Dow Jones futures fell after the close along with S&P 500 futures and Nasdaq futures. Delta Air Lines earnings and other economic data are in.

The stock market rally eased on Wednesday as the Federal Reserve saw the banking crisis spur a recession.

Newly released minutes from the March 21-22 Federal Reserve meeting showed Fed officials forecasting “a mild recession beginning later this year.” Policymakers expected the bank stress would “wet economic activity, hiring and inflation,” the Fed minutes showed. However, members remained “very vigilant” on inflation risks. While several policymakers pondered keeping rates steady, they eventually voted to raise rates by a quarter point to 4.75% to 5%.

Ahead of the opening, CPI came in lower than expected, with CPI inflation falling a full percentage point to 5%. But core inflation, which excludes food and energy, rose as expected to 5.6%.

The probability of a Fed rate hike in early May barely dipped to around 70%.

China’s stocks were hit hard afterwards Berkshire Hathaway (BRKB) CEO Warren Buffett signaled his concerns about geopolitical tensions, particularly in China and Taiwan. Alibaba (baba) JD.com (JD) PDD holdings (PDD) and Tencent Holdings (TCEHY) all fell hard.

BABA stock tumbled further overnight after it was revealed that SoftBank was planning to sell much of its stake in the Chinese e-commerce giant.

TSLA stock met resistance at a key level and continued to consolidate Tesla (TSLA) result next week.

Shopify (BUSINESS), service now (NOW), cloud flare (NETWORK), Crocs (CROX) and note (MRK) are all traded near potential entries.

Delta Airlines (DAL) reports the results early Thursday and announces the results for the airlines. DAL shares fell 2.4% below its 200-day moving average on Wednesday American Airlines (AAL) announced preliminary first-quarter results that came in slightly ahead of the January forecast but below analyst consensus. AAL shares fell 0.2% to a three-month low.

ServiceNow and CROX stocks are on SwingTrader. NOW stock and Crocs are also on the IBD 50. Shopify was the IBD stock of the day on Wednesday.

Dow Jones futures today

Dow Jones futures fell a fraction from fair value. S&P 500 futures and Nasdaq 100 futures were down 0.1%.

The Labor Department will release March PPI and weekly jobless claims at 8:30 am ET.

Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

stock market rally

The stock market rally opened solidly higher after the CPI inflation report, retreated and then wobbled until recession fears from the Fed took hold.

The Dow Jones Industrial Average fell 0.1% in trading on Wednesday. The S&P 500 index fell 0.4%. The Nasdaq Composite fell 0.85%. Small cap Russell 2000 fell 0.7%.

US crude prices rose 2.1% to $83.26 a barrel, the highest close in almost five months.

The 10-year government bond yield fell 1 basis point to 3.42% after hitting 3.34% just after the open. The two-year yield fell 9 basis points to 3.97%. The 3-month T-bill yield fell just 2 basis points to 5.01%.


Among growth ETFs, Innovator IBD 50 ETF (FFTY) fell 0.7%, while Innovator IBD Breakout Opportunities ETF (BOUT) gained 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) was down 0.2% with NOW stock a notable component. The VanEck Vectors Semiconductor ETF (SMH) is down 1.8%.

ARK Innovation ETF (ARKK) slumped 2.9% and ARK Genomics ETF (ARKG) 2.3%, reflecting more speculative story stocks. Tesla stock is Ark Invest’s #1 ETF, with Shopify a top 10 holding. Cathie Wood’s Ark also owns a small BYD equity interest.

SPDR S&P Metals & Mining ETF (XME) fell 0.8% and Global X US Infrastructure Development ETF (PAVE) rose 0.4%. The US Global Jets ETF (JETS) fell 3.1% with Delta and AAL shares being big components. The SPDR S&P Homebuilders ETF (XHB) was down 0.1%. The Energy Select SPDR ETF (XLE) was up modestly 0.1% and the Health Care Select Sector SPDR Fund (XLV) closed marginally higher.

The Financial Select SPDR ETF (XLF) is down 0.2%. The SPDR S&P Regional Banking ETF (KRE) fell 1.1%.

