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Here's Why The Stock Market Sold Off After The Fed Meeting

Stocks gave up all their gains and closed well in the red Wednesday after the Federal Reserve hiked interest rates by a quarter-point, as widely expected.

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The three key indexes initially extended their gains after the Fed announcement at 2 p.m. ET. But by the close, the Nasdaq was down 0.2%, the S&P 500 fell 0.3% and the Dow Jones industrial average shed 0.4% in the stock market today. Small caps lagged as the Russell 2000 sank 1%. Volume ran slightly higher on both the NYSE and Nasdaq, according to preliminary data.

Stocks turned south as Fed Chairman Jerome Powell said, "Some asset prices are in the upper reach of their historic ranges." Though the Fed statement omitted language about "accommodative" monetary policy, Powell said it remains accommodative.

Big banks including Goldman Sachs (GS) and JPMorgan (JPM) weighed on the Dow.

Earlier in the session, automakers, retailers and apparel stocks were among the biggest sector gainers. Tesla (TSLA) surged as much as 4% to retake its 50-day moving average, though it closed slightly below the line. The electric vehicle maker may benefit from reports that California may nearly double EV subsidies. A tax credit that had been in effect for qualified EV buyers since 2010 is set to phase out since Tesla's sales reached 200,000 in July.

Apparel, jewelry and consumer electronics retailers rose. SPDR S&P Retail (XRT), which tracks the S&P Retail Select Industry Index, rose 1%. The $781.6 million ETF's holdings include IBD Leaderboard stock Amazon (AMZN) and IBD 50 name Grubhub (GRUB).

Healthy Gains For Biotechs

Several biotechs outperformed as iShares Nasdaq Biotechnology (IBB) gained as much as 1%. The $9.6 billion ETF counts Amgen (AMGN), Biogen (BIIB), Vertex Pharmaceuticals (VRTX) and Alexion Pharmaceuticals (ALXN) among its top holdings.

Vertex popped nearly 3% to reclaim the 183.49 buy point of a flat base it first cleared Aug. 29. Volume that day was 7% below average, less than the 40% minimum increase needed for a good breakout. Volume ran about 14% faster than usual Wednesday. Shares closed with a 2% gain.

The biotech, which develops treatments for cystic fibrosis and other chronic conditions, joined Leaderboard on Wednesday as a half-position. Its current flat base is still early stage, since Vertex broke out from a bottoming base in March last year.

Alexion vaulted more than 5%, nearing a 138.87 buy point of a cup base. Shares rallied on news Alexion will buy privately held Syntimmune in a deal worth up to $1.2 billion.

Among other biotechs, Vanda Pharmaceuticals (VNDA) gapped up and soared 9% for a new closing high. Earlier in the session, shares vaulted as high as 14% to climb past a 23.45 buy point of a seven-week cup base. The Washington, D.C.-based biotech will join the S&P SmallCap 600 index on Monday.

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