Dow Jones Futures: Bulls Resist Pullback as Tesla, Nvidia Power Higher; FedEx earnings mixed
Dow Jones futures edged higher after hours, along with S&P 500 futures and Nasdaq futures. FedEx (FDX) reported after the close, with Fed Chairman Jerome Powell set to testify before Congress on Wednesday.
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The stock rally saw a loss for a second session in a row. The Nasdaq and even the S&P 500 had been extended, so a pullback was not a surprise and might even be welcome. The major indexes gave up ground reluctantly, especially the Nasdaq, too Tesla (TSLA) and Nvidia (NVDA) continues to move higher.
Market breadth was weak on Tuesday, but has been improving.
Merit homes (MTH) brought back a buy point on Monday, while Allegro MicroSystems (ALGM) and Lantheus Holdings (LNTH) flashed early entries. ELF beauty (ELF) presented a tight contribution. WE HAD (ATI) is moving toward a possible listing.
However, buying stocks with a market potentially starting a pullback carries additional risks.
Tesla and Nvidia shares are on the IBD Leaderboard, with ELF shares on the Leaderboard watch list. ELF Beauty and ALGM stock are at the IBD 50. Tesla stock is at the IBD Big Cap 20. Meritage Homes was Tuesday’s IBD stock.
Fed chief Powell
Fed Chairman Jerome Powell will speak to the House Financial Services Committee on Wednesday at 10 a.m. ET, and then appear before the Senate Banking Committee on Thursday. Last week, the Fed left interest rates steady, but signaled that two more rate hikes are coming this year. The markets mostly expect a rise either in July or September, but see little chance of a new rise before the end of the year. Fed chief Powell, along with several other policymakers this week, may try to bolster expectations of another rate hike. But Powell was relatively dovish in his comments after the meeting last week. Either way, inflation reports and other economic data in the coming weeks and months will tell the story.
Dow Jones Futures today
Dow Jones futures were just above fair value. S&P 500 futures rose a fraction and Nasdaq 100 futures rose 0.1%.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
FedEx Revenues
FDX shares fell 3% in late trading after FedEx earnings narrowly beat fiscal Q4 views while earnings missed. The shipping giant also provided 2024 EPS guidance that was largely below views. FedEx shares fell 0.8% to 231.65 in Tuesday’s regular session, just below a 235.81 buy point from a flat base that is part of a base-on-base formation. The shares just topped this entry last Thursday.
United Parcel service ( UPS ) fell 1% overnight. UPS stock was down 0.7% on Tuesday, trading around its 50-day line and 200-day, well below the February 2022 peak.
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Stock market rally
The rally opened with decent losses, but came down after the first hour of trading.
The Dow Jones Industrial Average lost 0.7 percent in Tuesday’s trading. The S&P 500 index fell 0.5 percent. The Nasdaq composite gave up less than 0.2%. The small-cap Russell 2000 fell 0.5%.
US crude oil prices fell 1.8% to $70.50 a barrel. The 10-year government yield fell 4 basis points to 3.73%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 0.2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 1%. VanEck Vectors Semiconductor ETF ( SMH ) was down 0.35%. NVDA stock, the largest SMH holding, climbed 2.6%, hitting a new record high.
ARK Innovation ETF ( ARKK ), reflecting more speculative story stocks, fell 0.1% and ARK Genomics ETF ( ARKG ) gained 0.35%. TSLA shares, the No. 1 holding across Ark Invest’s ETFs, rose 5.3% on strong sales of electric cars in China and another US charging technology deal, this time with Rivian (TORN).
The SPDR S&P Metals & Mining ETF ( XME ) fell 0.5%. The US Global Jets ETF (JETS) fell 0.3%. The SPDR S&P Homebuilders ETF ( XHB ) rose 0.6%. The Energy Select SPDR ETF (XLE) fell 2.2% and the Health Care Select Sector SPDR Fund (XLV) fell 0.1%.
The Financial Select SPDR ETF ( XLF ) yielded 0.75%. The SPDR S&P Regional Banking ETF ( KRE ) retreated 1.3%.
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Shares close to buy points
Meritage Homes rose 2% to 132.89, back above a 130.68 buy point from a flat base, according to MarketSmith analysis. The MTH share has traded around this entry for the past two weeks. Surprisingly strong housing starts helped lift housebuilder shares.
Allegro Micro shares fell 4% to 41.76. Shares bounced back from the 50-day line, broke a consolidating trendline and topped short-term resistance. The ALGM stock did all this in higher volume.
Lantheus stock jumped 5.2% to 92.87, moving sharply above its 50-day line. The LNTH share has an emerging consolidation with a possible buy point at 100.85. But Tuesday offered early entry. Medical product companies have revived the past several sessions
ELF shares rose 3% to 107.19, clearing a 108.43 three-week tight intraday entry and setting a new closing high. It provided a place for existing investors to add a few more shares.
ATI shares rose 2.7% to 40.36. The specialty alloy play has a consolidation buy point at 43.32 on a daily chart, but is working on a possible handle. On a weekly chart, the handle is there, giving ATI stock a lower buy point at 41.
Market rally analysis
The stock market recovery retreated modestly on Tuesday, but the major indexes came well off intraday highs. The Nasdaq, which has been extended, barely fell at all.
Megacap growth. In addition to the Tesla stock and Nvidia, apple (AAPL), Meta platforms (META), Amazon.com (AMZN) and Netflix (NFLX) all advanced.
The broader market suffered losses, but in a normal, healthy way. The losers significantly outnumbered the winners, but the overall trend has been favorable.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 0.9% but never touched its 10-day line.
The Invesco S&P 500 Equal Weight ETF ( RSP ) also gave up 0.9%, finding support at the 10-day line and near the April top.
The Nasdaq Composite remains 8.6% above its 50-day line, with the Nasdaq 100 9.9% above that line, both significantly elevated.
A few buying opportunities emerged on Tuesday, such as Meritage and ALGM shares. As always, market and sector performance will be key to how such stocks fare going forward.
A market pause or pullback would allow leading stocks to find support at key moving averages or perhaps consolidate around traditional buy points, creating new entries. Other potential leaders, such as ATI shares, are trying to forge handles.
Look at indices or ETFs like Dow Jones, QQEW, RSP, XLI to get an idea of how pauses or pullbacks will translate to individual names.
Of course, some stocks will lag or even break down in a modest pullback. Some of these stocks may have lagged in recent weeks, but it’s not always obvious when the market moves higher.
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What to do now
A modest decline still appears to be the most likely scenario for the stock market rally in the short term. The options are sideways action, a more severe drop or renewed market strength that almost immediately pushes the Nasdaq to more extreme levels again. Neither of these scenarios seem particularly positive for new purchases, especially technical games.
If you are making new or additional purchases in the current climate, be prepared to backtrack quickly. You may consider taking some profit in some extended names, although it depends on the size of your position, your overall exposure and your investment style.
Continue to build watchlists. A large number of stocks take some time to propagate new listings, but you’ll be ready to pounce.
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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