Stocks Slump Post-Fed As Rates Rise; Cummins, Solaris Energy, Axogen In Focus

0:00There's a lot of hype and a lot of good news already priced into the marketplace today.

0:03Ken Shreve:We're entering a period of so much more change that it could be a tailwind for active management. Women are now in the protagonist seat for the family's financial story. I'm Joe Davis. And I'm Christine Kashkari. And this is season two of Better Vantage by Vanguard, an eight-part video podcast series hosted by custom content from WSJ and Vanguard. All investing is subject to risk, including possible loss of principal. This content was created by Custom Content from WSJ, a unit of the Wall Street Journal Advertising Department.

0:42Ken Shreve:Good afternoon, everyone, and welcome to Stock Market Today for Wednesday, June 17th. It's Alyssa Coram here and some Fed-related volatility, as it was Kevin Warsh's first day, officially our first meeting at the helm of the central bank. So investors digesting this new approach with a new sheriff in town. Joining me now to discuss the market reaction and some stocks to watch is my colleague, Ken Shreve. Ken, what do you have for us today? Well, you mentioned it, Ali, a little bit of volatility had interest rates spike and in the end, not such a great close. So we'll talk about that and talk about some stocks to watch.

1:23We always find three. So let's take a look at Cummins, ticker CMI. Also want to take a look at Solaris Energy Infrastructure. That is ticker SEI. And then we'll conclude by talking about a medtech firm, medical products firm called Oxygen, A-X-G-N.

1:44Ken Shreve:All right, a good roadmap there. Let's kick things off with a look at the major indexes. Here's the NASDAQ composite down about 1.4 % by Sessions close here, finishing just above that 26 ,000 level, but below the 21-day line. Meanwhile, the S &P 500 was down about 1.2 % on the day. We had the Dow down 1 % on the day. And then the Russell 2000 down about eight-tenths of a percent. You mentioned bond yield. So let's take a look at that, the intraday there, just so you can see the pickup in volatility on that front. So, Ken, what do you make of the market's reaction here today? Well, I mean, it was really about, you know, spiking interest rates.

2:38You know, the Fed had their two-day meeting that concluded at 2 o 'clock. It was a very, very short statement. That was the first thing that got a lot of, you know, coverage by the media. The Fed statement came out, and it was a very, very short statement by the Federal Open Committee. And the new Fed chairman, Kevin Warsh, but they held firm on interest rates as expected, three and a half to three and three quarters – four – I always get this – three and a half to three and three quarters percent. And but there was a big, big spike in interest rates because the Fed's dot plot, which is the summary of economic projections, there were more committee members, maybe not a big surprise, but there were more committee members that are envisioning a quarter point rate increase before the end of the year.

3:36I don't know if that was a big surprise to the market, but nonetheless, the dot plot did show more committee members, you know, expecting a rate increase before the end of the year. That caused the two-year, the yield on the two-year note to spike 17 basis points. So that was a really, really big move in the two-year note. The 10-year note also really strengthened. That was at around 4.43 percent by the end of the day. That was up about, what, seven or eight basis points. So pretty material move in that 10-year note as well. And anytime you have interest rates spiking like that, that's going to hurt stocks.

4:18So it ended up being not such a great day for the market. And you ended up having the second straight distribution day for the NASDAQ composite. It looks like, we don't have a final volume yet, but it looks like volume is going to be a little higher on the NASDAQ for the second day in a row. That's two straight distribution days for the NASDAQ. And then, you know, since the NASDAQ came off its high, you know, you've had a couple of distribution days there when it came down to the 50-day moving average. So you've got, you know, a period of time here where the NASDAQ is in this distribution phase.

4:50We now have six distribution days in, you know, a fairly short period of time. So this is a little bit concerning. And, you know, the market's going to have to resolve after what it heard from the Fed today. I don't know that there was anything, you know, new from the Fed. I mean, the market had been kind of, you know, kind of going back and forth. Is the Fed going to hike rates in December or not? I think it's more feeling more confident now, especially after this retail sales report that we got earlier today. I mean, retail sales were much stronger than expected. So I think the odds are, you know, it's better than 80 percent that we're probably going to get a quarter point hike in December.

5:33So we will see. Not a great reaction by the market, but this was just a story of higher interest rates today. Exactly. And that is, you know, typically not, doesn't translate well for the stock market.

