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In a tough, post-Fed market, strategist finds opportunity knocking in a couple of this year's hottest sectors

By Barbara Kollmeyer

Critical information for the U.S. trading day

Blink and you missed a post-Federal Reserve bounce, as stock futures signal a reboot for Wall Street selling on Thursday.

"Whatever reaction we see today is likely to be a one-day thing (just like last FOMC). The Fed has no idea where inflation is going, and neither do we. The economic data is what matters, not Fed dots or forecasts or guidance," said Brent Donnelly, president of Spectra Markets, in a Wednesday tweet that seems to have aged well.

Read: Here's the comment from Powell that could make it hard for the Fed to slow down the pace of interest-rate hikes

Sifting through the market rubble is our call of the day from Fundstrat's Mark Newton, who offers up a few investing ideas. For starters, he says no one should expect a material rally or markets to start trending soon, hence a short-term mind-set is required.

For the S&P 500 , he sees important resistance above 3,837 at 3,900, while a move to under 3,875 opens the door to test 3,705 in the short run.

Fundstrat's head of technical strategy zeroes in on crude prices, where he sees half of May gains erased, which could bring prices down to the lower $100s -- first $111, then $108. "Given the ongoing positive intermediate-term momentum, a pullback like this would be a chance to buy energy," he told clients in a note.

Newton is also looking at "real deterioration" for utilities and REITS, even if markets are pretty volatile. A robust rally in Treasury yields has coincided with declines in those defensive groups along with precious metals.

In year-to-date terms, utilities remain an outperformer to broader U.S. benchmarks, and any near-term weakness is likely a buying opportunity, he said.

"Reasons to buy dips are threefold. First, defensive sectors like utilities are likely to outperform as equity markets enter a volatile stretch into end of Q2. Second, U.S. Treasury yields are showing evidence that a cyclical peak could be near (and should be in place by the end of June)," Newton said.

The third, as shown on the chart below, prices on utility ETFs such as Invesco S&P 500 Equal Weight Utilities (RYU) or Utilities Select Sector SPDR (XLU) are nearing trend-line support that has held since last summer, he said.

"This held already twice since the initial trough was formed last July, and points to a decline to $64.42 as providing an excellent entry for longs," Newton said.

On this weakness, he likes utilities such as Consolidated Edison (ED), Duke Energy (DUK), Southern Co. (SO), Atmos Energy (ATO), Xcel Energy (XEL) and Eversource Energy (ES). They have outperformed XLU this year and are anywhere from 13% to 16% off 52-week highs, he says.

He says steer clear of laggards such as American Water Works (AWK), AES (AES), NextEra Energy (NEE), Pinnacle West (PNW), FirstEnergy (FE), all having broken to at least fresh six-month lows and new annual lows for some and likely to lose more.

Newton is also keeping a close watch on the Cboe Volatility Index, or the VIX , noting a giant triangle pattern forming as shown in this chart, which is likely to resolve in massive upside breakout. The VIX tends to decline during market rallies and rise during times of stress:

He says "any move back above this week's highs of 35.05 will be hugely significant technically, and likely coincide with a possible final equity market washout into late June." A break below 23.75 would be a positive for markets, but a solid drop below 20 is needed to "truly believe equity markets are in the clear."

"Given the uncertainty ahead of the end of quarter, buying implied volatility on the recent pullback seems prudent and, technically, looking to sell on an upside breakout," he says.

The buzz

Shock and awe from the world's central banks continues, with the Fed hike followed by a surprise 50 basis-point Swiss National Bank rate rise that is sending the franc sharply higher. The Bank of England raised rates 25 basis points to a 13-year high.

Tesla (TSLA) has raised auto prices. Stocks are dropping in premarket along with the sector as techs look set to get particularly hit hard today. Elsewhere, CEO Elon Musk will meet Twitter (TWTR) employees on Thursday, where he is expected to confirm his desire to get that $44 billion takeover deal done.

Elsewhere, U.S. weekly jobless claims, building permits and housing starts and a Philadelphia Federal Reserve survey are all hitting at 8:30 a.m. ET.

Boeing (BA) was upgraded to buy/high risk from neutral at Citi, which trimmed its price target to $209 from $219. But it prefers Airbus .

AC Immune shares (ACIU) are down 15% premarket after a trial of its Alzheimer's treatment misses its main goals

Revlon (REV) has filed for bankruptcy, but will continue operating through a restructuring.

Amazon (AMZN) Prime Day is just around the corner. July 12 and 13

European gas prices are surging a second day after Russia's Gazprom cut supplies through the continent's biggest pipeline. German, French and Italian leaders headed to Kyiv on Thursday to show support for Ukraine as Russia's war approaches four months.

The markets

Stock futures are tumbling, bond yields are climbing, and the dollar has turned lower. Gold is up some, while oil has turned lower. Bitcoin and other cryptos have also come off a post-Fed bounce.

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:

Ticker  Security name 
TSLA    Tesla 
GME     GameStop 
AMC     AMC Entertainment 
NIO     NIO 
RDBX    Redbox 
AAPL    Apple 
AMZN    Amazon 
MULN    Mullen Automotive 
NVDA    Nvidia 
BA      Boeing 

Random reads

A wealthy American may be in trouble in Spain, after claiming thieves allegedly stole a nearly $1 million watch that may be worth far less.

A Manhattan landlord sees the value of his office building drop $12 million after listing it as an nonfungible token in Ether.

Stuck for a holiday plan? $110,000 will get you an around-the-world Disney theme park tour, via private jet

The internet can't get enough of Chewy's (CHWY) kindness toward a bereaved dog owner:

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-Barbara Kollmeyer


(END) Dow Jones Newswires

06-16-22 0816ET

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