Dow Jones Breaks Support As President Biden Makes This Debt Ceiling Deal; Elon Musk says Tesla will “try” this
Dow Jones futures rose slightly after hours, along with S&P 500 futures and Nasdaq futures. Tesla (TSLA) holds its annual shareholder meeting, but doesn’t come with much big news.
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The stock market rally retreated on Tuesday as fears of the debt ceiling increased selling pressure towards the end. The Nasdaq had rallied for much of the session thanks to megacap tech, incl Advanced Micro Devices (AMD), Nvidia (NVDA), Microsoft (MSFT), Amazon.com (AMZN) and Google parent Alphabet (GOOGL).
The S&P 500 and Dow Jones retreated for most of the day, with the latter closing below its 50-day line. The market breadth was bleak.
Conversations about debt and ceilings
President Joe Biden and congressional leaders held new talks on the debt ceiling at the White House on Tuesday afternoon. House Speaker Kevin McCarthy said “we have a lot of work to do,” saying the two sides are far apart. He added that a deal could come this week.
However, the White House announced shortly before Tuesday’s closing bell that President Biden will cancel his upcoming trip to Asia due to debt ceiling negotiations. That news, which signaled that no debt-limit breach is imminent, pushed the major indexes to session levels.
Without an increase in the debt ceiling, the US could default in early June, perhaps on June 1.
Meanwhile, the FTC moved to block Amgen (AMGN) takeover of Horizon Therapeutics (HZNP). That raised concerns about M&A activity in biotech and medical in general.
Goal (TGT), TJX Cos. (TJX) and Dynatrace (DT) reports on Wednesday morning. The TGT share is struggling below its moving average. TJX stock is just below an early entry. Dynatrace stock has already cleared an early entry and stops just short of a traditional breakout.
Nvidia stock is on the IBD Leaderboard, with Dynatrace joining as an earnings options trade. The DT share is also on the IBD 50 list. The MSFT share is on the IBD Long-Term Leaders list and the IBD Big Cap 20.
The video embedded in this article discussed Tuesday’s market action and analyzed On holding (DU), AMD and Axcelis Technologies (ACLS).
Tesla vs. BID: EV Giants Vie For Crown, But Which Is The Better Buy?
Tesla’s shareholder meeting
Tesla’s shareholder meeting took place at the Austin EV facility.
TSLA stock investors were looking for more details on a range of issues and products, including the Cybertruck, 4680 batteries and an updated Model 3.
CEO Elon Musk said Tesla will deliver production Cybertrucks this year, but did not provide more details on timing and much more.
Tesla gave a dark silhouette of what could be the next generation vehicle. But there were no details on when the EV, presumably a cheaper model, will arrive or when the specs might be.
Musk says he expects the economy to pick up in 12 months. He also designated the humanoid robot Optimus.
In a break with longstanding policy, Musk said, “We’ll try out some advertising and see how it goes.”
Musk also shot down rumors that he may step down as Tesla CEO.
Early Tuesday, Bloomberg reported that Tesla Shanghai is close to starting trial production of a revamped Model 3.
Tesla shares rose 1% in late trading. Shares rose 0.1% to 166.52 in Tuesday’s regular session, just below the 21-day mark. Tesla stock is also facing resistance at the 50-day line, with the 200-day line above it. If Tesla stock makes any progress, it will have a 207.89 double-bottom buy point.
Dow Jones Futures today
Dow Jones futures rose 0.1% against real value. S&P 500 futures and Nasdaq 100 futures rose less than 0.1%. Tesla stock is a major S&P 500 and Nasdaq 100 holding.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
Stocks were mixed for most of Tuesday’s session, but the Nasdaq fell on debt ceiling concerns.
The Dow Jones Industrial Average fell 1% in Tuesday’s trading. The S&P 500 index fell 0.6 percent. The Nasdaq composite fell 0.2 percent. Small-cap Russell 2000 retreated 1.4%
Megacaps were key drivers. AMD shares rose 4.2%, briefly topping an official buy point. Nvidia shares rose 0.9% to a new 52-week high. Google shares rose 2.6% and Amazon 2%. The MSFT share rose 0.7%.
