Dow drops 200 points as Fed says more hikes are coming after this pause: Live updates

It’s been a spectacular 2023 run for the market, but the music is about to stop, according to Jonathan Krinsky, chief market technician for BTIG.

“The rubber band continues to get stretched to the upside, and our view remains that we are at the tail end of this parabolic move for the Nasdaq,” he said in a Wednesday report. Indeed, the Nasdaq Composite is up 30% for the year.

He highlighted that the Invesco QQQ Trust (QQQ) is 10.5% above its 50-day moving average, and 22.7% above its 200-day moving average, marking the top 3% of all readings since 1999 and the top 1.5% of all readings after 2002.

“Does that mean it can’t go higher? No, but it does mean the risk/reward is extremely poor in the near-term,” he wrote.

He added that areas including semiconductors and homebuilders, per the VanEck Semiconductor ETF (SMH) and the iShares U.S. Home Construction ETF (ITB), are also showing extremes. Indeed, both SMH and ITB hit fresh highs on Wednesday. “Again, all of these trends are clearly established, but a tactical unwind looks increasingly likely, in our view,” Krinsky said.

–Darla Mercado

Nvidia jumped about 2% Wednesday to hit a new all-time high of $422.76, once again topping a $1 trillion market capitalization. The chipmaker has been the biggest beneficiary of the artificial intelligence craze on Wall Street, climbing 186% this year.

— Yun Li

These are the stocks making the biggest midday moves:

• Logitech — Shares tumbled 12.3% after the company announced president and CEO Bracken Darrell is departing. Citi downgraded shares to neutral from buy following the announcement.
• UnitedHealth — UnitedHealth dropped 7% after CFO John Franklin Rex said more seniors are getting medical procedures they delayed during the pandemic, according to a FactSet transcript of a presentation made Tuesday at the Goldman Sachs Global Healthcare conference. It’s a trend that means rising costs for the health insurance company. Other insurers also dropped. Humana slid 13%.
• Toyota — The Japan-based automaker’s shares gained 4.5% Wednesday. Shareholders re-elected chairman Akio Toyoda in an endorsement of the company’s governance and new electric vehicle strategy. Toyota announced earlier in the week it would introduce a full lineup of battery electric vehicles with “next generation” batteries.
• Lumen Technologies — The telecommunications stock gained 6% during midday trading Wednesday, adding to the 16% advance that was made Tuesday. On Monday, Lumen announced a new network interconnection ecosystem called ExaSwitch that was created in partnership with Google and Microsoft.

See the full list here.

— Alex Harring

While the central bank will likely skip a rate hike on Wednesday for June, Wharton professor Jeremy Siegel says commentary from Federal Reserve chair Jerome Powell will remain hawkish.

Siegel told CNBC’s “Halftime Report” that the Fed dot plot will “shock” onlookers as to how much further the Fed will tighten monetary policy. The dot plot encompasses the view of seven Fed governors as well as 12 regional bank presidents as to where the federal funds rate should trend. Siegel also added that the labor market will be more important to the Fed as opposed to inflation for the remainder of the year.

“Inflation is basically over,” Siegel said. “They should stop [raising rates] completely, I think they should’ve stopped before and I’m worried about whether they stop soon enough, but we will see on that issue.”

— Brian Evans

Goldman Sachs says AI and consumer health are the key themes for the remainder of this year. With this in mind, it said it continues to see “the most compelling risk/reward in the group among a collection of large cap companies that have many of the same narratives in common (i.e., well-established & scaled end market positioning, ability to manage for improved margin trajectory in 2023 and beyond.”

The firm highlighted Amazon as its top pick, attributing its years of stock underperformance, rising utility nature of the shopping habits of its Prime users and growing cross-platform narratives. It also named Uber and Meta as top picks.

“In addition, we would highlight the following stocks among a wider array of our Buy rated stocks as well positioned for secular growth when measured against our thematic work: GOOGL, PINS, MTCH, BMBL, EXPE, TTWO & IAC,” the noted continued.

— Hakyung Kim

The recent rally for stocks could faces a big test on Wednesday with the latest decision from the Federal Reserve and a press conference from Jerome Powell.

However, Wolfe Research strategist Chris Senyek said in a note to clients that momentum indicators suggest that the rally could have enough strength to overcome a Fed meeting that is bad for stocks on the surface.

“While the NDX and SPX are pushing up against key resistance levels and relative strength (RSI) indicators are overbought, near-term momentum (MACD) has become even stronger. As such, Powell will likely need to sound dramatically hawkish if he wants to derail this ‘melt up,'” Senyek said.

— Jesse Pound

Citi analyst Patrick Cunningham launched coverage of a group of chemicals stocks, saying lithium producer Albemarle is a buy because of growing electric vehicle demand. Albemarle is up nearly 0.6% so far Wednesday.

