Momentum levels and today’s huge announcement could cause a sentiment shift in the stock market. The Federal Reserve has kept its stance on inflation being “transitory” and any mention of change could shift markets. I’ve identified two defensive plays that would benefit from a shift — and more in today’s stock market recap.
But first…
Stock Market Recap
In the stock market recap, global stocks are mixed today as the world eagerly awaited the Federal Open Market Committee announcement.
The FOMC met for the second day in a row today and had an announcement scheduled for 2 p.m. EDT. Retail sales dropped 1.3% in May. Remember, retail sales make up two-thirds of our gross domestic product. Although disappointing, this could help the case for the Fed to continue adding liquidity to the market by buying bonds.
Analysts don’t expect the Fed to change its “transitory” stance on inflation. They do, however, believe the Fed could hint at future changes in interest rates. This would likely be enough to fuel inflationary fears and cause a sell-off. If we see the bond markets going higher, interest rates would be dropping. This would likely happen with no big Fed changes or hints, and would be good news for tech stocks. If interest rates go higher, investors will wonder if they can get bigger returns from tech or bonds. This would be bearish for tech stocks and bullish for defensive stocks.
The S&P 500 has gone from 90% of its stocks trading above their 50-day moving averages two months ago to only 62% of them today. The S&P 500 has continued on an upward trend despite this, which means that fewer stocks have been driving the index higher. That means the market is increasingly vulnerable. And this usually precedes a pullback.
Roger’s Radar: Top 2 Metal Plays
Schnitzer Steel A (Nasdaq: SCHN) has pulled back near its 50-day MA. SCHN recycles scrap metals and manufactures steel products globally. SCHN has a one-year return of 221.3%. Any mention from the Fed on taking action would likely cause tech stocks to cool off and defensive stocks like SCHN to move higher.
The second play I’ve identified today is a metals and mining ETF with a one-year return of 125.73%. It has also experienced a pullback and may benefit from a sentiment change.
In today’s video, you’ll learn about the imminent narrowing of momentum in the broader indexes… get an update on today’s Fed announcement… whether inflationary stocks will continue trending… whether tech is done rallying or just getting started… and the top stock and ETF on my radar.
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