Stocks Slump After Fed Holds Rates Steady; WaterBridge, Nova, Curtiss-Wright In Focus

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0:39Ken Shreve:Good afternoon, everyone, and welcome to Stock Market Today for Wednesday, March 18th. It's Alyssa Kaur, I'm here. And bearish action in the stock market today with the major indexes looking at risk around long-term support levels. We'll get to that and also an exciting earnings report after the close in Micron. Joining me now to discuss all that and more is my colleague, Ken Shreve. Ken, what do you have for us today? Yeah, lots of headlines to go over today, Allie. We had our second straight hotter-than-expected reading on wholesale and prices, a Fed meeting, but found three different stocks, oil and gas stock, a chip equipment stock, and aerospace and defense stock.

1:24Let's talk about Waterbridge Infrastructure, WBI, in the chip equipment group. a little-known name Israeli company called Nova, N-V-M-I. And in the Aerospace and Defense Group, it's going to be Curtis Wright, CW.

1:40Ken Shreve:All right, all worth reviewing. We'll get to those, but first we want to take a closer look at the major indexes, and we'll start with the NASDAQ composite. We've been watching very closely the action here. Actually, this is the S &P, so why don't we start there? The S &P now very close to that 200-day moving average, Ken, with that major index down some 1.4 % on the day. Even harder hit was the Nasdaq composite, the tech-heavy index down 1.5 % today, closing again below that 200-day line, a battleground there. And the Dow down 1.6 % on the day, closing below its own 200-day line. And the Russell 2000 was also down 1.6 % today around recent lows, still above the 200-day.

2:33Ken Shreve:But still not a very good look here, Ken. So with the S &P closing below the 200-day, it also closed below Friday's low. So we don't like seeing either of those things happen, Ken. kayak gets my flight hotel and rental car right so i can tune out travel advice that's just plain wrong bro sky coin way better than points never fly during a scorpio full moon just tell the manager you'll sue instant room upgrade stop taking bad travel advice start comparing hundreds of sites with kayak and get your trip right bad advice you talking to me kayak got that right? No, I mean, cold, cold comfort is that it's holding above 6600 and holding above that that 200 day moving average.

3:30But yeah, the rally, you know, the rally is officially, officially dead here for the S &P 500. I mean, the market was was trying to hold up well all day. And And then we had the Fed policy statement came out at 2 o 'clock. And then there was just kind of this persistent selling and just kind of a close near lows. The Fed, as expected, just kept the federal funds rate unchanged at 3.5 and 3.75 percent. And, you know, just going through some of the highlights of what he said, I don't think he said anything super surprising. He said the economy has been expanding at a solid pace. Talked about consumer spending still in pretty good shape.

4:30Talked about sluggishness in the housing market. We know that. Talked about the fact that some committee members concerned about the low level of job creation in recent months. So we've seen kind of a mixed jobs picture and maybe this low level of job creation, if this is going to have maybe a kind of a negative effect on the unemployment rate going forward. So maybe the market took that to be a little negative. So, you know, but again, before the open, two straight bad readings from the producer price index. We had a bad reading for January prices and then, you know, bad reading again this morning.

5:14But the market initially took the producer price index in stride. We actually almost tried to turn positive in the morning, but then we just kind of held fairly mild losses for a good portion of the session. And then the selling just kind of picked up the pace, like you noted there, late in the day. And that can happen when you're in kind of this market that's been kind of struggling near the 200-day moving average. You get these kind of, you know, maybe strong opens followed up by weak closes. So this was not the kind of close that the bulls were hoping for. Again, I don't think there were any big surprises from the Fed, but this is a market that has been under some distribution ever since the NASDAQ turned lower below that 24 ,000 level.

6:06We've seen a lot of institutional selling. We had a nice rebound off that 200-day moving average about 10 days ago, that nice reversal higher. And it was a good, solid first day of a rally attempt for the NASDAQ, but it really didn't amount to much. And then, you know, the selling today is just a reminder that this market still has some work to do. And it's still, you know, kind of on the sick side here. Yeah. Yeah.

6:35Ken Shreve:So the rally attempt is still intact for the NASDAQ because we are technically above that reverse. Still holding above that. Yep. Yeah. By a thread, we did close below this quasi follow through day. We know that the volume didn't qualify, even though it was gained at 1.2%. But we also noted that even with that, it was in a weak position. And looking at a historical example like we did on IBD Live this morning, something similar position-wise didn't pan out, even though it did have that volume requirement. So we're back below the 200-day. And the S &P, with it undercutting Friday's low, the rally attempt slate is wiped clean, Ken.

