Dow Jones futures were little changed late Wednesday, along with S&P 500 futures and Nasdaq futures. The Dow Jones fell modestly while the Nasdaq tumbled to fresh lows, but the stock market rally isn’t “all dead” yet.
For real economy stocks, Wednesday was normal or even positive. Boeing (BA), Citigroup (C), Flagstar Bancorp (FBC) and Avient (AVNT) cleared buy points or early entries.
The sell-off in growth stocks continued with the Nasdaq undercutting its Feb. 23 intraday. Stay-at-home plays Amazon.com (AMZN), Zoom Video (ZM), Teladoc Health (TDOC), Datadog (DDOG) and 2U Inc. (TWOU) all broke below long-term support, Tesla (TSLA) retreated to a 2021 closing low while Nvidia (NVDA), Roku (ROKU) and ServiceNow (NOW) tumbled decisively below their 10-week lines.
Marvell Technology (MRVL), Snowflake (SNOW), Okta (OKTA) and Splunk (SPLK) headlined earnings late Wednesday. But all of these tech stocks were breaking down or broken heading into quarterly results, falling sharply on Wednesday.
Marvell earnings were in line and guidance mixed. Snowflake reported strong revenue growth while Okta and Splunk beat views. Okta stock tumbled overnight on a $6.5 billion acquisition. Marvell fell modestly while SNOW stock reversed higher. Splunk stock, which is at 10-month lows, rose solidly.
Tesla stock and Nvidia are on IBD Leaderboard. ServiceNow stock is on IBD Long-Term Leaders list. Tesla and Nvidia stock are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures were roughly flat vs. fair value. S&P 500 futures and Nasdaq 100 futures edged lower.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live.
Coronavirus cases worldwide reached 115.72 million. Covid-19 deaths topped 2.57 million.
Coronavirus cases in the U.S. have hit 29.44 million, with deaths above 531,000.
Stock Market Rally Wednesday
The stock market rally sold off, closing at session lows. Real economy names held up while tech giants retreated and speculative names sold off.
The Dow Jones Industrial Average fell 0.4% in Wednesday’s stock market trading after being slightly positive for most of the session. Boeing stock was a key Dow winner, but Apple (AAPL) and Microsoft (MSFT) weighed on blue chips. The S&P 500 index slumped 1.3%, back below its 21-day line but holding just above its 50-day. The Nasdaq composite tumbled 2.7%, knifing through its 50-day line and undercutting its Feb. 23 low.
The 10-year Treasury yield rose 6 basis points to 1.47% after pulling back in recent days. The strong uptrend in long-term sovereign bond yields has pressured the stock market rally, especially speculative growth.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) skidded 3.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) slumped 3.25%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 4.1%, with Zoom Video and NOW stock notable components. The VanEck Vectors Semiconductor ETF (SMH) lost 3.15%. NVDA stock is a top SMH holding.
Reflecting more-speculative story stocks, Ark Innovation ETF tumbled 5.9% and Ark Genomics ETF 6.3%. Both undercut recent lows, with ARKK closing below them.
Tesla is the top holding across Ark Investment’s ETFs, including ARKK. Teladoc and Roku stock also are top-five Ark holdings while Ark bought a lot Zoom stock on Tuesday. Ark also holds sizeable stakes in many smaller, less-liquid names. Those will be hard to exit, especially with Ark Invest disclosing much of its daily buys and sells.
Boeing Stock Briefly Breaks Out
Dow Jones giant Boeing (BA) climbed 2.4% to 228.56. Intraday, shares hit 235.40, breaking out from a 229.71 cup-with-handle buy point on a weekly chart. Citigroup stock rose 3% to 70.38, clearing a 69.52 cup base buy point, according to MarketSmith analysis. But Citi’s breakout comes weeks after Goldman Sachs (GS), JPMorgan Chase (JPM) and even Wells Fargo (WFC).
Avient stock popped 5%, breaking out of a cup base in huge volume. Flagstar stock climbed 3%, rebounding bullishly from its 10-week line as its builds the right side of its flat base. FBC was Wednesday’s IBD Stock Of The Day. Avient stock was Tuesday’s.
Amazon, Zoom Video Break 200-Day
Amazon, Zoom Video, Teladoc, Datadog and TWOU stock fell below their 200-day moving averages. AMZN stock fell 2.9% while the other four retreated 3.75%-9.5%. For Zoom and Datadog stock, it was their first-ever closes below the 200-day.
Amazon stock is one of a handful of trillion-dollar companies.
Zoom stock is perhaps the ultimate coronavirus play, though Amazon, Teladoc also have thrived in the pandemic, along with cloud-based Datadog and 2U. As vaccinations ramp up and Covid restrictions ease, investors are betting richly valued at-home companies will see slower growth.
Teladoc stock, Datadog and 2U broke out to new highs just a few weeks ago.
Tesla stock fell 4.8% to 653.20, the lowest close since Dec. 23 but above last week’s intraday low of 619. Roku stock fell 5.2%, Nvidia 4.5% and ServiceNow 6.1%.
Stock Market Rally ‘Mostly Dead’
Is this a violent stock market rotation out of growth, or the beginning of a tech-led market correction? Strictly looking at the Nasdaq and tech leaders, this looks like a stock market correction. But the Dow Jones and cyclical sectors held up well while the S&P 500 index is still above its 50-day line, barely.
The market rally may be “mostly dead,” to quote Miracle Max from “Princess Bride,” but that’s still “slightly alive.” But where’s Miracle Max to revive the rally? At this point, any more weakness would likely push the “mostly dead” rally to “all dead.” On the flip side, it would take a lot to bring the market rally fully back to life, much like Princess Bride’s Wesley.
This is an important day to read The Big Picture to stay in sync with the market direction and leading stocks and sectors.
One thing’s for sure, growth, especially speculative growth, is out of favor. This stocks could bounce back quickly or several weeks or months from now, while some may never bounce back.
Don’t focus on 2020 winners like Zoom stock or Datadog if they’re performing poorly now.
Investors should be taking a defensive stance, at least with tech names. If your stocks are losing, either you’re out of sync with the market or the market itself is out of sync. Consider moving more into mining, industrial, agricultural and financial stocks. But if the entire market rolls over decisively, recent relative winners will likely crumble too.
Cash is king in a correction, and holding a lot of it in the current market climate is a wise choice.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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