The Dow Jones Industrial Average jumped almost 400 points ahead of the next Fed meeting. First Republic stock plummeted despite reports the troubled bank is seeking the aid of JPMorgan Chase as it battles to stay afloat. The Donald Trump SPAC Digital World Acquisition rocketed amid more Stormy Daniels legal drama.
There was some bullish action even though the stock market is still gripped by a correction. Wheaton Precious Metals attempted a weak breakout, while Royal Gold joined Leaderboard amid an encouraging move.
The Federal Open Market Committee Meeting, led by Fed Chair Jerome Powell on 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 added.
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.
Treasury yields rose as the yield curve continued to stay inverted. The 10-year yield surged 10 basis points to 3.5% while the two-year yield spiked 12 basis points to 3.97%.
Nasdaq Lags As Small Caps Jump
The Nasdaq lagged the other major indexes after last week's outperformance. It closed up 0.4%, near highs for the day. Enphase Energy impressed with a gain of 4.8%.
The benchmark S&P 500 rose 0.9%. However, it failed to decisively move above the 200-day moving average. NRG Energy was a strong performer here, rising 6.8% to end back above the 50-day moving average.
The S&P 500 sectors were all positive. Energy, materials and industrials were the top performers. Consumer discretionary and technology made the slimmest gains.
Solid action among financials bolstered small caps, with the Russell 2000 rising 1.1%. Growth stocks reversed higher, with the Innovator IBD 50 ETF making a modest 0.4% gain.
Dow Jones Today: CAT, HON Gain, Microsoft Stock Falls
The Dow Jones Industrial Average managed to claw back some of its recent losses as it rose just shy of 400 points. This translates to 1.2%.
Industrial machinery maker Caterpillar was a top performer on the Dow Jones today as it rose 2.5%, as did Dow Inc.. But Honeywell International fared best of all with a 2.8% gain.
Microsoft, which surged last week as investors sought safety in Big Tech stocks, lagged as it fell 2.6%.
The stock fell back below the 276.86 buy point of Friday's breakout, MarketSmith analysis shows. Intel was the only other component to end the day in negative territory.
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 closed the session off highs but still rose 11%. It briefly retook the 50-day moving average but ultimately 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 An SOS
While bank stocks in general were rallying, embattled First Republic continued to struggle.
Bank stocks reacted positively to the news Credit Suisse is to merge with fellow Swiss banking giant UBS. Banking fears seem to be somewhat sated for now.
But First Republic stock was a noteworthy laggard, falling 47.1%. Liquidity fears remain despite JPMorgan leading a consortium that sank 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 90% 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 gave up some early ground buy still rose 2.2%.
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.
