Dow Jones Rallies As Powell Looms; Donald Trump Stock Surges Amid Legal Drama

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The Dow Jones Industrial Average jumped nearly 400 points ahead of the Fed’s next meeting. First Republic (FRC) stock fell despite reports that the troubled bank is seeking help from JPMorgan Chase (JPM) as it struggles to stay afloat. The Donald Trump SPAC Digital World Acquisition (DWAC) rocketed amid more Stormy Daniels legal drama.

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There was some bullish action even though the stock market was still holding a correction. Wheaton Precious Metals (WPM) attempted a weak breakout, while Royal Gold (RGLD) joined the Leaderboard amid an encouraging move.

The Federal Open Market Committee Meeting, chaired by Fed Chair Jerome Powell on Tuesday and Wednesday, looks key.

“US stocks are skeptical because risk aversion will not go away until markets are confident that the Fed is done with their rate hike campaign,” said Oanda senior market analyst Edward Moya in a note to clients. The banking system still lacks confidence as Wall Street tries to send yields lower, he added.

It looks like “credit conditions will continue to tighten while monetary policy conditions are expected to ease as the economy heads into a recession,” Moya said.

Treasury yields rose as the yield curve continued to remain inverted. The 10-year yield rose 10 basis points to 3.5% while the two-year yield rose 12 basis points to 3.97%.

Nasdaq Lags As Small Caps Jump

The Nasdaq lagged other major indexes after last week’s outperformance. It closed up 0.4%, near the high for the day. Enphase Energy (ENPH) impressed with a rise of 4.8%.

The benchmark S&P 500 rose 0.9%. However, it failed to move decisively above the 200-day moving average. NRG Energy (NRG) was a strong performer here, rising 6.8% to finish above its 50-day moving average.

The S&P 500 sectors were all positive. Energy, materials and industry are the top performers. Consumer discretionary and technology made the least gains.

Steady action in financials supported small caps, with the Russell 2000 up 1.1%. Growth stocks reversed higher, with the Innovator IBD 50 ETF (FFTY) earning a modest 0.4% gain.

Dow Jones Today: CAT, HON Gain, Microsoft Stock Falls

The Dow Jones Industrial Average was able to recoup some of its recent losses as it rose just over 400 points. This translates to 1.2%.

Industrial machinery maker Caterpillar ( CAT ) was a top performer on the Dow Jones today as it rose 2.5%, as did the Dow Inc . (DOW). But Honeywell International (HON) fared best of all with a 2.8% gain.

Microsoft (MSFT), which surged last week as investors sought safety in Big Tech stocks, lagged behind as it fell 2.6%.

The stock fell below Friday’s 276.86 breakout buy point, MarketSmith analysis shows. Intel (INTC) was the only other stock to end the day in negative territory.

Donald Trump SPAC Rockets Despite Legal Trouble

There is a saying that there is no such thing as bad publicity.

And that was certainly the case Monday for the Trump-linked SPAC, Digital World Acquisition.

It closed the session off highs but was still up 11%. It briefly retook the 50-day moving average but eventually turned back around that line, though.

The former president found himself embroiled in more legal drama.

He claimed on his Truth Social platform over the weekend that he would be arrested Tuesday on charges following an investigation into a $130,000 payment made to porn star Stormy Daniels in 2016. Despite the payment, Trump has denied having an affair to the adult actress.

Trump, who is running to take back the White House, urged supporters to “‘PROTEST, GET OUR COUNTRY BACK!’ “

In addition, a defamation trial over rape claims involving Trump was suspended indefinitely on Monday.

DWAC stock is down more than 90% from an October 22, 2021, high of 175. It fell early when news broke that the blank check firm was moving to acquire the publicly traded Trump Media and Technology Group, which includes Truth Social.

Bank Stocks: Republic Falls First, Sends SOS to JPMorgan

While bank stocks generally rallied, embattled First Republic continued to struggle.

Bank stocks reacted positively to the news that Credit Suisse ( CS ) is merging with fellow Swiss banking giant UBS ( UBS ). Banking fears seem a bit satiated at the moment.

But First Republic stock was a notable laggard, falling 47.1%. Liquidity fears remain despite JPMorgan’s leadership of a consortium that has sunk a combined $30 billion in bank deposits, serving well-heeled customers.

It continued to fall despite news that JPMorgan Chase is now advising the firm on strategic alternatives. It may look to raise additional capital, while selling the bank is another possibility.

FRC stock is now down 90% so far in 2023 and miles below its major moving averages.

However, regional banks are trying to fight back after last week’s debacle. The iShares US Regional Banks ETF (IAT) gave some early ground buying still up 2.2%.

Outside the Dow Jones: New Leader Eyes Entry

Investors should be busy building their watchlists for when the current correction ends.

The new Leaderboard stock Royal Gold is worth considering. It was added to the list of top stocks because it strongly cleared the 50-day moving average. It is now looking to clear a cup-with-handle base buy point of 131.99.

Royal Gold acquires and manages precious metal streams and royalty interests. Overall good performance is reflected in its IBD Composite Rating of 90 out of 99.

Wheaton Precious Metals is just below a buy zone after earlier testing a cup-with-handle entry of 46.63.

The relative strength line hit a fresh high, an encouraging sign. It is in the top 9% of stocks in terms of price performance over the past 12 months.

Gold often rallies in value amid periods of economic uncertainty. Recent concerns over the banking system have given gold stocks a boost.

Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.

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