Dow Jones futures were little changed early Wednesday, along with S&P 500 futures and Nasdaq futures. Dow component Johnson & Johnson ( JNJ ) rose late when it proposed paying $8.9 billion to settle claims that talc products caused cancer.
The stock market rally lost ground on Tuesday as fears of the recession increased. Job openings fell to a 21-month low, much lower than expected. While the data further lowers Fed rate odds, it raises concerns that the US economy is headed for a recession.
The major indexes had modest losses and did not show much damage. Much of that reflects megacaps. apple (AAPL), Microsoft (MSFT) barely budged Meta platforms (META) edged higher. So did Google’s parents Alphabet (GOOGL), working toward a buy point. Tesla ( TSLA ) fell slightly, extending Monday’s slide after first-quarter deliveries. However, TSLA had key support.
Growth overall held up reasonably well, with some software manufacturers such as e.g ServiceNow (NOW) make strong moves. On the downside, AI stock fell after a short seller’s latest move vs. C3.ai (AI). C3 continued to slide late.
The general market breadth was weak. Many groups, including steel producers, base metal miners, building materials companies and heavy construction manufacturers, suffered heavy losses. on financial fear.
Banks also fell, especially regional names but also giants such as JPMorgan Chase (JPM). If nothing else, the recent banking woes are likely to mean less lending, especially for commercial real estate, which weighs on the economy.
JPMorgan CEO Jamie Dimon warned in his annual shareholder letter on Tuesday that the banking crisis is “not over yet” with “consequences” for years to come.
Gold and gold stocks had a strong day as recession fears and a weaker dollar sent investors into safe havens.
ServiceNow and META stocks are on SwingTrader. Microsoft and Google shares are on IBD Long-Term Leaders.
The video embedded in this article discussed Tuesday’s market action and analyzed NOW stock, Atkore and C3.ai.
J&J Talc settlement
After the settlement, Johnson & Johnson offered to pay $8.9 billion to settle longstanding claims that baby formula and other talc products caused cancer. J&J subsidiary LTL Management filed for bankruptcy again.
JNJ shares rose 3% in late trading. Shares climbed just over 1% for a third straight session on Tuesday, reclaiming the 50-day line. But the JNJ share is still not far from a two-year low.
Dow Jones Futures today
Dow Jones futures were little changed relative to fair value, even with JNJ shares giving a small boost. S&P 500 futures and Nasdaq 100 futures were flat.
The 10-year government yield rose slightly to 3.35%.
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
The stock rally started on Tuesday little changed but retreated, with the major indexes down modestly but masking deeper weakness.
At 10 a.m. ET, the JOLTS survey showed job vacancies fell to 9.9 million in February from January’s downwardly revised 10.6 million. That’s the lowest in 21 months and well below impressions. It’s something the markets – and Fed Chair Jerome Powell – have been wanting to see for months. But the indices quickly turned lower as the focus turned to recession fears.
The Dow Jones Industrial Average fell 0.6% in Tuesday’s trading, along with the S&P 500 index. The Nasdaq composite fell 0.5. The small-cap Russell 2000, exposed to regional banks, gave up 1.8%.
U.S. crude rose 0.4% to $80.71 a barrel, from morning highs, but up nearly 11% over the past four sessions.
The 10-year Treasury yield fell more than 9 basis points to 3.335%, the lowest close in nearly 7 months. The two-year yield fell 15 basis points to 3.83%.
The odds of a rate hike in May fell to 40% on Tuesday from 57% on Monday. The March jobs report, due out on Friday with US markets closed, is likely to swing expectations for interest rate hikes again.
The US dollar fell to its lowest level since February 2nd.
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 1.5%. The iShares Expanded Tech-Software Sector ETF (IGV) just edged higher, with MSFT and NOW stocks making up large components. The VanEck Vectors Semiconductor ETF ( SMH ) fell 1.5%.
Reflecting more speculative stock stocks, the ARK Innovation ETF ( ARKK ) fell 0.5% and the ARK Genomics ETF ( ARKG ) fell 0.4%. TSLA stock is the No. 1 holding across Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) fell 2.5%% and the Global X US Infrastructure Development ETF (PAVE) fell 3.75%. The US Global Jets ETF (JETS) fell 0.7%. The SPDR S&P Homebuilders ETF (XHB) returned 2.7%. The Energy Select SPDR ETF (XLE) retreated 1.8% and the Health Care Select Sector SPDR Fund (XLV) ticked higher.
The Financial Select SPDR ETF ( XLF ) fell 0.9%. JPM shares, a major holding, fell 1.3 percent. The SPDR S&P Regional Banking ETF (KRE) fell 2.2%, not far from multi-year lows.
Top five Chinese stocks to watch now
AI stock plunged 26% to 24.95 on massive volume, erasing much of a recent big advance for the highly volatile name.
Kerrisdale Capital Management, which had previously said it was selling AI shares short, sent a letter to C3.ai’s auditor, Deloitte, accusing the artificial intelligence company of “using accounting methods that have the effect of income statement inflation.”
C3.ai said in a response that “Kerrisdale Letter appears to be a highly creative and transparent attempt by a self-confessed short seller to short the stock.”
AI stock fell 6% in overnight trading.
Apple shares fell 0.3% and Microsoft ended just below break-even. The META share rose 0.8 percent. All are extended.
Google shares rose 0.3% to 104.72, near a 106.69 cup-with-handle buy point, according to MarketSmith analysis.
Tesla shares fell 1.1% to 192.58, but held above their 21-day and 50-day lines. Shares fell 6.1% on Monday, back below a 200.76 buy point as analysts fear further price cuts will be needed to stimulate demand. On Tuesday, Tesla reduced prices in Australia.
Market rally analysis
The stock market rally retreated on Tuesday, but it is not clear whether it was the start of something serious or no big deal
After rooting for months for weaker economic data to end Fed rate hikes, investors on Tuesday were more fearful of a recession than the Fed.
The major indexes had modest losses overall and looked normal or even healthy.
The Nasdaq traded within Friday’s trading range for a second session in a row. The S&P 500 and Dow Jones retreated after four-day winning streaks.
Apple stock and megacaps did not move. Chips rejected but doesn’t look hurt.
Software stocks were the leaders on Tuesday, with ServiceNow up 2.5% to 476.05 earning an analyst upgrade, moving toward a consolidation buy point of 494.72. NOW stock was actionable on Friday from a strong move above the 50-day line and breaking a downtrend.
But losers beat winners on Tuesday, by more than 2-to-1 on the Nasdaq and NYSE. And many of the losers were hammered, particularly in mining, construction or manufacturing. Nucor (NOW), Rio Tinto (RIO), Atkore (ATKR) and larva (CAT) fell along with stocks in their groups.
Bank stocks, particularly regional plays, continue to struggle.
Market breadth had improved in the past week, after several weeks of narrow leadership. So Tuesday’s action bears watching. But it was only one day.
Time the market with IBD’s ETF market strategy
What to do now
The market rally was supposed to pull back, and it got one. Most of the big losers were not leaders, while growth names generally did well.
So investors need not overreact. But the action in many groups and individual shares shows the importance of being nimble and controlled.
This is not a crazy bull market, so investors should enter the rally gradually and avoid buying extended stocks. They should also consider continuing to take partial profits quickly, especially with highly volatile names like AI stocks. Don’t let winners turn into losers.
This is definitely a time to be engaged, and pay close attention to the major indices, leading stocks and your own portfolio. Keep working on your watchlists.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
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