7:24Ken Shreve:So we've got to start over with the S &P. Yeah, exactly. So and even I know Webby this morning on IBD Live, our chief market strategist, even if he was even if he was looking at at that Monday day where we had that one point two percent gain on the on the on the NASDAQ, you know, even though we're not counting distribution days. I mean, today was was a distribution day for the NASDAQ volume did pick up the pace. It was a higher volume decline. Even if we were looking at Monday as a follow-through day, when you get a distribution day so soon after a follow-through day, it really does call it into question.

8:05So it was a day of strength, definitely, on Monday. But we're still holding above that prior low when we reversed higher off the 200-day moving average. So technically, this is, what, the eighth day of a rally attempt. So we'll keep counting and we'll keep looking for a follow through day, but just not a good day for the bulls at all. But, you know, really, it was not much new from the Fed today. He talked a little bit about stagflation and we saw stagflation in the 70s, but he didn't want to, you know, Fed Chairman Powell didn't want to talk about the prospects for stagflation, still saying it's way too early to call it now.

8:53Certainly the market is concerned about that possibility with the job market being a little mixed and oil prices today. Oil was a little bit higher. I think it closed about 1 % higher today. It did hit a high of$99 a barrel. It settled a little bit below that. But rising oil prices are a problem for the market here. If they stay high, Chairman Powell acknowledged that that is certainly not going to help inflation in the near term. So there clearly are some worries about the market here that if oil prices stay high for the foreseeable future and if this Iran conflict doesn't resolve as quickly as the market hopes it will, So that could result in sticky inflation and could cause some problems.

9:51So the market's just trying to resolve that. And that pretty thick layer of uncertainty could take a little while to resolve here.

9:59Ken Shreve:Right. Okay, let's take a quick look at the 10-year Treasury yield. Ticking back up today after a two-day break. But since the conflict broke out and since oil broke out, we've seen the yields on the rise here, Ken. And with the Fed happening today, even though rates held unchanged, we did see a move here in the 10-year. Yeah, again, this is kind of problematic for the market and maybe another reason why you had some softness in the major stock indexes today. And I just mentioned this on on IBD Live. You have you've had this relentless rise in the yield. This is basically corresponded with the with the start of the war and with the with the with the breakout of with the oil, you know, with the with the breakout in oil and in USO.

10:55So rising rising bond yields, rising oil prices, that's typically not going to go hand in hand with a with a stock market rally. So I kind of lost track of how much that 10-year yield strengthened today. I know it was up a little bit. So we don't want to see that 10-year yield continue to rise. But certainly the prospects for rate cuts have diminished quite a bit. There was a time earlier in the year where the market was hoping for two rate cuts. Now, the Fed is looking at one at this point, one before the end of the year and maybe one next year. So still a very fluid situation, but rising bond yields was not a help to the market either today.

11:47Ken Shreve:Right. Okay. Well, let's take a look at SMH, the chip sector. We are going to really be keeping a close eye on this come tomorrow's regular session. with Micron's earnings, which we will discuss at the end of our little wrap-up here. Dig into that. We know that there could be a ripple effect on the chip sector, on the AI theme. So this is a sector that we're watching very closely. Yeah, and it was really outperforming for a good portion today, even when the market was lower. And again, for a good portion of the morning, the market was really holding itself together and performing pretty well ahead of 2 p.m.

12:30Eastern when we got the policy statement. The SMH was outperforming and the NASDAQ 100. We were seeing nice days of outperformance from Intel, from AMD, and a lot of chip equipment stocks. And we're going to talk about one in a little bit that outperformed today. And you can still see AMD ended with a 1.6 % gain. And how did Intel do today? You might have just pulled it up. Yeah, I did.

12:57Ken Shreve:It was also up on the day of 2.2%. Intel. So we still saw some outperformance in the chip space. And a lot of chip equipment stocks outperformed as well. So even though SMH did reverse lower, getting some early resistance at the 50-day moving average, still seeing some good outperformance in the semiconductor sector. sector. And really, you know, throughout the day today, I was seeing a lot of stocks still showing good supporting action at the 10-week moving average. So it'll be interesting to see how Micron trades in the after hours and what kind of day it brings about for tomorrow. But I was encouraged today, at least, to see a lot of stocks still holding support, especially in the chip equipment group, a lot of stocks, you know, holding support at their 10-week lines.

13:49And so we'll see. We'll see what tomorrow brings. But right now, SMH getting some early resistance at the 50-day line here. Right.

