Dow Jones Futures: Market Rally Turns Upside Down; Here’s what to do now

Dow Jones futures were little changed overnight, as were S&P 500 and Nasdaq futures. smart sheet (MARS) and GameStop (GME) fell behind earnings.




X



The stock market rally had a mixed session. The Nasdaq retreated from 2023 highs while the Dow Jones rose slightly. Meanwhile, small- and mid-cap stocks continued their recent rally.

Software, e-commerce and tech titans have struggled, including Microsoft (MSFT), parent company of Google Alphabet (GOOGL), Amazon.co.uk (AMZN), ServiceNow (NOW) and Shopify (SHOP).

Chips fell, but held up better than many tech sectors. Nvidia (NVDA) declined modestly but remained within its recent range.

You’re here (TSLA) extended its winning streak, though it closed out new highs of 2023.

A variety of stocks and housing-related groups stood out.

The recent action may be a healthy corrective to what has been a narrow market rally. Still, there were few buying opportunities on Wednesday and little reason to exit or reduce positions in some hard-hit names.

Floor and decor (FND) was actionable after making a bullish move above the 50-day line within a base. mobileye (MBLY) sent a buy signal but closed in the lower half of its range. biogenic (BIIB), technically already in a buy zone, bounced higher from the 50-day line on a hopeful sign for FDA approval of its latest Alzheimer’s drug.

NVDA, Shopify and Tesla shares are on the IBD ranking. FND stock is on SwingTrader. MSFT stock is on IBD Long-Term Leaders. NOW stock is on the IBD 50 and IBD Big Cap 20.

Dow Jones Futures Today

Dow Jones futures were flat to fair value. S&P 500 futures tilted higher and Nasdaq 100 futures were flat.

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.


Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live


Key wins

SMAR stock plunged 19% overnight. Smartsheet revenue topped first-quarter EPS and sales. But the billings were insufficient. The workplace management software maker also provided full-year EPS, revenue and cash flow guidance, suggesting some underperformance for the rest of the year. Shares fell 5.15% to 49 in Wednesday’s regular session. back to around a buy point of 48.99. Smartsheet stock rebounded 4.8% on Wednesday.

GME stock plunged 19% after hours, signaling a move below the major moving averages. GameStop reported a bigger-than-expected decline in losses and revenue. The mall-based video game retailer and meme stock pioneer also fired CEO Matt Furlong and named big investor Ryan Cohen as executive chairman. GameStop stock rose 5.75% to 26.11 on Wednesday. GME stock worked a buy point of 27 from a low.

Biogen Alzheimer’s drug

FDA staff documents for Friday’s advisory panel on Biogen’s Alzheimer’s disease treatment, Leqembi, came as no surprises, analysts said Wednesday. This raised hopes that the committee will recommend approval. Biogen stock reversed higher around the 50-day line, rising 1.7% to 304.90.

BIIB stock remains within the range of a double-bottom buy point of 296.90, initially cleared on April 28. Wednesday’s renewed strength offered a new buying opportunity near the 50-day mark and broke a month-long downtrend.

Stock market rally

The stock market rally saw the Nasdaq pull back as many big techs fell solidly, but other sectors held up well or rose.

The Dow Jones Industrial Average rose 0.3% in trading on Wednesday. The S&P 500 index slipped 0.4%. The Nasdaq composite fell 1.3%, its worst loss since April 25. The small-cap Russell 2000 jumped 1.8%, while the S&P MidCap 400 jumped 1.5%.

U.S. crude oil prices climbed 1.10% to $72.53 a barrel.

The 10-year Treasury yield jumped 8 basis points to 3.78%. However, treasury bill rates have generally fallen. The 1-month Treasury fell below 5% after teasing 6% at the end of May just before the debt ceiling agreement.

Markets are still betting that the Federal Reserve will take a break next week. However, the Bank of Canada unexpectedly raised rates on Wednesday, a day after Australia’s central bank also defied expectations.

AND F

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) slipped 2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 3.1%, with top Microsoft and ServiceNow stocks and SMAR stocks also in IGV. ETF VanEck Vectors Semiconductor (SMH) fell 0.6%. Nvidia stock is a major holding.

Reflecting more speculative stocks, ARK Innovation ETF (ARKK) fell 1% and ARK Genomics ETF (ARKG) lost just over 1%. Tesla stock is the top position among Ark Invest’s ETFs. SHOP’s stock is also a big holding.

