Dow Jones Futures: What’s Next For Stock Market Rally After Growth’s’ Wild Ride? Tesla, Square Lead Key Movers Late
Dow Jones futures fell slightly on Tuesday night, along with S&P 500 futures and Nasdaq futures place (SQ) Headliner Key Earnings and Tesla (TSLA) under multiple EV games that are active overnight.
It’s been a wild day for the stock market rally, at least for the Nasdaq, and especially for speculative growth names like Tesla stocks and China EV rivals Nio (NOK). The Nasdaq fell more than 3% for the day but rebounded for a modest loss. Bitcoin price fell for a second session in a row.
The squared earnings exceeded the prospect aided by the bitcoin activity. However, net sales and purchasing volumes missed the estimates. Last IPOs Upwork (UPWK) and PubMatic (PUBM) also towered over views.
Square floor fell 5% late. SQ stock was down 4.3% on Tuesday after rebounding from its 50-day line. Upwork stock rose 18% and PubMatic rose 10% overnight, after both rising sharply from key levels during the day on Tuesday. UPWK bounced off its 50-day line and landed slightly higher. PUBM closed on modest losses, but after falling below a buy point it was very difficult to hold.
These stocks show strength, pass buy points amidst market turmoil
The Nasdaq had looked like it was about to trigger a vertical breach during the day as it quickly fell through its 50-day line. However, the strong recovery to modest losses leaves the market direction unclear. The Dow Jones and the S&P 500 offset relatively modest losses and closed just above breakeven. The stock market rally could simply take place in a sector rotation, with rising yields and commodity prices triggering a shift into mining, agricultural and financial stocks.
Dow Jones components Caterpillar (CAT), Disney (DIS) and JPMorgan Chase (JPM) advanced, all expanded from recent breakouts. Microsoft (MSFT) fell but rebounded from its 10 week line to close above its buy point of 232.96.
Bitcoin price fell below $ 45,000 on Tuesday, after exceeding $ 58,000 on Sunday. The cryptocurrency rebounded to over $ 48,000 overnight. Bitcoin is well above what it was before the market opened on Feb. 8 when Tesla announced it had bought $ 1.5 billion worth of cryptocurrency.
Tesla rebounds, workhorse crashes
Tesla stock fell 2% to 698.84 on Tuesday after falling to 619. Stocks are still nearly 11% this week and 11% below their 10-week line. TSLA stock rose slightly overnight when ARK Invest’s Cathie Wood said ARK bought “a lot” on Tuesday. That follows a major purchase of Tesla stock by Ark on Monday, and Wood spoke about the company last week.
Tesla is ARK’s largest stake in its ETFs and in many ways an indicator of the type of speculative growth games Cathie Wood is focused on.
Nio stock was down 3.1% to 49.11 after falling to 41.66. Shares fell 7.8% on Monday to hit the 50-day line. The Nio share rose overnight. Nio earnings are due on March 1st.
But some EV stocks fared far worse. EV delivery truck manufacturer Workhorse group (WKHS) lost a major USPS vehicle contract to Oshkosh Corp. (Occupational Safety and Health) WKHS stock cratered 47% and then fell sharply overnight. Oshkosh stock rose 6.1% on Tuesday, then rose in extended trading.
Churchill Capital (CCIV) crashed 38%. Luxury EV startup Lucid Motors has confirmed it will go public late Monday as part of a SPAC merger with Churchill Capital. CCIV stock was up 468% since Jan. 8 when rumors about Lucid SPAC increased. Churchill Capital rose modestly overnight.
Tesla shares are on the IBD leaderboard, but fell from a half to a quarter position on Tuesday. Microsoft stocks are on the leaderboard and IBD Long-Term Leaders. Disney Stock and Caterpillar are on SwingTrader.
Dow Jones Futures today
Dow Jones futures fell 0.1% from fair value. S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.25%.
Remember that night action in Dow futures and elsewhere does not necessarily result in an actual trade in the next regular trading session.
Analyze actionable stocks in the stock market rally on IBD Live with IBD experts.
Coronavirus cases reached 112.62 million worldwide. Covid-19 deaths topped 2.49 million.
Coronavirus cases in the US have hit 28.89 million people, with deaths over 514,000.
Stock market rally Tuesday
The stock market rally began on Tuesday, with the Nasdaq posting heavy losses. But the major indices reduced losses as Fed Chairman Jerome Powell spoke. Powell says there is a link between the Fed’s liquidity and asset prices. However, he reiterated his commitment to the current aggressive monetary policy and stressed that strong employment growth was a priority. Powell also said the Fed is carefully examining whether to issue a “digital dollar” but is not facing major technical and political issues.
The Dow Jones Industrial Average was a fraction higher in stock market trading on Tuesday and thus just below the record high. The S&P 500 Index gained 0.1%. The Nasdaq network fell 0.5%.
Microsoft stock fell to 228.73 during the day, testing the 10-week line, but not with wild falls like many stocks on Tuesday, including Square. Stocks also never undercut early entries at 227-228. At the close of trading, MSFT shares recovered to a loss of 0.5% to 233.27 and were thus above the official buy point of 232.96.
Growth stocks generally lost ground, even on large afternoon rallies.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 2% while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 2.1%. The iShares Expanded Tech-Software Sector ETF (IGV) was down 1.1%, with MSFT stock being the main component. The VanEck Vectors Semiconductor ETF (SMH) was down 1%.
The Ark Innovative ETF was down 3.3% and the Ark Genomics ETF was down 3.05%.
Stock market analysis
The Nasdaq fell to just above the January 29 low during the day and then swung up and down the 13,000 level before almost returning to break-even.
We need to see how the market reacts over the next few days to put Tuesday’s action in perspective.
Perhaps Tuesday will mark the beginning of a rebound for the Nasdaq and big winners like Tesla and Nio. But sometimes a stock market rally finds support and then breaks it. It did so in early September when the Nasdaq cut losses on the second day of a pullback before falling below its 50-day limit on the third day.
Given that the Dow Jones is holding on the growth of real economy stocks, this appears in many ways to be a sharp sector rotation within a market rally.
For the time being, this remains a confirmed stock market rally. This is a good day to read The Big Picture and stay in sync with market direction and leading stocks and sectors.
Investors should be a bit defensive, especially on high quality growth stocks. The Nasdaq has seen a lower trend in the last few sessions. Today, many growth stocks have broken charts after the last few days. Even before the most recent withdrawal, there were many good buying opportunities.
One reason to take partial profits when the Nasdaq was extended in late January through early February is to make it easier to handle pullbacks. Selling expanded stocks in strength can help you hold a core position through pullbacks. If you’ve sold some winners at Tuesday’s lows, those early partial wins have at least increased the average selling price.
Don’t let a stock drop more than 7% -8% from your purchase price. Yes, if you had to sell at Tuesday’s lows you might regret it, at least for now, but the point is to keep your capital and not hope for a rebound.
In the meantime, make sure you keep working on watchlists. The last few sessions have shown the importance of diversifying leadership. Having a few names like Disney would have made the past few days less painful.
Please follow Ed Carson on Twitter at @IBD_ECarson for information on the exchanges and more.
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