Dow Jones Futures: GOP poised to win House in midterms; Elon Musk sells more Tesla shares
Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. Midterm election results come as Tesla CEO Elon Musk sold more TSLA shares.
X
The stock market rallied on Tuesday morning, driven by lower government interest rates and a falling dollar. The major indexes posted strong gains as Bitcoin and other cryptocurrencies plunged on a surprise Binance-FTX takeover deal. But the shares recovered somewhat at the end.
Bitcoin related stocks like cryptocurrency exchange Coin base (COIN), trading app Robinhood Markets (HOOD), cryptocurrency manager Silvergate capital (SI) and Bitcoin miner Digital Marathon (MARA) sold out.
Looking ahead, the consumer price index poses a big threat.
Key income
Walt Disney (HAZE), Occidental Petroleum (OXY), Tesla (TSLA) rival Lucid Motors (LCID) and Array technologies (ARRY) reported late Tuesday.
Disney stock fell sharply overnight as earnings fell short, even as Disney+ subscriber growth was strong. OXY stock, more than 20% owned by Warren Buffett’s Berkshire Hathaway (BRKB), edged lower on mixed earnings. LCID stock plunged on weak third-quarter results and falling Lucid Air bookings. ARRY stock moved higher on strong earnings and guidance.
In other news, Meta platforms (META) will begin widespread layoffs Wednesday morning, according to multiple reports.
Tesla shares
Tesla CEO Elon Musk revealed that he sold 19.5 million shares for $3.95 billion on November 4, 7 and 8. It could be to pay for his recent Twitter deal, although Musk said in early August that stock sales were the last thing he would need. .
Musk’s latest stock sale likely helped drive Tesla stock’s recent decline. Increased China subsidies and concerns about Elon Musk’s Twitter reign could also take a toll on TSLA stock.
Tesla shares fell 2.9% to 191.30 in Tuesday’s session after falling to 186.75 intraday, just above May 2021 lows.
Mid-year elections
The by-election results will be released on Tuesday evening. Republicans are a virtual lock to take back the House, but there doesn’t seem to be a massive GOP wave. The Senate is on its way, but final results in key races could be days away.
Either way, President Joe Biden and the Democrats will no longer have full control of the White House and Congress. Financial markets tend to do better with gridlock in Washington. Stocks also traditionally do well in the third year of a presidential term.
So a divided Congress could be positive for Wall Street, and could be good news for defense firms, private prisons and drug makers. Then again, the markets may have already priced some of that in.
Dow Jones Futures today
Dow Jones futures were little changed relative to fair value, with DIS shares weighing on blue chips. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.3%.
China’s consumer growth rose less than expected. Wholesale prices fell.
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 rally in the stock market moved higher on Tuesday morning, but gave it back in the afternoon as the Bitcoin meltdown spilled over into stocks. The S&P 500 and Nasdaq briefly turned negative before recovering.
The Dow Jones Industrial Average rose 1% in Tuesday’s trading. The S&P 500 index rose 0.6 percent. The Nasdaq composite rose 0.5 percent. The small-cap Russell 2000 posted a gain.
Tesla shares fell and approached May 2021 lows during the day.
Apple shares and Microsoft rose 0.4%, Google shares rose 0.5% and Amazon fell 0.5%. Everyone is up this week, but after tumbling last week.
The 10-year government yield retreated 9 basis points to 4.13%.
The US dollar fell significantly for the third day in a row, hitting its lowest levels since late September.
US crude oil prices fell 3.1% to $88.91 a barrel. Natural gas futures fell 11.6%, continuing their huge daily swings.
Bitcoin dive
Despite the weaker dollar, Bitcoin plunged when the world’s No. 1 cryptocurrency exchange Binance agreed to buy rival FTX, which has faced a liquidity crisis. There are doubts that the Binance-FTX deal will actually happen, with FTX facing large withdrawals in the past couple of days. Just a few months ago, FTX and founder Sam Bankman-Fried had been seen as potential saviors for other ailing crypto firms.
Bitcoin crashed to $17,484.20, its lowest since November 2020 and is currently trading around $18,500. The pioneering digital currency broke below $20,000 on Monday evening. Ethereum, Dogecoin and other cryptocurrencies showed similar or even greater losses as well.
