Dow Jones futures fell slightly on Wednesday morning, along with S&P 500 and Nasdaq futures. Palo Alto Networks and Coinbase announced Tuesday evening, with Wingstop and chip giant Nvidia expected on Wednesday.
The stock market rally lost more ground, with the Dow Jones falling below a key level while the S&P 500 and Nasdaq retreated towards major support. The 10-year Treasury yield continued to climb, approaching the 4% level again amid stronger than expected and disappointing economic data. Home deposit (HD).
Investors should take a more defensive stance, at least in the short term.
Palo Alto Networks (PANW) and Toll Brothers (TOL) announced its results on Tuesday evening. The same was true for three major holdings of Ark Invest: Exact Sciences (EXA), Crispr Therapeutic (CRSP) and Coinbase (PIECE OF MONEY).
Baidu (BIDU) released fourth quarter results ahead of Wednesday’s opening. wing stop (WING), TJX Cos. (TJX) report early Wednesday as well.
Nvidia (NVDA) earnings loom Wednesday night, a key report for the chip sector and the overall market rally.
WING stock is on IBD Leaderboard and IBD 50.
The video embedded in the article reviews Tuesday’s market selloff and analyzes Auto life (ALV), Lamb Weston and Wingstop.
Dow Jones Futures Today
Dow Jones futures lost about 0.1% relative to fair value. S&P 500 futures slid 0.1% and Nasdaq 100 futures fell.
Crude oil futures fell slightly. Copper prices fell 1%.
Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.
PANW stock jumped 10% early Wednesday after Palo Alto earnings topped fiscal second-quarter views, but forecasts were mixed. Palo Alto stock fell 1.4% to 166.89 on Tuesday, retreating toward the 200-day line. A decisive move above last week’s high at 177.60 would eliminate multi-month resistance, offering entry.
TOL stock edged higher in premarket trading as fiscal first-quarter earnings topped views. Toll Brothers’ stock fell 2.6% on Tuesday to 55.70, closing in on the 50-day and 10-week lines. After nearly doubling from last October to February 2, stocks retreated as Treasury yields rebounded. But the TOL stock has a buy point of 62.71 cups with handle.
EXAS stock fell slightly in overnight trade after Exact Sciences topped fourth-quarter views, but gave online guidance for 2023. Exact Sciences stock could test the 50-day line on Wednesday after slipping 3.5% to 61.26 on Tuesday.
CRSP stock edged higher in long action. Crispr reported a lower-than-expected fourth-quarter loss and said it was on track to complete its FDA submission by the end of the first quarter for its genetically modified therapy to treat sickle cell disease and beta -Thalassemia dependent on transfusions. Crispr stock fell 4.8% on Tuesday to 62.07, dropping below the 50-day line.
COIN stock fell slightly overnight as Coinbase reported a slightly lower-than-expected fourth-quarter loss as revenue fell 75%. COIN stock fell 8.4% to 46.63 on Tuesday, heading back towards the 200 and 21-day lines. Investors might view a decisive rebound from these levels as a sort of aggressive entry.
Baidu stock jumped above the 21-day line early Wednesday as the search engine, artificial intelligence and self-driving company beat views and announced a $5 billion buyout. BIDU stock fell 0.6% on Tuesday to 140.82, below the 21-day line but above the 50-day line.
WING stock fell 4.2% to 166.21 in heavy volume on Tuesday, slipping below a 169.04 cup buy point with a handle cleared last week, according to MarketSmith analysis.
TJX stock fell 1.3% to 78.82, slightly below the 50-day line in a flat base 6% deep. The official buy point is 83.23, but a strong move above the 50-day line would also break a trendline entry.
Nvidia stock fell 3.4% to 206.55 on Tuesday, just below its 21-day line. Microsoft (MSFT) has announced that its Xbox games will be on Nvidia’s cloud gaming service. NVDA stock is extended from a low base but has a tight three week pattern with a buy point of 230.59. By Wednesday’s close, the chip giant will likely have a handle on a daily chart with that same entry, for consolidation dating back to April. But Nvidia’s stock would still be extended from the 50-day/10-week lines.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally started lower on Tuesday, with selling soon accelerating on S&P Global’s flash reading of the US economy, with the global index and services gauge both moving above the 50 breakeven point. .
