Stocks were routed this afternoon following Fed Chairman Jerome Powell’s post-FOMC speech. The Dow, S&P, and Nasdaq Composite all plunged, driven lower by hawkish talk from Powell.
“We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected,” he said after a 75 basis point rate hike was announced.
Powell added that it was “premature” to talk about pausing hikes at this point, and that “we have a ways to go.”
Stocks temporarily rallied prior to Powell’s press conference on a Fed statement that accompanied the rate hike.
“In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” read the statement, which investors initially interpreted as bullish.
Sentiment flipped sharply as Powell said the “ultimate level of interest rates will be higher than previously expected.”
The only thing worse would have been a surprise 100 basis point hike. In response, the S&P cratered, closing below the 10-day moving average, 50-day moving average, and its minor bullish trend (yellow trendline) in one fell swoop.
Another bad day tomorrow would likely confirm a deeper bearish continuation. The stochastic indicator suggests the market could fall further as well, potentially testing the October lows in the process.
Do not be surprised at all to see the major indexes set new lows like they have all year following minor rallies.
Disney (NYSE: DIS) is in a similar predicament after failing to rally significantly above the 50-day moving average. DIS fell precipitously today, closing below the 10-day moving average and its minor bullish trend (yellow trendline).
DIS also ran into support (green line) at the early October high. The stochastic indicator suggests that DIS has ample room to fall, too, and DIS set a lower high relative to the highs of mid-September.
Overall, DIS is in a tough spot, as is the general market.
For those reasons, it might make sense to take a bearish position on DIS with a trade trigger of $100.21, below today’s low, as investors weigh the latest Fed meeting.