economy may be running away from the Fed. While the thought of rapid change could be enough to scare investors now, we see higher inflation as a long-term positive for the market,” Lindsey Bell, chief investment strategist at Ally Invest, commented in an email sent to IBD. “We’re still seeing historically low levels of inflation, so it would take a lot of change for inflation to get out of control. If you’re worried about inflation, there are ways you can protect your portfolio.”
Powell and other Fed board governors are slated to meet on Tuesday and Wednesday in the next FOMC meeting.
At one point on the Cboe, the yield on the benchmark U.S. Treasury 10-year bond hit 1.55%.
That’s sharply up from 0.93% at the start of 2021.
Beyond Dow Jones
Meanwhile, new breakouts have quickly lost traction.
Avient (AVNT), a recent showcase in the IBD Stock Of The Day, reversed badly after clearing a 46.48 proper buy point in a seven-week cup pattern on Wednesday.
The member of IBD’s plastics industry group, Avient specializes in coloring, polymer and additive ingredients. In the fourth quarter, thanks in large part to a key acquisition, the Avon Lake, Ohio-based company posted a 53% rise in fourth-quarter earnings to 52 cents a share on a 51% jump in sales to $997 million.
Avient remains above key technical levels, including the 21-day exponential moving average.
Broad-Based Profit-Taking
At Thursday’s session low of 30,547, the blue chip Dow fell as much as 2.3% and sliced below its critical 50-day moving average. The Dow industrials are trying to trim those severe losses in the final hour of trading and at around 3:05 p.m. stooped 1.2% lower. The Nasdaq got hit harder, falling around 2%; the S&P 500 slid nearly 1.3%.
Small caps also got throttled by sellers; iShares Russell 2000 (IWM) at one point fell more than 3% and clipped its own 50-day moving average for the first time since late October. The Innovator IBD Breakout Opportunities (BOUT) exchange traded fund plunged 6.1%.
In a healthy market, key equity indexes trade above their 50-day lines — which plot a stock or index’s average closing price over the past 50 trading sessions — and lead them higher.
On Feb. 25, IBD made a downward revision on the current outlook for stocks.
A New Rally For Energy?
Meanwhile, a decision by OPEC and Russia to extend current cuts in producing oil to April fortified buying in the commodity. West Texas Intermediate futures jumped 3.6% to $63.53 a barrel, extending a year-to-date gain to almost 31%.
Oil exploration firms rode the bullish news. Dow industrial component Chevron (CVX), Diamondback Energy (FANG) and Matador Resources (MTDR) all rose.
The trio currently make the watchlist of top stocks on IBD Live.
Chevron recently cleared resistance near 95 and has risen admirably.
Notice how the relative strength line has been rising sharply since early February. This means the megacap energy stock has been outperforming the S&P 500 in a big way.
More specifically, Chevron surpassed a 95.92 buy point in a long, deep bottoming base. From November to early January, CVX formed a mediocre handle with an intraday high of 95.82. Add 10 cents to the highest price within the handle to find the correct buy point.
The Jan. 14 breakout attempt sputtered. But Chevron went on to form a second handle, and this one featured fewer down days in heavy volume.
A new buy point at 96.41 emerged. CVX has gained 11.5% from this new pivot point.
Matador Resources: In Bull Run Mode
Matador has gotten extended after rushing past a 13.94 entry in a long, deep cup with handle in early January. The small cap has yet to test its 10-week moving average; the first and second rebound off the 10-week line can offer a follow-on entry point, but success is higher when the market is in a confirmed uptrend.
Analysts surveyed by FactSet expect the Dallas-based oil and gas explorer to grow earnings 222% this year to $1.77 a share and another 34% in 2022.
in 2020, Matador’s profit slumped 54% to 55 cents a share. That plunge has impacted its Earnings Per Share Rating, now a 48, according to IBD Stock Checkup.
More Growth Stocks To Watch
Meanwhile, stocks in the MarketSmith Growth 250 that bucked Thursday’s sell-off include multimedia content provider Discovery (DISCA), First Republic Bank (FRC), Callon Petroleum (CPE) and casual apparel chain American Eagle Outfitters (AEO).
Please follow Chung on Twitter: @saitochung and @IBD_DChung
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