“We think the timing is right to buy ALB, maintaining our long-term bullish view and seeing a positive risk/reward setup with EV battery supply chain restock a potential near-term catalyst for lithium prices,” Cunningham wrote Tuesday.

— Sarah Min

Netflix‘s stock rally may have gone too far even as the company remains in strong position relative to its rivals, according to Barclays.

Analyst Kannan Venkateshwar hiked his price target on Netflix to $375 per share from $250. However, the stock closed at over $435 per share on Tuesday, and Barclays maintained its neutral rating on the stock.

“While we believe Netflix continues to be structurally the best positioned to benefit from engagement shift toward streaming, present valuation seems to more than adequately reflect potential upside from near-term growth optimization tools like paid sharing and advertising,” Venkateshwar said in a note to clients.

— Jesse Pound

BTIG analyst Lance Jessurun called SoFi Technologies a top pick that could surge more than 45%. The stock was up nearly 4% on Wednesday.

“Given numerous tailwinds, GAAP profitability, and policy changes, we see significant upside to shares, and note that SOFI is our favorite long-term choice in the consumer-facing fintech space,” Jessurun said to clients on Tuesday.

— Sarah Min

BTIG analyst Lance Jessurun called SoFi Technologies a top pick that could surge more than 45%. The stock was up nearly 4% on Wednesday.

“Given numerous tailwinds, GAAP profitability, and policy changes, we see significant upside to shares, and note that SOFI is our favorite long-term choice in the consumer-facing fintech space,” Jessurun said to clients on Tuesday.

— Sarah Min

After the AI trade led the way for first five months of the year, some investors have been betting that the rally will broaden out from here. The last two weeks show they may be on to something.

ETFs following small caps (IWM) and the equal-weighted S&P 500 (RSP) have both seen heavy inflows since the start of June, and both have outperformed the Nasdaq 100.

Read more about the ‘catch-up’ trade on CNBC Pro.

— Jesse Pound

The percentage of bullish financial newsletter writers climbed to 53.4% in the latest week from 51.3% a week ago, according to Investors Intelligence — that’s the most bulls since November, 2021 when they reached “a danger level of 57.2%,” II said.

“That level suggests many professionals have shifted their funds to equities, limiting the amount to drive markets still higher,” II said. “Overall, the bull count becomes a concern when it exceeds 55%. That is the initial caution level, and preparation for a defensive strategy should begin. Bulls 60% and above, signal elevated risk and the need to prepare for a market decline. That occurred in 2021, when the bulls hit 63.7% that April and 61.2% that July.”

The number of bears narrowed further, to 20.6% from 21.6% last week — the fewest pessimists since early January 2022, when U.S. stocks reached all-time highs. Those expecting a correction fell to 26% from 27.1%.

The bull-bear spread expanded to 32.8 points — the widest gap since November 2021 — from 29.7 points last week and 24.6 points two weeks ago.

— Scott Schnipper

The Dow fell more than 100 points to start the session, weighed by steep losses in UnitedHealth, as traders awaited the Fed decision. The S&P 500 and Nasdaq, meanwhile, traded along the flatline.

— Fred Imbert

Shares of AMD rose 2.6% in the premarket following a report by Reuters that Amazon Web Services is considering using AMD’s new artificial intelligence chips.

The chipmaker introduced its latest AI chips on Tuesday and said its most advanced GPU for AI will start shipping to customers later this year. Investors initially responded negatively, with the stock closing 3.61% lower on Tuesday. However, several analysts were bullish, including Morgan Stanley’s Joseph Moore who said the firm “remains very optimistic for this opportunity.”

“We have high confidence in our base case AI revenues (not including supercomputer) of $400 mm next year, with builds pointing to upside even to our bull case estimate of $1.2 b,” he wrote in a note Wednesday.

— Michelle Fox

IPO activity in the U.S. is poised to return to normal levels in the second half of the year as the equity market stabilizes, according to Goldman Sachs.

Goldman’s IPO issuance barometer has risen to a level consistent with the typical frequency of IPOs after hitting a trough in September 2022. The barometer, which based on CEO confidence, economic indicators, short-term Treasury yield and the S&P 500 prices, gauges how conducive the macro environment is for IPOs.

“The improving macro backdrop has not translated into IPO activity yet, but follow-on activity has been more resilient,” David Kostin, Goldman’s head of U.S. equity strategy, said in a note.

— Yun Li

Wholesale prices fell even more than expected in May, providing another sign that inflation pressures are beginning to ease in the U.S. economy, the Labor Department reported Wednesday.

The producer price index declined 0.3% for the month, more than the expected 0.1% decline from Dow Jones. Prices for final demand goods slid 1.6%, accounting for the bulk of the headline decrease. That drop in goods prices in turn can be traced to a 13.8% tumble in the gasoline index.