The five best Chinese stocks to watch right now

Buffett warns of tensions in China

Warren Buffett said on CNBC on Wednesday that he thinks China is an e-giant BYD (BYDDF) is “extraordinary”. Taiwan semiconductor (TSM) is a “fabulous company”. But that didn’t stop Berkshire from significantly reducing its stakes in both companies.

Buffett made a big bet on TSM in Q3, but then reduced the position by 86% in Q4. He said he was “reassessing” China-Taiwan tensions, not the business or the management.

Meanwhile, Berkshire roughly halved its large, long-term stake in BYD as of August, with the latest share reduction announced earlier this week.

TSM shares fell 2.7% on Wednesday, trading below the 50-day moving average. BYD stock fell 3.9%, back below its 50-day mark.

But many China internets have had bigger losses. BABA plunged 5.9%, undercutting its 50-day MA within a cup-and-handle basis. SoftBank plans to sell most of its stake in Alibaba, the Financial Times reported late Wednesday. Alibaba dipped slightly overnight from initial after-hours lows.

JD stock plummeted 7.65% to its worst level since its October lows. PDD stock slipped 5.2% and started losing track of its 200-day moving average. TCEHY stock fell 5.4% and fell below its 50-day mark.

The Krane CSI China Internet ETF (KWEB) fell 4.5% to 28.62, below its 200-day moving average. It hit a 52-week high of 36.19 on Jan. 26 after more than doubling from its October low.

Stocks near buy points

SHOP shares climbed 1.2% to 45.30 on Wednesday, but came off a sharp intraday high of 48.75. Investors could use 48.36 as an early entry. JMP Securities upgraded Shopify stock to a buy rating on Wednesday.

NOW stock was up 0.3% to 471.43, but was also well below session highs. ServiceNow stock now has a grip on the base of the cup, giving it a buy point of 482.43.

NET stock rose 3.9% to 63.04. For the day, shares surpassed an early entry at 63.19 in a consolidation.

CROX shares fell 1.5% to 126.19. Shares are working at an official buy point of 143.60. But investors could use 130.90 as an early entry which would erase most of the trade by Jan 18th.

MRK shares rose 1.1% to 113.75. Shares are near a consolidation buy point of 115.59. The Dow Jones drug giant has wedged itself in the past few days, failing to stage a major shakeout.

Tesla stock

Tesla shares fell 3.35% to 180.54. turn down from near the 50-day moving average. Stocks are still within a cup and handle basis with a buy point of 217.75, according to MarketSmith analysis. The base formed below the 200-day moving average, which has drifted to around 214. Investors should use a decisive break of the 200-day line as an entry point.

TSLA shares fell 10.8% last week.

Tesla earnings are due April 19, with gross margins taking center stage.

Analysis of the market rally

The stock market rally ebbed and flow on Wednesday, taking a crucial trend down from the afternoon. Not only are Fed officials predicting a recession, it’s also that markets are seeing policymakers hike rates one last time.

Outside moves are never a good sign, but the major indices haven’t changed much in character — yet.

The Nasdaq, which was shut down for the third consecutive day, slipped below 12,000 but is still above its 21-day price. The S&P 500 briefly surpassed its early April highs before falling. The Dow Jones reversed from its best levels in nearly two months.

The Russell 2000 fell back below its 21-day moving average.

Some leading stocks made gains. But many others turned down from opening wins.

Nasdaq, S&P 500 and many growth stocks are poised to break through key levels. But they are also not far from breaching a key support.

Time the market with IBD’s ETF market strategy

What now

This is not a rapid stock market rally. Major indices have moved sideways over the past few months, with large swings in sectors and leaders at various points. So investors should get involved, but this isn’t the time to be super-aggressive.

How exposed should you be? If your stocks are working, your exposure could be 40%, 50% or more depending on your risk tolerance. If you’ve been rocked out of stocks or had to squash a string of losers, your exposure may be significantly lower.

Either way, as conditions improve, you can gradually make new purchases and increase your engagement. Stay engaged and stay flexible. Have your watch lists ready and your exit strategies.

Read The Big Picture every day to keep up with market direction and leading stocks and sectors.