Dow Jones Futures: Market Rally Retreats Amid Debt-Ceiling Drama; Nvidia earnings due
Dow Jones futures rose slightly after hours, along with S&P 500 futures and Nasdaq futures. Ongoing debt ceiling talks are in focus. Palo Alto Networks (PANW) rose on earnings on Tuesday evening, with Nvidia (NVDA) revenues are due on Wednesday. PTC Therapeutics (PTCT) delved into disappointing data from clinical trials.
X
The share rally retreated on Tuesday, with a number of shares from leading groups suffering heavy losses.
Talks about the debt ceiling continue without any agreement being imminent. House Speaker Kevin McCarthy said the two sides are “nowhere near” a deal on the debt ceiling. At the same time, President Joe Biden and the House Republicans do not seem so far apart when it comes to provisions to raise the debt limit. Meanwhile, the recent uptick in government yields and the US dollar may finally be weighing on stocks, along with various hints of weakened consumption.
The video embedded in this article reviews Tuesday’s market action and analysis Alamo’s Gold (TO GIVE), Merit homes (MTH) and Las Vegas Sands (LVS).
Dow Jones Futures today
Dow Jones futures rose 0.1% relative to fair value. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.2%.
Crude oil futures rose 1 percent.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Earnings
Palo Alto Networks, New relic (NEW), Intuit (INTU) and Toll Brothers (TOL) reported overnight.
PANW stock rose solidly in extended trading after Palo Alto earnings topped third-quarter earnings while earnings were in line. The cybersecurity firm guided slightly higher for Q4 EPS. Shares fell 1.2% to 189.74 in Tuesday’s regular session, back below the 50-day mark. Palo Alto stock is working with a 203.54 buy point from a handle in a long consolidation.
NEWR stock fell overnight, signaling a big drop below a buy point and a test of early entries around 76. New Relic earnings top solid while earnings slightly beat fiscal Q4 views. But the data analytics firm guided for lower earnings for the first quarter and 2024. Shares fell 1.2% on Tuesday to 82.51, but rose to close above a buy point at 80.98. New Relic shares rose March 17 on a report of a possible upcoming private-equity bid.
INTU shares fell solidly after hours. Intuit revenue exceeded forecasts for the third quarter, while revenue missed. Software maker Turbo Tax lost 0.95% on Tuesday to 449.80. Intuit stock has a buy point at 462.60 handle from a long consolidation.
TOL shares rose modestly in late trading. Toll Bros. earnings comfortably beat financial consensus for the second quarter, with the luxury homebuilder also guiding the third quarter up. Shares fell 1.5% to 63.75 on Tuesday, falling below the 21-day mark but still above a buy point at 62.71.
Analog devices (ADI) reports early Wednesday. ADI stock retreated 1.8% to 187.92 on Tuesday. It has paused in its work with a buy point of 198.35 from a cup base.
Nvidia, Elf beauty (ELF) and Snowflake (SNØ) report late Wednesday.
Nvidia earnings and guidance could have a big impact on the chip sector and AI-related stocks. On Tuesday, Nvidia and Microsoft (MSFT), the two biggest names in artificial intelligence right now, said Tuesday that they will collaborate on AI. Nvidia shares retreated 1.6% on Tuesday, falling modestly for a third straight session, just below 52-week highs.
ELF shares fell 1.1%, just below the 50-day line after falling 4.3% on Monday. SNOW stock gave up 1.85%, stopping near the top of a bottom base or within a longer consolidation.
NVDA stock is on the IBD Leaderboard, while ELF stock is on the Leaderboard watchlist. The AGI share is on SwingTrader. SNOW stock is on the IBD 50. Alamos Gold was Tuesday’s IBD Stock Of The Day.
PTCT stock dive on sample data
PTC Therapeutics announced late Tuesday that its vatiquinone treatment failed to meet the primary endpoints of a phase three study in patients with Friedreich’s ataxia, an inherited disease that affects the body’s nerves. The biotech said vatiquinone showed significant benefits for some secondary metrics.
