Russell 2000 Wavers After Fed Rate Hike

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On Wednesday, stocks were hit with a round of selling that accelerated following the Federal Open Market Committee’s 100% vote in favor of raising rates by 25 basis points.

The Dow Jones Industrial Average lost 0.6%, its worst day since October. But the threat most discussed was Federal Reserve Chairperson Janet Yellen’s statement of an acceleration in the pace of increases to two or three in 2017. Each increase was to be a quarter percentage point in order to achieve a goal of 0.50% to 0.75%.

The Dow’s loss blocked, if only temporarily, its rush to achieve 20,000. And the decline had a negative impact on other indices as well: The S&P 500 fell 0.8%, the Nasdaq lost 0.5% and the Russell 2000 was hit with a loss of 1.3%.

The benchmark 10-year Treasury note’s yield rose to 2.523% from 2.479% on Tuesday.

Before the Fed’s announcement, crude oil was already in the red, and the Fed’s move pushed its price lower. WTI (January) fell to $51.04 per barrel, down 3.7%. And that resulted in a loss of 2.1% of stocks in the energy sector of the 500.

At the close the Dow Jones Industrial Average fell 119 points to 19,793, the S&P 500 lost 18 points at 2,253, the Nasdaq fell 27 points closing at 5,437, and the Russell 2000 closed at 1,356 for a loss of 18. The NYSE’s primary exchange traded over 1 billion with total volume of 4.3 billion shares. The Nasdaq crossed 1.9 billion shares. On the Big Board, decliners outpaced advancers by 4-to-1, and on the Nasdaq, decliners led by 2.7-to-1. Blocks on the NYSE increased to 7,195 from 6,213 on Tuesday.

S&P mid-cap (MDY) in Bullish Flag
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Russel 2000 Wavers After Fed Rate Hike

The SPDR S&P Midcap 400 ETF (NYSEARCA:MDY) closed yesterday at the low of the day, and the bottom (support) of a bullish flag. Volume was just average compared to the volume of the last six weeks. The next support is at 296 and then the major support line at 288.40.

Russ 2000 (IWM) mixed signals
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At first glance, this chart looks similar to that of the MDY. However there are two bearish characteristics here: Selling volume is much higher and MACD has issued a short-term sell signal. Support on this chart is first at yesterday’s close at 135 and then at 133, the top of the next flag. Major support is at the line at 126.

Conclusion: The mid-caps and the small-caps are in a non-confirming state, with the small-caps in danger of a further breakdown. But overall the market is still in a powerful uptrend.

Yesterday’s response to an almost certain decision by the Fed caused a bit of profit-taking. Another attempt at the Dow’s psychologically meaningful level at 20,000 will have to wait for another round of buying. But first, the bulls must decide what sectors are undervalued. Stocks that benefit from an investment in the repair of the nation’s infrastructure had a run and are still less expensive than banks, utilities, etc., and consider our Trade of the Day for your long-term portfolio.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/12/russell-2000-wavers-rate-hike/.

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