Dow Jones futures fell slightly on Thursday night, along with S&P 500 and Nasdaq futures, with Treasury yields continuing to rise. The stock market recovery suffered heavy losses on Thursday after Fed chief Jerome Powell did not seem too concerned about the increase in Treasury yields and gave no indication of a policy “turnaround” to cool down stocks. long-term rates.
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Broadcom (AVGO) reported gains after closing.
The Dow Jones, S&P 500, Nasdaq and Russell 2000 indices broke below recent lows on Thursday, the last blow to a stock market recovery. Treasury yields have increased.
Tesla sold strongly, while Taiwan Semiconductor (TSM) plunged below its 50-day line. Nvidia (NVDA) and Service now (NOW) dropped to long-term support levels. Tesla’s action, perhaps the most important action of the past year, has a long way to go before it reaches clear levels of support.
Why this IBD tool simplifies the search for the main stocks
Father of Google Alphabet (GOOGL), Microsoft (MSFT), OK (OK), Five below (Five and Polaris (PII) are five stocks that hold up relatively well, close to possible points of purchase.
But there were few safe havens on the stock market on Thursday. Mining stocks, which have been big winners amid a move to “real economy” names, have been the big losers. Freeport McMoRan fell 6.6%. The increase in Treasury yield spreads is good news for the financial sector, but JPMorgan Chase (JPM) fell 1.5%. Flagstar Bancorp (FBC), which issued a buy signal on Wednesday and erupted briefly on Thursday morning, reversed downward to a 4.1% loss.
Fed Chief Powell stimulates market movements
Fed chief Powell said in a midday speech on Thursday that the securities’ recent action “caught my eye”, adding that “we would be concerned about the disorderly conditions in the financial markets”. But he did not say that recent stock and bond market swings reach that limit. He also did not give clear guidance on what the Federal Reserve can do in response. Specifically, Powell did not address the idea of reviving “Operation Twist”, in which the Fed buys long-term debt and sells short-term debt to try to lower long-term rates.
The Fed’s next meeting will be on March 16 and 17, so policymakers can take action or provide further guidance on what action they can take.
More broadly, Powell said that monetary policy remains very accommodative. He also didn’t seem concerned about rising inflation. Policymakers have signaled that they want more inflation, even if they are willing to see price increases reach 2% for a prolonged period, with the resumption of employment being their main concern.
Consumer inflation remains weak, but commodity prices, from crude oil to copper and agricultural products, have skyrocketed. Crude oil futures rose 4.2% to 63.83 a barrel on Thursday, with OPEC + agreeing to maintain current production cuts until at least April.
Broadcom earnings
Broadcom’s earnings outpaced views, and the tech giant outperformed revenue for the current quarter. AVGO’s shares fell modestly in extended trading. Broadcom fell 4% on Thursday, reducing its 50-day line. The chip giant had held up better than many other technology leaders, but is now starting to bow to the market.
Nvidia, Taiwan Semiconductor, Microsoft and Tesla are on the IBD Leaderboard. Microsoft’s shares are in the IBD Long-Term Leaders. Google’s shares are in the IBD Big Cap 20. The shares of Google, Nvidia and AVGO are in the IBD 50. Vale’s shares were the IBD shares of Thursday. FBC was Wednesday’s stock, while FIVE’s stock was back on February 25th.
Dow Jones Futures Today
Dow Jones futures lost 0.4% against fair value. S&P 500 futures plunged 0.5%. Nasdaq 100 futures fell 0.65%, with Broadcom and Tesla acting as obstacles.
The 10-year Treasury yield rose to 1.58% overnight, after rising to 1.54% in Thursday’s regular session.
At 8:30 am ET, the Department of Labor will release the February jobs report. At this point, does Wall Street want to see a report of weak jobs to control Treasury earnings?
Keep in mind that overnight action on Dow futures and elsewhere does not necessarily translate into real trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks at the stock market’s high on IBD Live.
Coronavirus News
Coronavirus cases worldwide reached 116.19 million. Deaths from Covid-19 reached 2.58 million.
Coronavirus cases in the USA reached 29.51 million, with deaths above 533,000.
Stock market rally
The stock market rebound was up and down in the morning, definitely lowering after comments by Fed chief Powell. The main indices recovered from intraday lows, but closed in the lower half of their intervals.
This is an important day to read The Big Picture.
The Dow Jones Industrial Average lost 1.1% in Thursday’s stock market trading, finally easing after Nasdaq started its post-Powell liquidation in the afternoon. The Dow Jones index closed just below its 50-day line. The S&P 500 index plunged 1.3%, clearly below 50 days. The Nasdaq compound dropped 2.1% to a new 2021 low. The Russell 2000 lost 2.7%, closing well after 50 days.