The SPDR S&P Metals & Mining ETF (XME) gained 1.3% and the Global X US Infrastructure Development ETF (PAVE) gained 2.1%. The US Global Jets ETF (JETS) climbed 0.6%. The SPDR S&P Homebuilders ETF (XHB) rose 1.5%, with FND stock a notable holding. ETF Energy Select SPDR (XLE) rebounded 2.7%. The SPDR healthcare sector fund (XLV) slipped 0.4%. The BIIB stock is in XLV.

The Financial Select SPDR ETF (XLF) edged up 0.4%. The SPDR S&P Regional Banking ETF (KRE) gained 3.3%.


Five best Chinese stocks to watch now


Market rally analysis

The stock market rally saw high-flying areas pull back while other segments took the reins.

The Nasdaq staged a bearish outdoor day after hitting a new 52-week high shortly after opening. The composite and the Nasdaq 100 had been stretched. The overall Nasdaq is now 6.2% above the 50-day line and the large-cap Nasdaq 100 6.9%, still somewhat elevated.

The S&P 500 has fallen slightly, still just around the 2023 highs.

The Dow rose slightly after finding support at the 50-day line on Tuesday.

Meanwhile, the Russell 2000 and S&P MidCap 400 continued to rise, helped by the rebound in bank stocks.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell just over 1%, but better than the Nasdaq 100’s 1.7% loss.

The Invesco S&P 500 Equal Weight ETF (RSP) gained 0.7%.

The advances led the decliners by nearly 2 to 1 on the NYSE and by a solid margin on the Nasdaq.

Overall, the market recovery action could be positive. Yes, we all wish stocks would go up every day, but that can’t happen. So some of the big winners taking a break or stepping back modestly is healthy. Meanwhile, the scope of the market continues to expand.

Of course, if the Nasdaq continues to sell off and the broader market also falters, Wednesday’s potentially “constructive” action could turn out to be the start of a “destructive” slide.

Key Sectors, Actions

The housing sector, including home builders, building materials and furniture retailers, was solid or strong. Just like energy, steel and infrastructure. Some of these names, such as FND stocks, issued buy signals, while others broke key levels. Many need a lot of repair work, though.

Tech titans, software names, e-commerce and medical products have had a tough day. For some, it was a noticeable but normal setback after a long time. MSFT shares fell 3.1%. Google stock fell 3.8% in a downward reversal. Amazon stock fell 4.25% and NOW stock fell 4.9%.

However, others suffered more technical damage. SHOP stock fell 6.4%, undercutting Tuesday’s early entry. Working day (WDAY) fell 5.4% and Cloudy (NET) plunged 8.5%, both down buy points. DXCM stock fell 4.5%, once again coming back from a traditional buy point and heading back towards its 50-day mark.

The chips performed well overall. MBLY stock climbed 2.8%, but well off early highs, closing below a downtrend breakout. Nvidia stock slid 3% below its 10-day line as it trades in a range since its post-earnings gap on May 25.

Tesla stock rose 1.5% to 224.57, off session highs of 280.83. But it was the ninth consecutive advance and the eighth consecutive with above-average volume. TSLA stock is extended from a buy point of 207.79. The relative strength line is at a seven-month high. As of Tuesday evening, Tesla began reducing long-range Model 3 inventory by 1% in the United States. Tesla has already offered deep inventory discounts on other Model 3 variants.


Time the Market with IBD’s ETF Market Strategy


What to do now

The rotation of the stock market rally seems orderly and constructive. But some stocks are retreating below key levels, while many rising stocks are not yet in position. Investors do not know if the rotation will continue or if it will become more volatile.

Currently, buying opportunities are relatively low, while investors may want or need to reduce or exit certain positions.

Hopefully the market action will create a wealth of opportunities, with big winners re-establishing themselves and potential leaders emerging. Look for these actions by running screens and updating watchlists.

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.

YOU MIGHT ALSO LIKE:

Catch the next big winning stock with MarketSmith

Best Growth Stocks to Buy and Watch

IBD Digital: Unlock IBD’s premium stock listings, tools and analysis today

Tesla vs. BYD: The EV giants are vying for the crown, but what’s the best buy?

Leave a Comment