The FTX token collapsed 80% on Tuesday after massive losses in recent days and weeks.
COIN stock plunged 10.8% to a four-month low. Binance’s purchase of FTX could forge a major new rival for Coinbase, which is also reeling from Bitcoin’s problems and concerns about crypto-related businesses.
HOOD stock, which includes Bankman-Fried as an investor, plunged 19%. MARA shares fell 5.3% to the lowest since July. After the shutdown, Marathon Digital reported a bigger-than-expected loss, while revenue fell by 75%.
SI stock plunged 23% to its lowest since December 2020.
Tesla still owns some Bitcoin, while Elon Musk has held Dogecoin for a while.
Tesla vs. BYD: Which EV giant is the best buy?
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 0.3%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 0.1%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.3%, with the MSFT stock a key component. The VanEck Vectors Semiconductor ETF ( SMH ) rose 2.2%.
The SPDR S&P Metals & Mining ETF (XME) rose 1.9%. The Energy Select SPDR ETF (XLE) rose 0.1%. The Health Care Select Sector SPDR Fund ( XLV ) rose 0.5%.
ARK Innovation ETF ( ARKK ), reflecting more speculative stock stocks, fell 0.4% and ARK Genomics ETF ( ARKG ) rose 1.4%. Tesla stock remains a top holding across Ark Invest’s ETFs.
Top five Chinese stocks to watch now
Market rally analysis
The stock rally looked badly damaged last Thursday in the wake of Fed chief Jerome Powell’s hawkish comments. But it’s back over the last three sessions, even with Bitcoin’s troubles.
The Dow Jones cleared last week’s high after regaining its 200-day line on Monday.
The S&P 500 rose slightly higher above its 50-day line, although it remains below near-term Nov. 1 highs.
The Nasdaq, weighed down by Tesla and technical issues, hit resistance at its 21-day moving average. It is still below the 50-day and far from the 200-day lines.
But the Direxion Nasdaq-100 Equal Weighted ETF (QQQE) rose just over 1% to edge above its 50-day line.
Falling Treasury yields helped lift stocks on Tuesday, while a falling dollar has been a key driver in the past three sessions.
Election results in the interim could spur market moves, but Thursday’s CPI inflation report could be the key. A tame CPI reading could give hope for slower Fed rate hikes and a lower peak rate. But another hot inflation figure can trigger a sharp sell-off in shares and bonds.
Why this IBD tool simplifies the search for top stocks
Leading stocks
There were not many new buying opportunities on Tuesday.
GlobalFoundries (GFS) rose above a trendline and a just-too-low handle after earnings.
Albemarle (ALB) cleared an early entry but quickly and ran up to its official buy point, closing just below that key level. However, ALB stock is well above its 50-day line after a big move from the November 3 intraday lows.
Crocs (CROX) briefly retook a buy point UnitedHealth (UNH) closed in shopping area.
Several LNG shares are near buy points.
Technical weakness remains a concern. Chip stocks are on the rebound, with the SMH ETF convincingly above the 50-day mark. Megacap technologies such as apple (AAPL) is trying to bounce, but after big selling. The same applies to cloud software.
Time the market with IBD’s ETF market strategy
What to do now
The stock rally is showing resilience after last week’s heavy losses, with the Dow Jones and S&P 500 regaining key levels. Investors may still want to be cautious, with the CPI inflation report looming. Also, there are not many stocks that can be used at the moment, although many are in the process of setting up.
Investors should be ready to take action by staying engaged and building your watchlists. Growth stocks are still generally out of favor, so make sure you cast a wide net to find stocks and sectors that are emerging leaders.
Definitely be aware of the income, which remains active. Some stocks have been big earnings winners, while others are recovering strongly after initially falling. But there have also been some high-profile sales, as Disney and Lucid shares showed overnight.
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.
YOU MAY ALSO LIKE:
Get the next big winning stock with MarketSmith
Do you want to make quick profits and avoid big losses? Try SwingTrader
Best growth stocks to buy and watch
IBD Digital: Unlock IBD’s Premium stock lists, tools and analysis today