5:46Ken Shreve:Well, all eyes are going to be watching very closely this new Fed chair. Of course, we know the president's relationship with Jerome Powell, his dislike, the fact that, you know, we haven't been bringing interest rates down. So we'll have to see if the expectations are for a rate hike. There have been questions about the Fed's independence. I think it'll just be really interesting to see how things progress here. But I think one thing's for sure. It does seem like Kevin Warsh is going to be a very different Fed chair than Jerome Powell. What that ultimately means for interest rates and the stock market is yet to be seen.

6:31Ken Shreve:But in the short term, a lot of digestion here as to what all that could entail and the shifting of expectations, like you said, in the short term of where interest rates are headed. Yeah, yeah. He did also remove some language from the last policy statement. Again, maybe not a big surprise. That did indicate a bias towards future rate cuts. And again, this is not a big surprise. We've seen a pretty good flurry of strong economic data. So one thing we do know, the economy is in pretty good shape. So if the Fed is having to raise rates, again, because it's cooling off an economy, that's okay. But the retail sales today were very, very strong.

7:22So consumer spending is holding up well. So we're dealing with a fairly healthy economy. We know that there's a lot of people, you know, middle class, a lot of people struggling out there and, you know, struggling to make to make ends meet. But at least the economic data that we're getting has been has been pretty, pretty decent. Kevin Warsh also announced a variety of different task forces. So clearly we have, you know, a new sheriff in town and a lot of changes. He announced some task forces just regarding, you know, the Fed and how they're communicating, a task force about their balance sheet, their reliance on data sources.

8:03So a lot of new changes. But I think it's becoming clear that with this economic data that rates are more than likely – it could change, but rates are more than likely. We're going to get a quarter-point rate hike in December, maybe even before then. We'll have to see. But again, a quarter point hike, not the end of the world. But again, markets are going to have to resolve this little distribution phase that the NASDAQ is going through here. We're below the 21-day moving average again. Again, not a major problem here, but it does bring a potential test of that 50-day moving average into play again.

8:45So we'll just have to see how it resolves, and we'll go from here.

8:51Ken Shreve:Yeah, I mean, two downside reversals in a row, two distribution days in a row, back below the 21 day after a powerful gap up. So not necessarily what the bulls want to see, but not all too surprising given the headline flow and given the character change with the pickup and volatility over the last couple of weeks. So we have our levels that we are watching, Ken, and it does seem like for traders who may be materially added to positions a couple of days ago, depending on how those individual stocks are acting, may need to back away a little bit. But for earlier buys off of the bounce on the 50-day or from earlier on in the power trend, seems like those might still be working out.

9:40Ken Shreve:But perhaps just a little bit of repositioning from recent buys, perhaps depending, again, on those individual moves. Yeah, we had a tremendous move by semiconductor stocks earlier in the day. And, you know, we'll take a look at SMH. That gave back – that was up close to – well, it was up well over north of 4 % earlier in the day. And you can see it closed up by a little over 1%. So not surprisingly, SMH gave back a lot of those early gains. I'm sure we saw a lot of leading semiconductor stocks give back a lot of gains too. So we'll have to see. It was not a win for the bulls certainly today. certainly today.

10:24And again, this is going to lift our distribution day count on the NASDAQ up to six. So we've had several in a short amount of time. So this is going to give the bull some pause here. Again, just keep an eye on your current holdings. Again, our leaderboard model portfolio has definitely been weighted a little more towards biotech lately. So we were looking at the model portfolio near the close. And, you know, we had that breakout in XBI today that still looking pretty good. That got pulled down a little bit. But, you know, we had some decent gainers and the damage wasn't too bad just because of the healthcare exposure.

11:08Crystal Biotech ended up having a nice day. So not a whole lot of tech in the portfolio at this point, which ended up being a good

11:17Ken Shreve:thing a good thing today exactly okay so uh speaking of tech just really quickly taking a look at the nasdaq 100 action today down one percent this is still above the 21 day line so just noting that little bit of a divergence there between the nasdaq 100 and the nasdaq composite let's also get your thoughts on levels to watch for the s &p 500 ken yeah this is also unfortunate to see it below uh that's going to be a little bit of a close below the 21 day we had a A little bit more of a volume increase on the New York Stock Exchange as well. So this is not as many distribution days on the New York Stock Exchange, but looks like also distribution on the NYSE today as well.