The Dow Jones Industrial Average fell 2.1% in Tuesday’s stock trading. The S&P 500 index lost 2%. The Nasdaq composite fell 2.5%. The small-cap Russell 2000 fell 2.9%.
U.S. crude oil prices fell 0.2% to $76.16 a barrel, extending steep losses from last week. Natural gas futures plunged 8.9% on Tuesday and 19% in the past four sessions.
Copper prices rebounded 2.9%.
The 10-year Treasury yield jumped 13 basis points to 3.95%. This is the highest since November and up 62 basis points from the February 2 low. Part of this reflects optimism that the United States will not fall into a recession. But it also means inflation is likely to be more persistent and the Fed may tend to be more aggressive. Markets now see at least an 80% chance of three more quarter-point rate hikes, with a small but growing chance of a half-point move in March or May.
On Wednesday, the Fed will release the January-February 31 minutes. 1 meeting. On Friday, investors will get the January reading of the PCE price index, the Fed’s favorite inflation gauge.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 2.2%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 2%. ETF VanEck Vectors Semiconductor (SMH) fell 3%. Nvidia stock is a major holding company of SMH.
Mirroring stocks with more speculative stories, ETF ARK Innovation (ARKK) fell 6.1% and ARK Genomics (ARKG) lost 6.25%. CRSP shares and Coinbase are two large holdings at Ark Invest.
The SPDR S&P Metals & Mining ETF (XME) lost 2.6%. The US Global Jets ETF (JETS) fell 3%.
The SPDR S&P Homebuilders ETF (XHB) fell 3.9% as Home Depot forecasts and rising yields hammered housing stocks. The TOL share is an XHB holding.
ETF Energy Select SPDR (XLE) and ETF Financial Select SPDR (XLF) each fell 2.1%. The SPDR healthcare sector fund (XLV) fell 1.3%.
Five best Chinese stocks to watch now
Market rally analysis
The stock market rally extended its decline on Tuesday. The S&P 500, Nasdaq and Russell 2000 all fell sharply, dropping below their 21-day moving averages. The Dow fell decisively below its 50-day line after holding that key level for a month.
Right now, the market pullback still looks normal on a weekly chart, but that’s a bit like saying a person’s blood pressure is “normal” but nearing the upper limit.
The S&P 500 and Nasdaq are falling near their 50- and 200-day lines, respectively. Breaking those levels would be worrisome.
Recent breakouts and buy signals have struggled with the overall market fading since Feb. 2 and particularly over the past three sessions.
Rising Treasury yields and a rebounding dollar are weighing on stock prices, especially growth stocks. With some short-term returns exceeding 5%, that’s a pretty decent risk-free return compared to stocks.
More generally, the market rally no longer ignores mixed (at best) earnings forecasts and economic data.
The good news is that investors don’t seem so complacent anymore. The Cboe Volatility Index, or VIX, hit its highest level since early January, just ahead of the Jan. 6 tracking day.
Speculative growth names, which surged after bear market lows in January, may not continue to lead higher if their actual earnings don’t match.
Some mining stocks showed strength as prices for copper and other metals rebounded. But will it last more than a day?
More defensive names stand out again. Weston Lamb (LW) revolves around a buy point while Hershey (HSY) flirted with a breakout on Tuesday. walmart (WMT) sent a buy signal on earnings despite weak forecasts.
Time the Market with IBD’s ETF Market Strategy
What to do now
Investors should be more defensive, perhaps reduce their overall exposure. Even if this is not your explicit goal, you should reduce exposure by reducing individual losers or taking at least partial gains from some winners.
The recent pullback could still be positive. Stocks that resisted the initial slight pullback in early February are now either blowing or retreating. A few good days could easily rekindle the fortunes of the market rally and trigger a number of buying opportunities. Investors must therefore be ready to act, by building their watch lists.
But if conditions worsen, you will need to step back more substantially. So stay flexible and stay engaged.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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