The Dow Jones Industrial Average rallied ahead of the next Fed meeting. First Republic (FRC) stock plunged despite reports the troubled bank is seeking the aid of JPMorgan Chase (JPM) as it battles to stay afloat. The Donald Trump SPAC, Digital World Acquisition (DWAC), rocketed despite more Stormy Daniels legal drama.
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There was some bullish action even though the stock market is still gripped by a correction. Wheaton Precious Metals (WPM) attempted a weak breakout, while Royal Gold (RGLD) joined Leaderboard amid an encouraging move.
The Federal Open Market Committee Meeting, which will be led by Fed Chair Jerome Powell Tuesday and Wednesday, looks to be key.
“U.S. stocks are wavering as risk aversion won’t be going away until markets are confident that the Fed is done with their rate hiking campaign,” Oanda senior market analyst Edward Moya said in a note to clients. The banking system still doesn’t have any confidence as Wall Street tries to send yields sharply lower, he says.
It looks like “credit conditions will continue to tighten while monetary policy conditions are expected to loosen as the economy heads to a recession,” Moya said.
Nasdaq Lags, Small Caps Pop
The Nasdaq was lagging after last week’s outperformance but was still slightly positive. It rose 0.3% in late trading. Enphase Energy (ENPH) impressed with a gain of more than 4%.
The benchmark S&P 500 was up nearly 1%. It is trying to get back above the 200-day moving average. NRG Energy (NRG) was a strong performer here, rising more than 6% as it seeks to reclaim the 50-day moving average.
The S&P 500 sectors were all positive or nearly positive. Energy, materials and financials were all having a good session. Consumer discretionary and technology had the toughest time.
Strong action among financials was bolstering small caps, with the Russell 2000 up 1%. Growth stocks reversed higher, with the Innovator IBD 50 ETF (FFTY) up 0.6%.
Dow Jones Today: Caterpillar Up, Microsoft Stock Lags
The Dow Jones Industrial Average was clawing back some of its recent losses as it rose more than 300 points. This translates to about 1%.
Industrial machinery maker Caterpillar was faring best on the Dow Jones today as it rose nearly 3%. It was closely followed by Honeywell International (HON).
Microsoft (MSFT), which surged last week as investors sought safety in Big Tech stocks, lagged as it fell more than 3%. The stock fell back below the 276.86 buy point of Friday’s breakout.
Donald Trump SPAC Rockets Despite Legal Woes
There is an adage that there is no such thing as bad publicity.
And that was certainly the case Monday for the Trump-linked SPAC, Digital World Acquisition.
It soared more than 12%, briefly retaking the 50-day moving average in the process. The stock got turned away at that line, though.
The former President finds himself embroiled in yet more legal drama.
He claimed on his Truth Social platform last weekend that he will be arrested Tuesday on charges following an investigation into a $130,000 payment made to porn star Stormy Daniels in 2016. Despite the payment, Trump denies having an affair with the adult actress.
Trump, who is running to reclaim the White House, urged supporters to ” ‘PROTEST, TAKE OUR NATION BACK!’ “
In addition, a defamation trial over rape claims involving Trump was indefinitely suspended Monday.
DWAC stock is down more than 90% from its Oct. 22, 2021, high of 175. It surged early on when news broke the blank check firm was moving to take public Trump Media and Technology Group, which includes Truth Social.
Bank Stocks: First Republic Plunges, Sends JPMorgan SOS
While bank stocks in general were rallying, embattled First Republic continues to struggle.
Bank stocks reacted positively to the news Credit Suisse (CS) is to merge with fellow Swiss banking giant UBS (UBS).
But First Republic stock was a noteworthy laggard, falling more than 40%. Liquidity fears remain despite JPMorgan leading a consortium that sunk a combined $30 billion in deposits into the bank, which serves well-heeled customers.
It continued to fall despite news JPMorgan Chase is now advising the firm on strategic alternatives. It may look to raise further capital, while a sale of the bank is another possibility.
FRC stock is now down nearly 89% so far in 2023 and is miles below its major moving averages.
However regional banks were trying to fight back after the debacle of last week. The iShares U.S. Regional Banks ETF (IAT) was up nearly 3%.
Outside Dow Jones: New Leader Eyes Entry
Investors should be busy building up their watchlists for when the current correction ends.
New Leaderboard stock Royal Gold is worthy of consideration. It has been added to the list of top stock as it bullishly clears the 50-day moving average. It is now looking to clear a cup-with-handle base buy point of 131.99.
Royal Gold acquires and manages precious metal streams and royalty interests. Overall strong performance is reflected in its IBD Composite Rating of 90 out of 99.
Wheaton Precious Metals is just below a buy zone after earlier testing a cup-with-handle entry of 46.63.
The relative strength line has just hit a fresh high, an encouraging sign. It is in the top 9% of stocks in terms of price performance over the past 12 months.
Gold often rallies in value amid times of economic uncertainty. Recent worries over the banking system have given gold stocks a boost.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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