Dow Jones Futures fall with market rally stuck at key levels; Tesla expands the slide
Dow Jones futures were down Thursday morning, while S&P 500 futures and Nasdaq futures fell modestly. The 10-year government rate of 4% again.
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Crypto financial firm Silvergate capital (SI) crashed on plans to shut down and liquidate. American Express ( AXP ) increased shareholder returns while MongoDB fell on guidance.
The stock market rally had a mixed session on Wednesday, with the major indices trading around key moving averages.
Chip shares did well, med Nvidia (NVDA), Advanced Micro Devices (AMD), At Semiconductor (ON), Aehr test systems (AEHR) and Monolithic power (MPWR). But NVDA shares, AMD, Onsei and Aehr Test Systems fell extended. MPWR stock works on a cup with handle base.
Tesla ( TSLA ) fell Wednesday amid two new security probes as well as an analyst downgrade. TSLA stock has fallen 10% since its March 1 investor day, which didn’t have much news. Shares continued to slide early Thursday.
SI shares crashed as the crypto bank plans to shut down. Database software manufacturer MongoDB (MDB) reported late Wednesday. American Express (AXP) announced another AXP share buyback and a dividend increase.
NVDA stock is on the IBD Leaderboard. MPWR stock is on the IBD 50, Big Cap 20 and IBD Long-Term Leaders Watchlists.
The video embedded in this article discussed the market rally’s action and analyzed Monolithic Power stock, Oracle (ORCL) and C3.ai (AI).
Dow Jones Futures today
Dow Jones futures fell 0.1% relative to fair value. AXP stock gave a slim boost to Dow futures. S&P 500 futures fell 0.3% and Nasdaq 100 futures retreated 0.6%. TSLA stock weighed on S&P 500 and Nasdaq 100 futures, and NVDA stock also fell early Thursday.
The 10-year government yield rose 4 basis points to 4.01%.
The Labor Department will release weekly jobless claims data at 8:30 a.m. ET on Thursday, with the February jobs report due Friday morning.
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
Silvergate Capital to shut down
After hours, embattled Silvergate Capital said it will wind down operations and liquidate Silvergate Bank. Silvergate is one of the largest lenders to large crypto firms and facilitates transfers between exchanges and market makers. Stocks have been in freefall for the past year as crypto-financial structures have failed. Last week, Silvergate said it would not be able to file its 10-K by the March 16 deadline.
SI shares fell nearly 40% in premarket trading, after falling 5.8% to a fresh low of 4.91 on Wednesday. Silvergate crashed 57% in March due to the 10K delay. SI stock peaked at 239.26 in November 2021.
Signature bank (SBNY), which has been trying to cut its crypto exposure after surging in previous years, fell 9% overnight. SBNY stock is at a two-year low. Coin base (COIN) fell 4%. Coinbase said on March 2 that it had switched to Signature Bank to facilitate dollar transfers, away from Silvergate.
Bitcoin fell modestly on the Silvergate Capital news.
AXP share buyback
AXP stock rose slightly overnight after the credit card giant announced it would buy up to 120 million shares, replacing the roughly 36 million remaining under a previous buyback plan. American Express also increased its quarterly dividend by 15% to 60 cents per share. American Express shares fell 0.3% to 174.83 on Wednesday, re-finding support around the 21-day line. AXP stock has a buy point at 182.25 cup with handle.
MDB stock plunged 11% in extended action after MongoDB earnings topped views but guidance disappointed. MongoDB shares rose 2.3% to 228.70 in Wednesday’s session, just below the 200-day line after bouncing back from the 50-day line last Friday. The database software company is working on a short consolidation with a potential buy point at 248.25.
Stock market rally
The stock rally traded up and down, and ended mixed.
The Dow Jones Industrial Average fell 0.2 percent in Wednesday’s trading. The S&P 500 rose 0.1%, with ON shares and AMD the top two performers. The Nasdaq composite rose 0.4 percent. The small-cap Russell 2000 posted a fractional gain.
US crude oil prices fell 1.2% to $76.66 a barrel. Copper futures rose 1.4 percent.
Treasury Yields, Fed Rate Outlook
The 10-year Treasury yield was flat at 3.97% after falling to 3.9% intraday. The 2-year government interest rate rose 5 basis points to 5.06%. The 6-month Treasury yield rose 2 basis points to 5.31%.
The odds of a rate hike of 50 basis points on March 22 rose to 76% from 70% on Tuesday and just 31% on Monday. Fed Chairman Jerome Powell’s testimony on Tuesday that he expects interest rates to go higher than previously expected, and perhaps at a “faster” pace, will hit stocks that day.