Excluding food and energy, PPI rose 0.2%, in line with the estimate. Excluding food, energy and trade services, the index was flat.

—Jeff Cox

Here are some of the names making moves in premarket trading:

• United Health — Shares sank nearly 6% following comments this week by United Health chief financial officer John Rex that there has been elevated volumes of non-urgent surgeries in the second quarter. Other managed care companies also fell, with Humana sliding about 8% and Cigna down 3.6%.
• Lumen Technologies — Share popped about 10%, one day after gaining 16% on news of Lumen’s new network interconnection ecosystem in partnership with Google and Microsoft.
• Shell — The European oil stock gained 2% after Shell boosted its dividend and share buybacks. The company also said it would keep oil production steady until 2030.

— Michelle Fox

Raymond James analyst Brian Vaccaro maintained a strong buy rating on Dave & Buster’s Entertainment, and raised his price target, saying the restaurant and entertainment firm’s presentation at its analyst day this week supported his positive view on the stock.

“Management’s presentation detailed its multi-pronged strategy to revitalize comps at D&B, improve margins ($40-60M cost savings), and grow new units which it believes can drive substantial EBITDA growth vs. current levels (illustrative ~$1B 3yr target vs. $527M PF 2022),” Vaccaro wrote.

— Sarah Min

The consumer price index came in line with expectations for May, giving market bulls some support, according to traders at JPMorgan.

“As the stock market shifts from extreme bearish to neutral/mildly bullish, the CPI print yesterday delivered an outcome supportive of risk,” they said in a note. “Let’s see what happens today with the Fed and tomorrow with Retail Sales to maintain that momentum. While the outcome of today’s Fed meeting, a pause, is consensus, there are a range of views on how the press conference unfolds.”

— Michael Bloom, Fred Imbert

After a choppy start, European stock markets moved higher through the first hour of trade.

The pan-European Stoxx 600 index was up 0.3%, with France’s CAC 40 up 0.44%, Germany’s DAX up 0.26% and the U.K.’s FTSE 100 up 0.08%.

— Jenni Reid

Economists on Wall Street are warning weakness in China’s property market could be a drag on the economy for years to come.

“We see persistent weaknesses in the property sector, mainly related to lower-tier cities and private developer financing, and believe there appears no quick fix for them,” Goldman Sachs economists led by China economist Lisheng Wang said in a weekend note.

Goldman’s economists said the property market is expected to see an “L-shaped recovery” — defined as steep declines followed by a slow recovery rate.

Morgan Stanley in an outlook report added should monetary easing measures fail to support the ailing sector, it will also lead to concerns of a spillover effect in the rest of the Asia-Pacific region.

A “downside risk would be if China’s property sector does not stabilize even with the easing we expect,” they said. “In that scenario, confidence and financial conditions will tighten in China, which will have direct implications for China’s growth but also will negatively spill over to the region.”

– Jihye Lee

South Korea’s export prices in May fell 11.2% year-on-year, the most since March 2010, when export prices fell by 12.2%. This comes after prices fell 7.2% in April.

Import prices also fell 12% year-on-year, following a 6% decline the previous month.

The South Korean won weakened by 0.42% to 1,273.02 against the U.S. dollar, while the Kospi rose 1.5%

– Jihye Lee

The S&P 500 and the Nasdaq Composite touched their highest levels since last April on Tuesday, but they were joined by a raft of exchange-traded funds that have also popped to new heights.

Tech names jumped on Tuesday, with fresh 52-week highs for the iShares Semiconductor ETF (SOXX) and the VanEck Semiconductor ETF (SMH). A handful of artificial intelligence funds joined them: the Global X Robotics & Artificial Intelligence ETF (BOTZ), WisdomTree Artificial Intelligence & Innovation Fund (WTAI) and the ROBO Global Robotics & Automation Index ETF (ROBO). The Invesco QQQ Trust (QQQ) and the index on which it is based, the Nasdaq-100, also hit 52-week highs.

It wasn’t just the high-flying tech space that touched notable levels. The Industrial Select Sector SPDR Fund (XLI), SPDR S&P Homebuilders ETF (XHB), iShares U.S. Home Construction ETF (ITB) and Vanguard Industrials ETF (VIS) all reached 52-week highs – a move that may strengthen the case that the rally is broadening.

–Darla Mercado, Gina Francolla

Logitech slipped 2.5% in extended trading after the company announced its CEO was leaving.

The company said Tuesday that Bracken Darrell, president and CEO, will leave to “pursue another opportunity. Guy Gecht, a non-executive board member, has been appointed interim CEO.

The stock has underperformed the broader market so far this year, up just 2.7%.

— Alex Harring

The three major futures indexes were mixed shortly after 6 p.m. ET.

S&P 500 futures were near flat. Nasdaq-100 futures were up 0.1%, while Dow futures slipped 0.2%.

— Alex Harring