U.S. equities are responding strongly to the announcement of another Federal Reserve interest rate hike on Wednesday. This was the hike second in three months, representing a big acceleration from the prior pace of just two hikes in the last 10 years. Moreover, it was a “hawkish hike” as Fed officials also increased its year-end 2019 interest rate estimate to 3%.
Markets, oddly, reacted in exactly the opposite way one would expect.
Stocks rallied strongly after the announcement (rate hikes are bullish now? Even though tightening campaigns result in bear markets and recessions?). Treasury bonds rallied, pushing down long-term rates. Gold and silver surged, ostensibly on inflation expectations, and the U.S. dollar weakened.
These could all be head fake moves, or perhaps an indication the market isn’t convinced the Fed will follow through with its hawkish threats. Or maybe the fear is that the Fed’s aggressiveness will prove a policy mistake, especially with the Atlanta Fed’s GDPNow real-time estimate of Q1 GDP growth falling to 0.9% this morning.
Volatility and strangeness aside, the bounce is unable to mask some fresh breakdowns underway in airline stocks. Significant technical breakdowns were seen near the open before the bulls could wrestle prices higher and cover the damage. I think these are dead-cat bounces ahead of continued weakness.
With that in mind, here are five airline stocks to avoid.