The Fed’s beige book report, released at 2 pm ET on Wednesday, showed little or no growth in six of the 12 Federal Reserve districts in recent weeks. Inflation remained widespread, although it slowed.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) gained 0.8%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 0.5%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 0.2%. The VanEck Vectors Semiconductor ETF ( SMH ) rose 2.6%. Nvidia stock is No. 1 in SMH, with AMD also a top component. ON stock and Monolithic Power are also in SMH.
ARK Innovation ETF ( ARKK ) and ARK Genomics ETF ( ARKG ) reflected more speculative history stocks, up 0.1%. Tesla stock is a large holding across Ark Invest’s ETFs. Cathie Wood’s Ark also owns a lot of COIN stock.
The SPDR S&P Metals & Mining ETF (XME) closed up 0.25%. The US Global Jets ETF (JETS) rose 0.45%. The SPDR S&P Homebuilders ETF (XHB) rose 1%. The Energy Select SPDR ETF (XLE) lost 1% and the Financial Select SPDR ETF (XLF) fell 0.4%. The Health Care Select Sector SPDR Fund ( XLV ) was down 0.5%.
Top five Chinese stocks to watch now
Tesla shares
Tesla shares fell 3% early Thursday.
TSLA fell 3% to 182 on Wednesday, hitting its lowest level in over a month.
The National Highway Traffic Safety Administration opened two new Tesla safety probes. One covers steering wheels coming off on some 2023 Model Y crossovers due to a missing bolt holding the wheel to the steering column. The investigation involves an estimated 120,000 Model Y vehicles.
NHTSA also announced a special probe into a fatal Tesla crash into a parked fire truck on Feb. 18, saying it believed the Model S was operating with an automated driving system. The regulatory agency has a large number of ongoing Tesla crash probes related to Autopilot or Full Self-Driving, including several related to incidents involving stationary emergency vehicles.
Berenberg downgraded Tesla stock to hold from a buy, saying the share price has returned to a fair value. The analyst said Tesla price cuts will hit gross margins in the short term, but still sees high margins in the long term.
As of Wednesday’s close, Tesla shares have fallen 10.2% since investor day on March 1. While the EV giant confirmed plans for a facility in Mexico, it didn’t give much away on a future next-generation car, presumably an affordable electric car.
Still, TSLA stock is down 16.4% from its Feb. 16 high of 217.65, but still up nearly 79% from its Jan. 6 bear market low of 101.81.
Three factors drove Tesla’s big early 2023 rally. First, investors believed that the price cuts in January would fuel a supply boom. Second, hoping for big Tesla Investor Day news. Third, the broader, growth-led market rally.
But Tesla is already resorting to significant additional discounts to achieve incremental delivery gains in the first quarter, while Investor Day failed to excite. A range-bound, sliding market since early February hasn’t helped either.
So, in that context, TSLA stock may have been resistant to holding onto the bulk of its early 2023 gains.
Perhaps Tesla stock will build a bottom base, with a buy point above the 200-day mark. It may include a test of the 50-day/10-week lines.
Tesla Kicked Off China EV Price War; Brutal battle ahead
Market rally analysis
The stock rally remains closely linked to its moving averages.
The S&P 500 managed to close slightly higher but just below its 50-day line after undercutting that key level on Tuesday. The Russell 2000 broke below its 50-day line intraday to hit its lowest levels since late January, before rallying for a wafer-thin advance
The Dow Jones fell, not far from 2023 and 200-day lows.
The Nasdaq rose modestly, but the resistance at the 21-day line.
On Friday, the market rally looked like it was breaking out of a short-term trading range, only to fall back this week. More generally, the major indexes are in the lower half of a trading range that goes back to early February.
Leading stocks did better on Wednesday.
Nvidia, On Semiconductor and chips were generally strong, providing support to the Nasdaq along with a slim apple (AAPL) gain. But buy signals in this sector are scarce.
Arista Networks (ANET) rose to the edge of the buying zone while some software plays such as New relic (NEW) and Fortinet (FTNT) gained ground within the consolidations after the gap-up.
Airline shares maintained their highs, even as cruise lines took on water. Homebuilder shares have held up remarkably well given the rising government interest rates.
Many other names faded with the market, although leaders did not suffer much damage.
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What to do now
The market recovery is again struggling around key levels.
While leading stocks are outperforming, many recent buys have run into trouble or failed to make headway. It is probably best to take a wait and see approach to the stock market rally shows renewed strength or breaks lower.
Although the S&P 500 and other indexes are not far from undermining recent lows, a couple of good days is all the rally needs to look healthy again. So use this time to prepare your watch lists.
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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