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Dow Jones Futures: These sectors lead market rotation; Tesla Falls; 3 shares in buying zones




Dow Jones futures tipped lower late Tuesday, along with S&P 500 futures and Nasdaq futures. The rise in shares continued its movement away from technology, and towards energy and finance on Tuesday. Tesla stock fell, but held key support while other megacaps such as apple (AAPL) barely moved.




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In overnight trading, HPQ shares and Clean storage (PSTG) signaled a breakout in revenue, but there were also big losers.

After several weeks of a wide-ranging rally, the stock market has returned to sector rotation. It is a more difficult environment for investors, especially for new purchases.

Software continues to be hammered. Asana (ASAN) and Digital sea (DOCN) extended Monday’s big sale, while Snowflake (SNOW) skid to its 50-day line.

Tesla (TSLA) fell sharply, but reduced losses. Other megacaps were little changed. Microsoft (MSFT) fell slightly for a second session in a row. Google parent Alphabet (GOOGL) and Nvidia (NVDA) also edged lower. But Apple makes and Amazon.com (AMZN) edged higher.

On the upside, energy stocks were strong on Tuesday as crude oil prices rose despite President Joe Biden releasing strategic oil reserves to the market, with Pioneer natural resources (PXD) among the slate names, buy signals flash. Finances rose again as government interest rates continued to rise.

Key income

In after-hours revenue news, PC maker HP Inc. (HPQ) and PSTG shares rose by 7.5 and 16%, respectively, on earnings. HPQ Warehouse and Pure Storage went out of bases overnight. But Autodesk (ADSK), Nordstrøm (JWN) and Space (GPS) sold 15%, 23% and 16% in expanded trade.

Dealers were high-income movers in Tuesday’s session, with Best buy (BBY) and Dick’s sports equipment (DKS) plunges on earnings while Dollar tree (DLTR) extended its last run.

The Tesla stock, Microsoft, Nvidia, Google and Snowflake are on the IBD Leaderboard. Apple stock and Pioneer Natural Resources are on SwingTrader. Microsoft and Google are long-term IBD leaders. Tesla, Google and Nvidia shares are at IBD 50. Pioneer was the IBD Stock Of The Day.

The video embedded in this article also analyzes the market action Xpeng (XPEV), PXD stock and SNOW stock.

Dow Jones Futures today

Dow Jones futures tipped lower relative to fair value. S&P 500 futures fell 0.1% and Nasdaq 100 futures fell.

Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session. The last few days have shown relatively calm action in Dow futures that did not announce the usual session deviation.


Join IBD experts as they analyze powerful stocks in the stock market rally on IBD Live


Stock market rally

The rise in equities started again with modest movements in the large indices, followed by significant divergences. However, this deviation was slightly smaller.

The Dow Jones Industrial Average rose 0.55% in Tuesday’s trading session. The S&P 500 index rose 0.2 percent. The Nasdaq composite fell 0.5%, even though it was well below the lowest level of the session. The big Nasdaq 100 also lost around 0.5%. Small-cap Russell 2000 fell 0.1%.

The 10-year government interest rate rose four basis points to 1.67%, after jumping by nine basis points on Monday. Crude oil futures rose 2.3% to $ 78.50 a barrel.

Among the best ETFs, Innovator IBD 50 ETF (FFTY) fell 1.6%, while Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.3%. iShares Expanded Tech-Software Sector ETF (IGV) fell 1.6%. Microsoft stock is an important IGV component. VanEck Vectors Semiconductor ETF (SMH) retreated 0.7%. The Nvidia share is an important SMH holding.

ARK Innovation ETF (ARKK) reflects more speculative history shares, giving up 2.3%, reaching a new low of six months. ARK Genomics ETF (ARKG) fell 1.3 %%, another 52-week low. The Tesla share is still the top holding across ARK Invest’s ETFs, but the ARK funds have paired the TSLA holding in recent months.

SPDR S&P Metals & Mining ETF (XME) increased 0.3% and Global X US Infrastructure Development ETF (PAVE) increased 0.4%. The US Global Jets ETF (JETS) fell 0.45 percent. SPDR S&P Homebuilders ETF (XHB) fell 0.1%. Energy Select SPDR ETF (XLE) rose 3.1%, with the PXD stock as a top 10 stock. Financial Select SPDR ETF (XLF) climbed 1.6%.


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Market Rally Analysis

This is still a confirmed stock market rise. The major indices are not so far away from all-time highs.

Nevertheless, the broad-based market upswing that took hold in October and the beginning of November has become more difficult to handle. After Monday’s downward reversal from record highs, the Nasdaq fell again on Tuesday, but closed above its 21-day line after fighting support near its 10 November low. Small-cap Russell 2000 found support on its 50-day line. The Dow Jones rose slightly for a second straight session, but is still below its 21-day line.

The stock market rally’s rotation out of growth is not particularly surprising. At Monday’s record high, the Nasdaq 100 was more than 8% above the 50-day line, signaling a strong risk of withdrawal. And that’s what happened. Megacaps either reduced gains, such as Tesla and Apple shares, or reversed lower, such as Nvidia shares. Meanwhile, many hot software stocks like Asana, SNOW stocks and related high value names like e.g. Airbnb (ABNB) and by Dash (DASH) crashed.

Sales continued Tuesday in software names. The SNOW stock found support on its 50-day line, but a two-day 12% drop is not the way you want to see growth names pull back.

Tesla shares fell 4%, but jumped off the 21-day line. Other megacaps did not change much, but no longer mask the underlying weakness in growth and the broader market upturn.

The FFTY ETF, which plunged below its 50-day line on Monday, is testing its 200-day line. Remember that FFTY, like growth stocks overall, fell last week even as Apple stock and other megacaps rose higher.

The IGV ETF slipped through its 50-day line on Tuesday, even with the MSFT stock still well above that key level. And while high-flying growth stocks are struggling, depressed high-value stocks like ARK are owned Year (ROKU) and Teladoc (TDOC) has not had any immunity from the sale.

Retail stocks were definitely hit or missed, with large positive and negative movements on earnings before and after Tuesday’s session.

On the upside, energy stocks and banks are rising with crude oil prices and government interest rates. Some flash early entries or other buy signals. The steel shares mostly held up after Monday’s big move.


Time market with IBD’s ETF market strategy


What to do now

When meme stocks dominated attention earlier this year, IBD asked: What’s your advantage of trading with these names? Now with sector rotation back in force, what exactly is your advantage in the current market environment?

Will the market rally regain broad strength, or will all the major indices fall? Will the sector rotation for commodity trading and finance last, or will growth pick up quickly?

Here and now, many growth stocks look severely damaged, while others are fighting for key support.

Some big winners like the Nvidia stock are holding up relatively well, but how long can the megacaps withstand broad sales growth?

Investors should have reduced exposure in the last few days. Much of it probably came from selling losers and taking partial or total winnings from winners who sold hard. But investors may simply have wanted to reduce their exposure in an uncertain environment, and hold on to long-term winners.

While cutting back on growth, investors can buy energy stocks such as PXD or bank stocks or ETFs. But investors may want to treat such purchases as swing trades, take at least partial profits with, for example, a 5% gain and reduce losses very quickly. Why? Because with sector rotation back in play, energy and financial shares can easily sell out quickly if the oil price and government interest rates fall back again.

The upcoming autumn Thanksgiving party will probably keep the volume low on Wednesday and especially in Friday’s half-day session, so it will be more difficult to judge the action in leading stocks and the major indices before next week.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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