Dow Jones futures rose slightly earlier on Wednesday, while the S&P 500 and Nasdaq futures fell modestly, with Treasury yields rising again. The House is expected to give final approval to the $ 1.9 trillion Biden stimulus project today.
X
The stock market’s recovery attempt had a strong session on Tuesday, with Treasury yields retreating. The Dow Jones hit a record before retreating as the S&P 500 index recovered important levels. The Nasdaq has rebounded strongly, but remains well below recent highs.
Likewise, growth names, such as Tesla (TSLA), Nio (NIO), Nvidia (NVDA) and Zoom Video Communications (ZM) were big winners on Tuesday, but are still in a strong downtrend.
New disruptions are coming from real economy names. Manufacturer of specialty chemicals Element Solutions (ESI) and auto giant Stellantis (STLA) broke out, while the steelmaker Ternium (TX) and car dealership CarMax (KMX) extended earnings within the purchase zones. Microsoft (MSFT) – less a high-octane, high-value name than Tesla shares – has taken over a point of purchase, as well as several key levels.
About that, General electrical (GE) has confirmed that it will sell its aircraft leasing business to AerCap (AER). GE will receive $ 24 billion and a 46% stake. GE is also planning to make a 1 to 8 reverse split. GE shares rose on Wednesday morning, signaling a new 34-month high. AerCap, which jumped on Monday with reports of a deal, was not yet active.
The shares of Microsoft and Nvidia are on the IBD Leaderboard and on the IBD 50 list. The shares of MSFT are also on the IBD Long-Term Leaders. KMX’s shares were Tuesday’s IBD shares.
Why this IBD tool simplifies the search for the main stocks
Vote on Biden’s stimulus project
The House is expected to give final approval to the $ 1.9 trillion Biden stimulus bill on Wednesday, voting on the Senate version of the legislation. The Senate approved the Biden stimulus bill, with some adjustments, on Saturday. After the House vote, the stimulus bill will go to President Joe Biden’s desk for his signature.
The stimulus project will provide checks for $ 1,400 to many Americans, expanded unemployment benefits and help schools and state and local governments. It also includes significant increases in spending on anti-poverty programs, ObamaCare and private pension bailouts. It also offers a little money for vaccinations and coronavirus tests.
After the huge Biden stimulus project – which comes weeks after a second coronavirus aid package – Congressional Democrats are considering an even bigger spending package later this year focused on infrastructure. This latter package is also likely to include large tax increases.
The impending spending blitz boosted interest rates and stocks in the real economy, with rising Treasury yields weighing on growing names.
Dow Jones Futures Today
Dow Jones futures were up 0.2% against fair value. S&P 500 futures were 0.1% below breakeven, while Nasdaq 100 futures fell 0.45%.
The 10-year Treasury yield was at 1.57%, slightly higher after Tuesday’s decline. A 10-year Treasury auction is scheduled for today. A poorly received seven-year auction on February 25th caused Nasdaq to fall below its 50-day line and pushed the market’s recovery into a “bullish trend under pressure”.
At 8:30 am ET on Wednesday, the Department of Labor will release the February consumer price index. The CPI hasn’t moved Dow Jones futures in a while, but Treasury markets have signaled some concern about future inflation.
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 118.24 million. Deaths from Covid-19 reached 2.62 million.
Coronavirus cases in the USA reached 29.80 million, with deaths above 540,000.
Stock market Tuesday
The stock market rally attempt had a generally encouraging session on Tuesday, although the closing fade was not large. The 10-year Treasury yield fell 6 basis points, to 1.53%, after rising for several days. This was a catalyst for growth actions.
The Dow Jones Industrial Average rose 0.1% in Tuesday’s stock market trading, weakening sharply in the final minutes after briefly hitting another record high. The S&P 500 index jumped 1.4%, jumping above its 50 and 21 day lines. The Russell 2000 rose 2.1%, up from its 21 days.
The Nasdaq compound rose 3.7%, but is still below its 50-day line.
Tesla’s shares soared nearly 20%, its biggest percentage gain in 13 months, driven by the general growth rally as well as strong sales in China. Nio’s shares jumped 17%. Nvidia jumped 8% and Zoom’s shares rose 10%. But all four stocks are still well below their 50-day lines and need time to repair their damaged graphics. Nvidia’s shares managed to recover their 200-day average, while Zoom was still stuck below that.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) gained 4.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained just over 5%, both closing on its 50-day lines. IShares Expanded Tech-Software Sector ETF (IGV) rose 4.4%, with Microsoft as the largest share and ZM’s shares a notable component. VanEck Vectors Semiconductor ETF (SMH) jumped 5.9%, with Nvidia as one of the main holdings.