PTCT stock plunged more than 20% overnight. The shares had been trading at two-year highs after clearing a base last week.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally got off to a mixed start on Tuesday, but gradually lost more ground, led by technologies.
The Dow Jones Industrial Average was up 0.7% in Tuesday’s trading. The S&P 500 retreated 1.1%. The Nasdaq composite fell 1.3 percent. Small-cap Russell 2000 fell 0.4%
US crude oil prices rose 1.2% to $72.91 a barrel. Copper prices, a good gauge of global economic activity, fell 0.9% to the industry’s worst in nearly six months.
The 10-year Treasury yield fell 2 basis points to 3.7% after rising to 3.76% intraday. It got a streak of seven sessions with higher rates.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF ( IGV ) fell 1.6%. PANW stock is a top-10 IGV holding. The VanEck Vectors Semiconductor ETF ( SMH ) yielded 1.4%. Nvidia stock is a major SMH holding, with Analog Devices also a component.
ARK Innovation ETF ( ARKK ), reflecting more speculative stock stocks, fell 2.2% while ARK Genomics ETF ( ARKG ) gained 0.2%. Both hit three-month highs during the day.
The SPDR S&P Metals & Mining ETF ( XME ) fell 0.6%. The US Global Jets ETF (JETS) fell 0.6%. The SPDR S&P Homebuilders ETF ( XHB ) fell 1.6%. The TOL share is an XHB holding.
The Energy Select SPDR ETF (XLE) rose 1.1% and the Health Care Select Sector SPDR Fund (XLV) fell 1.1%
The Financial Select SPDR ETF (XLF) fell 1.2 percent. The SPDR S&P Regional Banking ETF ( KRE ) climbed 1%, hitting resistance at the 50-day line.
Top five Chinese stocks to watch now
Market rally analysis
The stock rally suffered significant losses on Tuesday, especially for many leading stocks and groups.
The biggest losses came on the Nasdaq, which is looking good after rising significantly in recent weeks. The S&P 500 may be returning to sideways range after reaching 2023 highs late last week. Or there may just be a short pause before it explodes higher.
The Dow Jones fell back below the 50-day line, with the 200-day line not far behind.
The small-cap Russell 2000 reversed lower after hitting resistance at its 200-day line.
Decliners trumped advancing stocks, but not decisively.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 1.4%, but after hitting a three-month high on Monday. It is still above the 50-day mark.
The Invesco S&P 500 Equal Weight ETF ( RSP ) gave up 1.1%, back below the 200-day and 50-day lines. RSP must show more strength.
The biggest concern Tuesday was the heavy losses in several leading groups, including homebuilders, building materials, casinos, luxury goods, medical products, credit cards and more.
In some cases, the losses did not cause much map damage, such as for Country house (LNTH) or Builders FirstSource (BLDR).
But the LVS share, Meritage, Visa (V) and LVMH (LVMUY) all fell below their 50-day lines, undercutting or invalidating buy points.
Meanwhile, tech titans and chip leaders, including Nvidia, pulled back a bit. Some AI stocks pulled back after big gains, while Palantir Technologies (PLTR) continued to run.
There was no obvious trigger for the market rally’s retreat on Tuesday. Negotiations on the debt ceiling continue without signs of a break. Of course, a US default threatens if there is no agreement to raise the debt limit by the beginning of June. Perhaps the rise in government yields and the dollar finally hit a pain point for stocks, although speculative stocks did not lead the downside. A new massive Covid wave could take shape in China.
In the end, it doesn’t matter why stocks pull back.
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What to do now
The stock rally has been strange in recent weeks, with pockets of tremendous strength amid weak-at-best general market action. Tuesday’s decline in many leading groups raises concerns that market leadership may narrow further.
There were not many buying opportunities on Tuesday. The sell-off in some stocks shows that it is still a good strategy to take at least a partial profit on winning stocks.
This is an uneven market rally. It could become a broad, long-term upward trend. Or it may stop or even break. But as an investor, you need to be aware of what the market is doing right now.
Keep working on these watchlists.
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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