12:02So would have liked to have seen the SPY hold that 21-day, but it looks like it's going to close a little bit below it. So kind of the same situation as the NASDAQ, below the 21-day line, and also a distribution day. And, you know, the Dow had been holding up the best, along with the Russell 2000. That's still holding above the 10-day line. Nice four-session win streak. That got snapped in spades today, but still holding above the 10-day moving average. So technically looking better than the other two that we just looked at. And the Russell 2000, just giving up the 10-day here, looks pretty similar to the Dow.

12:44Ken Shreve:So, and, you know, a lot of times we do look at the dollar in relation to what we're seeing with interest rates here, Ken. So a notable uptick in the dollar today. Yeah, this was a big this was a big percentage move for the DXY, the U.S. dollar index. And just like interest rates were spiking today, this is you can see this was a noteworthy move for the for the dollar index today. I think it was a point. It was the final gain, 0.8. I think we know when the Fed statement came out. Yeah, yeah, exactly, exactly. So anytime you have spiking interest rates or a spike in the U.S. dollar, that is going to translate to negative action in the market.

13:27And that was a pretty notable move for DXY today for sure. It sure was. A breakout is what it was.

13:34Ken Shreve:Oh, yeah, absolutely. And a quick check-in on oil. You know, you mentioned the economy and we know that things are going to take time to normalize on a global scale in terms of the supply demand situation for oil. But good to see this come off a bit, you know, not quite at pre-war levels, but definitely calming back down. finally getting this relief in in in oil prices but uh yeah now it now it's coming with the with the market uh starting to to pull back here so it finally looks like i i don't i don't think we're going to be uh seeing oil uh well i should bite my tongue but i was going to say i don't think we're going to be seeing oil near a hundred dollars a barrel anytime soon i will uh knock on some wood when I say that.

14:27But yeah, with USO after the sharp break below the 50-day moving average, I think we can see oil consolidate a little bit here and take a breather. So I don't think we're going to have to worry about spiking oil prices anytime soon unless the situation with Iran and the U.S. gets unsettled all of a sudden. Hopefully that won't be the case. But I think the market can just kind of look past rising oil prices for a little while here. It looks like USO is just kind of damaged here and probably going to spend some time below the 50-day for a little while.

15:18Ken Shreve:weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required compatibility and availability varies 18 plus. Okay, let's check in on three stocks starting with Cummins, ticker CMI, a blue dot breakout in today's session. This is one of the first stocks that we covered on IBD Live this morning, Ken, and seeing a lot of relative strength in this name. And it's outside of tech, outside of AI. So it has that going for it right now. Yeah, big maker of diesel engines. They also are involved in natural gas engines. They do electrified power systems, powertrains.

16:07So this is, you know, a big large cap company. You see that earnings stability rank of seven. So this is a company with an excellent long-term track record of earnings. Very, very big company. You can see it's been trending higher for quite some time here. And once again, coming out of another base here after a pretty successful breakout from a prior base here. So the latest base formed after it found support at the 10-week moving average. And you've got that blue dot with the relative strength line moving into new high ground. So, yeah, it was a breakout that was looking good all day. And it got pulled down with the broad market.

16:54But this is a stock that is looking pretty good here. And, again, if it was one thing we talked about on the show this morning, like you mentioned with David Keller, You know, it's a little too early to say if there's going to be a rotation out of the technology trade, but we are starting to see, you know, other areas of the market work quite nicely. So definitely saw some money rotating into Cummins today. The financials have been working. Obviously, health care seeing a lot of rotation there as well. So, you know, some of these under some pressure today, but, you know, name like CMI Cummins could work in this market.

17:41So name that we're watching, several up days in a row and in the process of breaking out CMI and just a good fundamental leader and just a longtime record of outperformance. We'll see if CMI can work in this market. Yeah.

17:58Ken Shreve:And drilling down to the daily chart here, we did have a trend line break as an entry that triggered in the prior day's session. So that is when Swing Trader opted to add this and then I believe added to the position today as it broke out over that 718 level. So just a little bit more information on the setup here on the daily chart. And next on the list, Ken, let's go over to SEI in the Electrical Power Equipment Group. Another blue dot breakout today. Yeah, and one that actually held pretty well considering how the market closed here. Closed off highs a little bit. Solaris Energy. is a real fundamental standout here.