13:59Ken Shreve:It is close to that round number at 400 and some recent highs in this pullback within the broader context of a really nice longer-term uptrend. So our news editor, Ed Carson, was pointing out that perhaps if you want to ride the coattails of Micron's earnings because that stock is already pretty extended by some measurements. One way to play the strength in chips, if we do see that tomorrow, if this does progress as a setup, would be with this chip sector ETF. So like you said, we'll have to see and we'll get to Micron here soon. The stock not moving more than 1 % at this time. So we have a little bit of time to to get to the juicy details there.

14:46Ken Shreve:But first let's go to WBI water bridge infrastructure, oil and gas machinery here, Ken a handle setting up. And this is a recent IPO in the oil and gas space. Tell us more. Yeah, they they're a provider of sort of water management solutions for oil and gas explorers. So these companies, E &P firms, need a lot of water at these places where they're doing a lot of exploring for natural gas and oil. And we like these IPO setups. Waterbridge is a new issue, as you can tell. It doesn't have a long trading history. But it's a compelling growth story here. And it's setting up in a pretty nice IPO base.

15:38We call this a cup with handle base. The weekly chart tends to kind of smooth out the day-to-day volatility. It is prone to volatile price swings. If we go back to the daily chart, it is a volatile stock. I've seen several research firms saying this has a market cap of$3 billion. Other firms saying it has a market cap of$1 billion. It just depends on how many shares outstanding they're counting. So I'm a little unclear. I see just different market caps for this company. But a nice day of outperformance. We're still seeing a lot of oil and gas stocks outperforming in this market with obviously oil prices getting a firm bid here.

16:27Fundamentals look pretty good at Waterbridge. So I don't know that the stock is quite ready here, but I think it's a good one for the watch list just because it's a new issue. And again, still a compelling growth story here. We like the new companies still in the early stages of growth, and they seem to provide a new product, new service. And for a new issue, it seems to have a lot of positive qualities here. So the setup looks good. It kind of broke out over a little mini trend line today. But if the market can hold itself together here, this is one to keep an eye on and could be in the early stages of a move here.

17:10Ken Shreve:Sounds like a plan. I like how you're manipulating that chart here. I know. Isn't that so fun? I love it. I love it. I'm a huge fan of these dynamic charts and the new market surge. Okay, moving on. Let's go to NVMI. This is that smaller name in the semi-equipment group that you were talking about, Ken. Really interesting chart action here. Compelling setup, up 2.8 % on the day as it works on the right side of a base. You've got a trend line. You've got to bounce off of some of the moving averages. Tell us what you're seeing here. Well, it's a pretty decent-sized company. They're based in Israel,$14 billion market cap, so it's definitely well into the mid-cap size here.

17:57Pretty good annual earnings estimates here. Their sales growth has slowed a little bit in recent quarters, but this is a very interesting company here because TSMC, Taiwan Semiconductor, is a pretty big company, a pretty big customer of Nova. So Nova is tracked in the chip equipment group, and Intel is a big customer as well. So Nova's equipment is just used during the quality control process when Taiwan and TSMC and Intel are making the chips. And I think it's just a little known name in the chip equipment group that is broke out. It came down to the 10-week moving average and it is now setting up in a new base here.

18:54So some people may look at this and just say it's coming down and testing the 10-week moving average. You can buy it off of the first 10-week test. Other people may say it's kind of breaking out over a trend line here as it builds a base. Either way, the stock, in a good market, in a good healthy market, I would say the stock is actionable right here. The relative strength line is in new high ground already. Very, very, very, very strong. So bounce off the 10-week line. First test of the 10-week line, it looks actionable. Or you can just kind of watch it and wait and see if it sets up in a good base here.

19:31So high-priced stock, but a top-rated stock in the chip equipment group. Still seeing a lot of leadership in this group. It's still a top-rated group. Number four ranked group out of 197. So lots of leadership in this group. Everybody knows the, you know, the LAM researches and the applied materials, but lots of newer, younger names in this group that are really, really doing well. And I think Nova is a good name to watch, just sort of a chip equipment group that helps TSM and Intel and other companies just with the quality control, the chip making process. Yes.

20:13Ken Shreve:Okay. And we also want to check out Ticker CW. This is Curtis Wright in the Aerospace Defense Area. This group range number 17 out of the 197 groups that we track. And kind of like Nova, you had a breakout a couple of months ago, an uptrend, now an orderly pullback as it sets up once again. And so far this week, up about 5 % or so. Going closer to the action on the daily chart here, you can see a trend line in the works as the stock trades just shy of 700. Another really strong industry group in the market. We've been talking a lot about the Aerospace and Defense Group, 17th out of 197. Really broad-based leadership in the Aerospace and Defense Group as well.