US crude oil prices fell 0.35% to $70.86 a barrel.
Copper prices fell 2.2%, reflecting weaker Chinese economic data and a stronger-than-expected dollar. Gold retreated 1.5% and silver 1.6%.
The 10-year government yield rose 4 basis points to 3.45%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 1.1%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) retreated 2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 0.3%, with Microsoft shares as a top component. The VanEck Vectors Semiconductor ETF (SMH) closed just below break-even, with AMD shares and Nvidia heavy holdings.
The ARK Innovation ETF ( ARKK ) reflected more speculative story stocks, falling 2.5% and the ARK Genomics ETF ( ARKG ) falling 3.3%. TSLA stock is the No. 1 holding across Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF ( XME ) fell 2.8% and the Global X US Infrastructure Development ETF ( PAVE ) gave up 1.6%. The US Global Jets ETF (JETS) fell 0.45%. The SPDR S&P Homebuilders ETF ( XHB ) gave up 1.2%. The Energy Select SPDR ETF (XLE) retreated 2.5% and the Health Care Select Sector SPDR Fund (XLV) fell 0.8%.
The Financial Select SPDR ETF ( XLF ) fell 0.9%. The SPDR S&P Regional Banking ETF (KRE) retreated 1.5%.
Top five Chinese stocks to watch now
Market rally analysis
The stock rally had divergent action on Tuesday, with megacap techs rallying amid a general retreat.
The Nasdaq moved higher, reaching its best levels since late August. The S&P 500 fell just below its 21-day line. The Dow Jones fell below its 50-day line for its worst close since late March.
Breadth was unusually negative given the mixed action in the major indices.
Losers trumped winners by more than 2-to-1 on the Nasdaq and nearly 4-to-1 on the NYSE. New lows easily surpassed new highs.
The Nasdaq 100, led by AMD, Nvidia, Microsoft, Amazon and GOOGL shares, rose 0.1%, nearing August highs. But the First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 0.95%, though it remains above the 50-day.
The Invesco S&P 500 Equal Weight ETF ( RSP ) fell 1.4% to its worst close since late March. It is now fractionally closer to the October bear market lows than the 2023 highs of early February.
On a positive note, the chip sector is showing renewed strength and improved breadth. The SMH ETF gave up intraday gains on Tuesday but is still outperforming. The AMD share and Nvidia clearly lead the way. But Lamb Research (LRCX) and Materials used ( AMAT ) are chip-gear giants making bullish moves, with AMAT earnings due Thursday night. At Semiconductor (ON) and ACLS shares are EV-focused chip plays that have bounced back. Broadcom (AVGO) is near a buy point.
If the chip sector is ready to step up again, it is a positive sign for the market recovery. Semiconductors have a hefty market value in themselves. Also, chips are basically in everything. So if chips do well, it bodes well for a number of industries.
Meanwhile, the software has also improved. Yes, MSFT stock is part of that, although much of the gain reflects cloud computing and AI. But Salesforce.com (CRM) shares, Service Now (NOW) and Dynatrace are all behaving well, with several cloud names picking up again in recent weeks. ServiceNow announced new AI capabilities Tuesday in an alliance with Microsoft.
On the downside, the FTC’s move to challenge the Amgen-Horizon deal could set a precedent for blocking many biotech takeovers. So that could affect biotech stocks for some time.
Time the market with IBD’s ETF market strategy
What to do now
The stock rally continues to move sideways, with narrow leadership. Do not try to force yourself into heavy exposure in this environment. If you are in the right stocks, such as megacaps, you can have a decent exposure. If you haven’t had much luck, you may be almost entirely in cash.
When taking new positions, consider small bets and focus on early entries. It may be a good idea to take some partial profits relatively early to ensure that you end up with a profit. While some stocks, such as Nvidia, have made big gains, many others rise modestly from a buy point and then fall back.
Keep working on your watchlists. Although there are reasons to be cautious in a choppy market, it will not take much before the market recovery shows renewed strength. So you will be ready.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
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