18:55This is all about power generation, data center, infrastructure. They made a very small acquisition, but a very transformative one when they acquired a company called Mobile Energy Rentals. It was an acquisition less than$500 million but it really transformed the company because what they acquired were basically these natural gas-powered mobile turbines. And this is a business now that is powering data centers. And it's basically power generation. They're modular systems so they don't have to rely on the grid. So it's just another way of just modular power So they don't have to, it's just a new way that data centers are being powered.

19:51And Solaris is right there. Look at the annual earnings here. I mean, this is a growth story that I think is as compelling as Bloom Energy. Bloom Energy is fuel cell power. Solaris is, again, just kind of modular in these natural gas mobile turbines. But the annual earnings are great. The top line growth is very impressive here as well, and a very long growth runway here. So a company that has been trending very well and in the process of breaking out, again, just like Cummins with a nice blue relative strength line. Relative strength line has just been shooting to new highs as the stock has been moving higher.

20:36And again, it's just fundamentals that's driving the growth here. mid-cap, kind of borderline mid-cap, large-cap stock here, and excellent fundamentals and a really, really compelling growth story. So market is still, you know, serving up decent breakouts here. So, you know, seeing some distribution on the NASDAQ and market is a little bit iffy here, but still keeping an eye out on these stocks showing relative strength here. So So we may be ready to pull back here, but maybe not. So as long as we see a lot of setups here and a lot of individual growth stocks underneath the surface, we want to keep an eye on these stocks that are holding up well and showing relative strength.

21:20So Solaris is definitely a name to watch as well.

21:24Ken Shreve:Okay. And I would say with this stock about 11 % above the 10-week line, that is one thing to note. But given the stock's personality, it likes pulling back to and even beneath that level as it makes a move. So if you are adjusting your risk for this type of personality, I mean, it has also shown that it can go on moves before testing the 10-week. But I would keep that in mind as well, that this very well has that personality of one that it likes to hug. It's a hugger. It's a 10-week line hugger. It's a good point. Right. Absolutely. All right. Moving on, let's go to AXGN. You mentioned a lot of compelling action in the healthcare sector.

22:11Ken Shreve:So here's a look at a medical products stock with a blue dot. So a little bit of a theme here, Ken, I see with a blue dot stock on the weekly, on the verge of a breakout, nice outside day, upside reversal today. Yeah, this is a classic med tech firm, small cap, but this is a company, what they do is they repair, they have a medical technology that they repair and regenerate damaged peripheral nerves. So it's a really kind of a niche market, but their technology is used by reconstructive surgeons to repair peripheral nerves. So very, very profitable. Again, you can look at the annual earnings here and see it wasn't that long ago that they turned profitable just recently.

23:08I think it was 2024, maybe 2025. They turned their first profit, and they're going to be profitable going forward here. So, again, just in another outside day here, you see the stock reversed higher, bucked the trend, and held a strong gain in a down market. Volume was pretty good today, continuing a recent trend, trying to clear this consolidation here. It's in the right area. Again, another health care stock, seeing money move in here. And again, the fundamentals, the top line growth is here. And a lot to like here. You know, just a stock that has been trending well. Relative strength line is up near highs.

23:55It's got the good earnings and revenue. And it's got that end. It's got the new. It's doing something new that not a lot of other companies are doing here. The setup looks really solid. Nice breakout, nice sideways movement right at the 10-week moving average here and on the verge of another breakout here. So, as always, we like good fundamentals and technicals. Seems like an innovator here with new product, new service, and, you know, in a good sector as well. So kind of staying focused on innovative healthcare names here. And I think Oxygen checks a lot of boxes as well.

24:42Ken Shreve:Thank you, Ken. And thanks so much, everyone, for tuning in to today's show. We will see you tomorrow morning on IABD Live. We've got the Thursday crew, Rachel hosting and the gang. Looking forward to that show with you all. Starting 10 minutes before the opening bell. Investors.com slash IABD live for all the details. Starting 10 minutes before the opening bell. Now, it is a shortened trading week. Friday is a stock market holiday. So tomorrow is the last trading day of the week. And you will be joined on Stock Market Today by Ken and Ed Carson. looking forward to getting their take on how the week turned out with this volatility.

25:26Ken Shreve:It's turning out to be another very exciting week to watch with that gap up. But now we're pulling back a little bit on the Fed news. So tomorrow's close could be interesting. And then, you know, with that three-day weekend, the following week, I know, is going to be quite important as well. So the team has you covered, whether it's IBD Live or Stock Market Today, and we appreciate everyone for tuning in.