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“It’s the first time in a long time the FOMC has a real decision to make,” says JonesTrading’s chief strategist Michael O’Rourke, who is among the handful urging the Fed to pause. “Remember, this banking crisis is the result of banks that did not prepare properly for an interest-rate increase cycle. Another increase in the near term aggravates the problems at banks.”
Softer stock futures indicate investors are on a bit of a knife edge, following the first-back-to-back gains for the S&P 500
SPX
and Dow
DJIA
since recent market upheaval began. “There’s nothing like a banking crisis to kick-start an equity rally,” adds O’Rourke.
Onto our call of the day, which sees some silvery linings out there via one sector that few may be paying attention to right now. In a note to clients, Fundstrat’s head of technical strategy Mark Newton, says healthcare has “suddenly come to life,” a good sign for broader markets.
Before we get into that, he sees a “moment of truth,” nearing for the S&P 500. “It’s thought this lies at 4,043 up to 4,078, or 3/6/23 highs,” he said. The index closed above 4,000 for the first time since March 6 on Tuesday.
“Healthcare is now higher by +1.43% over the past week in equal-weighted terms
RYH,
while higher by more than +1.0% as per the SPDR S&P Healthcare ETF
XLV
compared to equal-weighted S&P 500 being higher by +0.20%,” says Newton, calling it a “welcome start to outperformance.”
He says his relative chart of healthcare versus the S&P 500 below shows a “steep ascent” has begun. “Since healthcare is the second largest sector in the S&P 500 by market capitalization at nearly 12%, and larger than financials, seeing this sector start to advance is a good sign for market bulls.”
S&P 500 Equal Weight Health Care ETF Invesco/S&P 500 Equal Weight ETF
Optuma/Fundstrat
However, much is on the line here as Newton says given the sector’s failed prior breakout attempt into year-end , healthcare needs to exceed those recent gains before anyone can start thinking it’s headed higher than the broader market.
While the market was glued to the fate of regional lenders, medical devices broke out as a subindustry group on Wednesday, and biotech is setting up for something similar, said the strategist, who notes the iShares Medical Devices ETF
IHI
has officially exceeded its early February downtrend.
“This is a bullish development and bodes well for this part of healthcare to start showing better technical strength than what’s been seen since early February,” he said. A test of the highs seen that month are likely, with $56.16 the big resistance level to watch on that ETF, said Newton, who points to his favorite liquid names within it as IDEXX Laboratories
IDXX,
Boston Scientific
BSX
and TransMedics
TMDX.
He also notes some bullish technical action recently for Ominicell
OMCL,
Shockwave Medical
SWAV,
Teleflex
TFX,
Bruker Corp.
BRKR
and Tandem Diabetes
TNDM,
and sees more strength for those in coming days and weeks.
Newton says biotech is also close to breaking out, but needs a bit more umpfh given it has lagged behind the tech move seen over the past month. So, for example, any move back over $128 in the iShares Biotechnology ETF
IBB
would help put the sector on better footing. He says if the ETF reaches that level, he’d expect a rally back to $139.
Names to consider: Regeneron Pharmaceuticals
REGN,
Vertex Pharmaceuticals
VRTX,
Amgen
AMGN
and Myriad Genetics
MYGN.
Read: Wall Street analysts predict approval for another ALS drug
The markets
U.S. stock futures
ES00
NQ00
are on the fence as a Fed decision nears. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
is a bit lower at 3.597%, while oil prices
CL
are down about 0.7% on the heels of a bounce. Gold
GC00
is higher and the dollar is down, mostly against the British pound
GBPUSD,
which shot higher after an unexpected 10.4% surge in inflation, one day ahead of a Bank of England policy meeting.
For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.
The buzz
The Fed decision is front and center for markets, the toughest to call since 2008, say some. Some 73% expect a quarter-point move, while the rest say the central bank will do nothing. The economic calendar is otherwise empty.
On the heels of a 30% rally on Tuesday, First Republic
FRC
shares are down 5% premarket trading, on news the struggling bank has hired advisers to navigate its crisis.
Read: 24 bank stocks that contrarian bottom-feeders can feast on now
Shares of GameStop
GME
are up nearly 50% after the meme-stock favorite retailer reported forecast-beating profit and sales. And that boat is lifting all meme tides, with AMC Entertainment
AMC
and its preferred equity units, known as APEs
APE,
each up 10% and Bed Bath & Beyond
BBBY
up 11% ahead of the open.
Nike
NKE
stock is slipping after the athletic-gear maker gave a downbeat outlook for gross margin.
China has reportedly granted emergency use for its first homegrown mRNA COVID vaccine.
Best of the web
How bank chaos triggered wild swings in rate expectations ahead of Fed meeting
Bill Gates says he’s blown away by AI.
The tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
| Ticker | Security name |
| GME | GameStop |
| TSLA | Tesla |
| FRC | First Republic Bank |
| BBBY | Bed Bath & Beyond |
| AMC | AMC Entertainment Holdings |
| APE | AMC Entertainment Holdings preferred shares |
| NIO | Nio |
| AAPL | Apple |
| NVDA | Nvidia |
| AMZN | Amazon |
Random reads
Teens can now get over their breakups with this government’s help.
When a mountain lion wants in your hot tub, best not refuse him.
Do yourself a favor and swim naked.
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