The Dow Jones closed lower after leading the upside early Wednesday. Stocks abruptly turned negative after the Federal Reserve's rate decision and Chair Jerome Powell's news conference.
The Dow Jones Industrial Average closed down 0.4% after paring earlier losses of about 1%. The Nasdaq closed 0.8% lower after trading down 1.3%, the hardest-hit index. The S&P 500 lost about 0.6%. Volume remained lower on the Nasdaq and on the NYSE vs. the close on Tuesday, according to early data.
As expected, the Fed slowed the pace of its rate hike to a half-point, targeting a range of 4.25% to 4.5%. But Federal Reserve policymakers expect to hike their key interest rate to 5.1% next year, which was higher than Wall Street anticipated. This sent the indexes down sharply.
Before today's Fed announcements, the market was expecting policymakers to take another step down at the next Fed meeting, with the odds of a quarter-point hike on Feb. 1 at 60%. That number fell to about 47% shortly after the Fed announcement. The Fed also expects the unemployment rate to rise to 4.6% next year as growth slows to 0.5%.
This week, the market rally has ripped back and fourth, but the indexes are still coming out ahead, despite today's losses. Wednesday's action is similar to Tuesday's, where investors initially saw gains in early trading, but the upside fizzled in afternoon trading.
The S&P 500 has successfully held above the 3,900 level, a key area of support, but is now moving further away from support at its 200-day moving average.
Delta Air Lines Higher After Raising Outlook
Delta Air Lines rose more than 1.3% after raising its Q4 outlook and 2023 guidance. The Atlanta-based carrier cited strong demand for holiday travel, saying EPS could nearly double in 2023.
Shares are trading slightly above their 50-day moving average and trying to regain the 200-day line. However, DAL stock is not actionable at this time and investors should wait for a new base to form.
Outside Dow Jones: Earnings On Deck
Earnings reports are due later this week from software maker Adobe and homebuilder Lennar.
Adobe is set to report after the market closes. ADBE shares are up over 2% so far this week as analysts forecast earnings of $3.50 per share on revenue of $4.53 billion.
Meanwhile, Lennar shares are up close to 3% this week, ahead of its earnings due out after the close. Analysts expect $4.90 per share on sales of $10 billion. One of the nation's largest homebuilders, Lennar has been rallying since mid-October and is trading above its 50-day and 200-day moving averages.
Solar Energy Stock Scores Breakout
Outside Dow Jones, Array Technologies scored a breakout early Wednesday as shares of the solar energy firm moved above a 23.60 cup-with-handle entry in heavy volume. The stock popped more than 7% and took out the buy point while the relative strength line hit new highs. But in late afternoon trading, ARRY undercut the buy point by a few cents.
Shares have been on a tear this week and are up over 14%. The solar industry's group strength is also supporting the breakout; it's currently No. 3 out of IBD's 197 groups. ARRY is certainly a stock to watch.
While earnings took a hit last year, analysts expect 2022 full-year EPS to rise 750% to 34 cents, followed by a 182% growth spurt in 2023.
Follow Rachel Fox on Twitter at @IBD_RFox for more Dow Jones and stock market commentary.