The 10-year Treasury yield jumped 7 basis points to 1.54%. Although it did not surpass last week’s intraday peak above 1.6%, this is the highest 10-year yield since February 2020.
Taiwan Semi dropped 5.9% to 115.59, exceeding its 50-day line. ServiceNow’s shares fell 4.9% and Nvidia’s 3.4%, both reducing recent lows, but finding support around their 200-day lines.
Among the best ETFs, Innovator IBD 50 ETF (FFTY) fell 5.2%, while Innovator IBD Breakout Opportunities ETF (BOUT) fell 5.75%. The iShares Expanded Tech-Software Sector (IGV) ETF fell 2.8%. The shares of Microsoft and NOW are the main stakes of IGV. VanEck Vectors Semiconductor ETF (SMH) slid 4.85%, with TSM, Broadcom and large components from Nvidia.
Reflecting more speculative story stocks, Ark Innovation ETF sank 5.5% and Ark Genomics ETF 5.8%.
Tesla Stock
Tesla shares sold 4.9% to 621.44, reducing last week’s low and setting a new intraday low of 600. It is now 31% below the January 25 peak of 900.40. Perhaps Tesla will find support at around 600. But if that doesn’t hold, the next level of support for TSLA’s shares could be the top of its previous base at around 500. The 200-day moving average is now around 472.
TSLA’s shares fell 3% in overnight trading.
Why is Tesla important to the stock market?
Tesla’s shares were a big winner in 2020 and it still boasts a huge market capitalization of $ 593 billion.
It is a leader in the fast-growing electric vehicle space, which was a booming market sector last year. EV shares are now selling strongly.
More broadly, Tesla is the symbol of highly valued or speculative growth names. (Unlike many speculative names, Tesla boasts strong profit growth – helped by some special factors – but analysts’ price targets make heroic assumptions about its long-term growth and market share.
If Tesla is doing well, its market weight and icon status are a catalyst for highly valued growth.
As ARK Investments’ largest share of ETFs, a major sale of Tesla shares is bad news for Cathie Wood’s ETFs. With other large ARK stakes also falling and investor withdrawals increasing, ARK could be forced to liquidate many of its positions, although not necessarily Tesla. With many investors following the example of ARK Funds, which discloses many of its purchases and sales every day, this can generate much greater losses.
Bulls can argue that Tesla’s stock has undergone far greater corrections to its incredible execution since the end of 2019, and that is absolutely correct. As long as it doesn’t really break – perhaps only after surprisingly bad news from the company – investor enthusiasm is likely to remain strong in stocks and perhaps also in speculative growth.
Actions to watch
Google shares rose 1.1% to 2,033.93, maintaining support at its 21-day exponential moving average. It still has a tight three-week entry of 2,145.24, just above the all-time high. The relative strength line for the GOOGL stock is at a record high. Unlike many story stocks, Google is more of a steady whirlwind in terms of earnings growth and stock performance. In a bull market, Google’s stock can be boring. But in a less hectic upward market trend, this FANG stock may perform well.
Microsoft shares fell 0.4% to 226.73. This is slightly below its 50-day moving average. A purchase point of 232.96 is still valid for MSFT shares. Staying above that level would also likely break a bearish trend and reach the top of the 21-day line. However, Microsoft’s RS line has shown a downward trend.
Vale’s shares fell 2.1% to 17.50, just above its 50-day line and holding much better than other miners on Thursday. Vale has a point of purchase of 18.57 cups with handles.
Five Below fell 4.8% to 183.19, closing cents below its 50-day line. FIVE’s stock is on a somewhat confusing flat base, with a buying point of 198.20.
Polaris shares fell 0.2% to 122.51, working on a flat basis with a buying point of 129.10, according to MarketSmith’s analysis. The flat base is part of a base-to-base formation, which is especially high in weak markets. Your RS line is at a maximum of 52 weeks, making it a special MarketSmith blue dot on a weekly chart. The ATV manufacturer is benefiting from external momentum now, as well as from its EV plans.
What to do now
In the current market environment, investors should be playing defense. If you are still in a series of growth actions, it is past time to reduce exposure. As Thursday’s stock showed, stocks in the real economy may hold up better, but that doesn’t mean they won’t fall either.
Investors must be substantially in cash.
Extend your watch list by focusing heavily on actions with lines of increasing or high relative strength. Remember that stocks can hold for a while and finally give in. Also on Monday, TSM’s shares issued early buy signals. So just because Google rose on Thursday, it doesn’t mean that it will lead when market conditions are really favorable.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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