Reflecting more speculative stocks, the Ark Innovation ETF shot up 7.65% and the Ark Genomics ETF rose 10.4%, after both suffered heavy losses in the past few days. Tesla shares are the No. 1 position in ARK Investments’ ETFs.
The latest stock market discoveries find three key trends
Stock in purchase zones
Element Solutions’ shares rose 7.2% to 20.24, from a point of purchase of 18.5 cups in large volume, according to MarketSmith’s analysis. The 5% chase zone for ESI stock reaches 20.48. The relative strength line reached a new peak, reflecting its superior performance in relation to the S&P 500 index. The specialty chemicals manufacturer – touching on electric vehicles, 5G, AI and smartphones – recently reported a 41% gain in EPS in the last quarter .
Stellantis shares rose 2.6% to 17.56, freeing an entry at the bottom of the 17.31 cup. Stellantis is the result of a recent merger between Fiat Chrysler and the French Peugeot. STLA’s inventory is delayed Ford (F), General Motors (GM) and especially Volkswagen (VWAGY), but profits are recovering solidly and its RS line is at a new high.
Ternium’s shares rose 3.9% to 35.43, above a point of purchase of 34.09 cups in large volume. TX shares originally burst on March 2 and fell a few days later. The shares just closed in the buying range on Monday, but fell below the entry on Tuesday morning before recovering.
CarMax shares reached 132 on the intraday, but reversed downwards, falling 0.3%, to 128.82, still slightly above the 128.68 point of purchase. KMX shares jumped 4.85% to 129.17 on Monday. The RS line is up. CarMax’s profits have rebounded as the tight supply of new cars fuels used car sales and prices. The used car giant also gave a big boost to digital sales during the pandemic.
Microsoft shares advanced 2.8% to 233.78, again above a buying point of 232.96. Tech giant Dow Jones also rebounded its 50- and 21-day moving averages, in addition to breaking a short bearish trend.
In many ways, the stock chart for MSFT over the past few weeks looks a lot like the S&P 500 index. Buying Microsoft shares near the 50-day line makes sense as a long-term leader. Investors can also start holding a stake here and then fill the position if and when MSFT’s shares complete and complete a new consolidation starting with the biggest all-time high of February 16, 246.13. The RS line for Microsoft shares has been delayed since July and is below the levels of early February, but has remained better than many technology names in recent weeks.
Bullish stock market analysis
Analyzing the current attempt to recover the stock market is difficult because the main indices are very divided. It is normal to see an index lead to the positive or negative side, but generally they all tend in the same direction. But that hasn’t been the pattern for the past few weeks.
On Tuesday, the stock market rose in all categories. Nasdaq led the way with a powerful recovery, with Tesla shares and many speculative growth names skyrocketing after several days of decline. The S&P 500 index rose sharply, while the Dow Jones made a small gain after a solid intraday gain.
But Nasdaq and many major stocks like Nvidia are still below their 50-day lines. The best one-day gains in history are all on the bear markets, so a big day for growth stocks in a correction doesn’t mean much in itself.
Tuesday marked the third day of an attempt to recover the stock market. Especially for Nasdaq and the growth sectors, a follow-up day to confirm the new high is the key. The sequel can come any day now. A strong Nasdaq gain from these levels could also push the high-tech index to or above its 50 and 21 day lines.
The Dow Jones, despite its dull finish, is trading at record levels. Several other shares of the real economy have entered the buying zones. To be honest, if Dow Jones and cyclical sectors had incorporated the stock market, the IBD would not have declared a correction last week. With Dow Jones and related sectors at new highs, it is easy to argue that this important segment of the market is in an upward trend – and has never been in correction.
The S&P 500 index also looks healthier, recovering important levels. Russell 2000 too.
IBD stock of the day in the purchase range as earnings rebound in these trends
What to do now?
Work on your stock watch lists, focusing on relative strength. Among them, pay close attention to the actions that are forming near points of purchase.
Investors may choose to take some small positions in stocks that are breaking or issuing other buy signals. In addition to some names like Microsoft, they will usually be real economy names. As for growth actions, wait for a follow-up day. Even so, many stocks like Nio, Zoom or Tesla can take weeks or more to create new buying opportunities.
This is an important day to read The Big Picture and understand the direction of the market.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MIGHT LIKE:
Do you want to make quick profits and avoid big losses? Try SwingTrader
Best growth stocks to buy and watch
IBD Digital: Unlock IBD’s premium stock lists, tools and analytics today