21:02So Curtis Wright, another name that a lot of people might not know about, but I mean, market cap of 25 billion. So this is this is a big a big time player. They make highly engineered components for commercial aircraft, military aircraft, naval defense. They also make components for the U.S. Navy, the nuclear part of the U.S. Navy, nuclear power plants as well. So they have this nuclear side of their business as well. So, again, just another great breakout here and test of the 10-week line. So I like these breakouts and stocks that come down and test their 10-week moving average. Seeing a lot of that in the market right now.

21:55So, you know, while we're seeing a lot of sell signals in the gold space, a lot of breakdowns and stocks violating their 10-week lines and giving sell signals, seeing plenty of other leading stocks and leading industry groups that are coming down and finding support at their 10-week line. And so at least from that perspective, it gives me some optimism that this market may still be OK. But obviously, with today's close, it was a little disappointing. But names like Curtis Wright and VMI that we just looked at, still seeing a lot of stocks finding support, a lot of leading stocks finding support where they should so far.

22:35So Curtis Wright is another one and lots of other aerospace and defense stocks finding support at their 10-week lines as well. So this is another name that is interesting with a pretty decent composite rating and another one to watch here. Yeah.

22:52Ken Shreve:And Ken, I would love your thoughts on the fact that, you know, we have this aerospace defense stock that we covered and an oil and gas stock. And we know what sort of headlines right now are in focus tied to the conflict in Iran. So it makes one wonder, well, it's a double-edged sword, right? Because that conflict is the reason why you're seeing more focus on some of these names in these sectors. Not that there aren't setups in these stocks at times when you don't have the big headlining war talk, but there's extra risk, headline risk around some of these things, at least perhaps short term. So with these setups, what should traders be thinking about?

23:45Ken Shreve:Because we don't know exactly which way the headlines are going to go here. So I think that that's just something to keep in mind. What are your thoughts? Yeah, I mean, you know, aerospace and defense stocks can do well, even when geopolitical headlines are not, you know, all about war and conflicts in this area of the world and that area of the world. A lot of aerospace and defense stocks can just be executing. And so you don't necessarily have to have wars happening here and there for stocks to be doing well in this particular industry. But, you know, you do want to pay attention to the headlines.

24:29In the end, it's about just analyzing a company and its fundamentals and just looking at quarterly earnings reports, looking at business momentum and return on equity and all these things. And above all else, just looking at price and price and volume and just looking at supply and demand and obviously paying attention to the geopolitical headlines and looking at what the company specifically does. So Curtis Wright, because they do a lot of work in commercial aircraft as well as military aircraft, they're spread out in different areas of aerospace and defense. So, you know, I think these different aerospace and defense stocks are in different areas of the industry.

25:18So just understand specifically the company that you own in this industry group. And above all else, just study supply and demand in the chart and make sure you're looking at a stock that's being accumulated and is in a good uptrend and has got the consistent track record of growth no matter what the geopolitical headlines are. Well said.

25:45Ken Shreve:Okay, now let's turn our attention to Micron with results out after the closing bell. As of right now, shares down 1.8 % after an earlier gain. The revenue here, Ken, we knew it was going to be a big report. Revenue almost tripled, topping estimates. So a very strong report. We knew it was going to be strong. But the reaction here shares down about 2%. I think the thing to keep in mind, though, Ken, is the stock went up a lot heading into this report. I mean, the prior two weeks of gain, I mean, a prior couple of days alone, up 8 percent. And last and that's on top of a gain last week of 15 percent.

26:32So you have a 23 percent move heading into the tonight's earnings report.

26:38Ken Shreve:Are the expectations just a little too high? and is this good news already priced into the stock, I guess, is the question. We don't know if this overnight action will carry through to the following regular session. It's been volatile. It initially was up about 10 points on the news, and now it's down 1%. So it's going to be volatile. But you're right, over the past 10 days, it was a nice pre-earnings rally. You remember when these fiber optic companies were coming out with earnings over the past couple of weeks, it was a lot of people were wondering, are these going to sell the news? Because they were rallying just as much as these data storage companies.

27:25But a lot of the fiber optics didn't sell the news despite huge pre-earnings rallies. So sell the news is very common. Stocks rally ahead of results, and sometimes they just come in and sell the news. So we'll see if it happens. It looks like it's selling the news just a little bit. But to see the stock down one and a half percent after such a powerful move doesn't look doesn't look too bad. So we'll see. We'll see how it opens tomorrow. But if it you know, if it digests gains a little bit from here, you see it's still holding comfortably above all of its moving averages. So we will see strong pre-earnings rally, and we'll see how it affects other names in the group.