Dow Jones futures rose slightly Wednesday, along with S&P 500 futures and Nasdaq futures. Bitcoin reclaimed the $40,000 level as cryptocurrencies rebounded overnight.
The stock market rally paused Tuesday, with the major indexes edging lower following a nice bounce over the past few sessions. Chip-gear makers such as AMAT stock led, while travel stocks have some baggage and Tesla embarked on its vision-only quest for self driving.
Zscaler stock jumped 11% in premarket trade on a beat-and-raise report. EPS jumped 114% with revenue growth accelerating for a fifth straight quarter, to 60%. signaling a gap above its 50-day line and possibly breaking a downward-sloping trend line. But ZS stock would still be well off record highs and below short-term resistance near 200.
Intuit stock, already in a buy zone, rose slightly overnight on solid earnings and guidance. INTU stock could move out of the 5% chase zone. Toll stock edged higher on earnings after shares bounced from their 50-day line Tuesday.
Dick’s Sporting Goods crushed EPS views and topped sales targets. DKS stock popped before the open, signaling a bounce from the 10-week line.
The stock market rally on Tuesday gave up morning gains but held above key levels.
Airline, cruise line and other travel-related stocks were early leaders, with JetBlue (JBLU), Carnival (CCL) and Boeing (BA) clearing early entries while MGM Resorts (MGM) and Caesars Entertainment (CZR) broke out. But several of these stocks came well off morning highs or even closed lower. Longer term, their earnings outlooks raise some concerns.
Meanwhile, chip-gear stocks continued to do well. Lam Research (LRCX) and Applied Materials (AMAT) rose again. Both LRCX stock and Applied Materials are still in range after rebounding from their 10-week lines and breaking trend lines on Monday.
Dick’s stock and Applied Materials are on IBD Leaderboard. JetBlue, AMAT and CZR stock are on SwingTrader.
Tesla Vision Quest
A day after reports that Tesla (TSLA) was testing Lidar on some vehicles, the EV giant said Tuesday that it’s dropping radar from Model 3 and Model Y vehicles for the North American market, starting with May deliveries. Some Autopilot features or other driver-assist systems such as Summon may be limited temporarily. Radar will still be included in the revamped Model S and X, at least in the short run.
Tesla CEO Elon Musk had hinted at a vision-only shift in recent weeks. Most automakers and tech companies working on self driving rely on a variety of sensors.
Tesla stock edged down 0.3% to 604.69 on Tuesday, holding above its 200-day line. TSLA stock popped 4.4% on Monday. The relative strength line for Tesla stock is just above a six-month low.
Bitcoin Price Tops $40,000
The Bitcoin price jumped 8% vs. 24 hours earlier to slightly above $40,000. That’s after tumbling to nearly $30,000 last week amid various Elon Musk tweets and China cryptocurrency crackdowns. Other digital assets, including Ethereum and Dogecoin, showed bigger gains Wednesday.
Bitcoin hit a record $64,829.14 in mid-April.
Dow Jones Futures Today
Dow Jones futures rose 0.25% vs. fair value. S&P 500 futures advanced 0.35% and Nasdaq 100 futures climbed 0.5%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 168.58 million. Covid-19 deaths topped 3.50 million.
Coronavirus cases in the U.S. have hit 33.94 million, with deaths above 605,000.
Stock Market Rally Tuesday
The stock market rally gave up morning gains to finish near session lows, but the major indexes didn’t give up much ground.
The Dow Jones Industrial Average fell 0.2% in Tuesday’s stock market trading. The S&P 500 index also dipped 0.2%. The Nasdaq composite finished just below break-even. The Russell 2000 retreated 1%.
The 10-year Treasury yield fell 4 basis points to 1.56%, the fourth straight decline. That’s good news for homebuilders and highly valued growth stocks and a drag on many financials.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) sank 1.1%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.2%. The VanEck Vectors Semiconductor ETF (SMH) rose 0.7%, with AMAT stock and Lam Research notable components.
SPDR S&P Metals & Mining ETF (XME) retreated 2.4% and Global X U.S. Infrastructure Development ETF (PAVE) lost 1%. U.S. Global Jets ETF (JETS) fell 0.36%, with JBLU stock a JETS holding. SPDR S&P Homebuilders ETF (XHB) popped 1%, with TOL stock an XHB component. The SPDR S&P Regional Bank ETF (KRE) skidded 2.3%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both climbed 0.6%. Both ARKK and ARKG remain below their 200-day moving averages. Tesla stock is the top holding for ARK Invest across its ETFs.
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JBLU stock fell 0.85% to 19.86 after hitting early highs of 20.89. CCL stock rose 2.4%, one of the S&P 500’s top performers despite coming off highs. Boeing stock advanced 1.4%, but was unable to close above its 50-day line. MGM stock climbed 1.1% to 42.21 after briefly moving past a 42.84 buy point, according to MarketSmith. CZR stock rose 1.9% to 107.06, near session highs and cleared a buy point of either 106.30 or 106.95.
A bigger concern is earnings. Obviously, this sector had a disastrous 2020 during the pandemic, and many of these companies are still expected to lose money in 2021. Analysts expect slim-to-modest profits in 2022. But matching or surpassing pre-pandemic earnings won’t happen until 2023, if then, for Boeing stock, Carnival and JetBlue. How much more can these stocks rebound in that context?
MGM stock will return to profitability next year, and won’t be too far from pre-pandemic earnings. Caesars earnings will roughly reach pre-pandemic levels next year. But neither MGM nor Caesars had tremendous earnings performance before 2020.
Not all economic recovery stocks share this flaw. Consider Caterpillar (CAT) and Ford (F). Both industrial giants, which remained profitable in 2020, are expected to see big EPS gains in 2021, to roughly pre-pandemic levels. Earnings should continue to climb in 2022. Caterpillar stock is in a buy zone while Ford stock may be forming a handle just below a buy point after racing higher last week.
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Market Rally Analysis
The stock market rally outlook didn’t changed much after Tuesday.
The Dow Jones and S&P 500 remain close to record highs and above their 21-day moving averages. The Nasdaq composite is holding above its 50-day moving average.
The Russell 2000 remains the laggard. The small-cap index tried to reclaim its 50-day line but reversed lower as financials and energy stocks retreated.
While travel stocks gave back much of Tuesday’s gains, homebuilders were strong while chip-gear makers such as LRCX stock added to recent gains.
On the downside, mining and steel stocks continued to pull back after strong runs. Many financials retreated with 10-year Treasury yields sliding.
The market rally remains under pressure, but is in much-better shape than a week ago. The S&P 500 setting fresh highs would be a positive sign, along with the Nasdaq moving further above its 50-day line. On the downside, the Nasdaq falling back below its 50-day would be a bad sign with May’s lows a last line of defense for the major indexes.
Most of all, investors will want to see how leading stocks, especially those recently triggering buy signals, perform in the days and weeks ahead.
What To Do Now
The past few days show the importance of staying engaged and being ready to act — prudently. After several weeks of choppy market action, the major indexes are trending higher. Investors need to be ready for buying opportunities for AMAT stock, striking quickly but not too aggressively.
If the market rally is starting an extended run of steady gains, you’ll want to be in the early leaders, modestly adding exposure while additional buying opportunities develop over time. But this could be the latest wave in an up-and-down market. If so, buying quickly may give you a chance to exit with a small gain — or possibly holding until the next wave.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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