Dow Jones futures fell modestly Wednesday night, along with S&P 500 futures and Nasdaq futures. The Dow Jones sank modestly on Wednesday, while the Nasdaq fell to new lows, but the stock market rally is not “quite dead” yet.
For stocks in the real economy, Wednesday was normal or even positive. Boeing (LICENSED IN LETTERS), Citigroup (C), Flagstar Bancorp (FBC) and Avient (AVNT) compensated purchase points or advance tickets.
The selloff of growth stocks continued with the Nasdaq undercutting its intraday low of February 23. Home plays Amazon.com (AMZN), Video zoom (ZM), Teladoc Health (TDOC), Datadog (DDOG) and 2U Inc. (TWO) all broke below long-term support. Tesla (TSLA) fell back to a 2021 closing low while Nvidia (NVDA), Roku (ROKU) and ServiceNow (NOW) declined decisively below its 10-week lines.
Marvell Technology (MRVL), Snowflake (SNOW), Okta (OKTA) and Spunk (SPLK) topped earnings Wednesday night. But all of these tech stocks were breaking down or breaking down in quarterly results, falling sharply on Wednesday.
Marvell’s earnings were in line and targeting was mixed. Snowflake reported strong revenue growth, while Okta and Splunk topped the views. Okta shares fell overnight in a $ 6.5 billion acquisition. Marvell fell sharply while SNOW shares rose slightly. Splunk shares, which are at 10-month lows, rose solidly.
Tesla and Nvidia shares are on IBD’s leaderboard. ServiceNow shares are on IBD’s Long Term Leaders list. Tesla and Nvidia shares are at IBD 50.
Dow Jones Futures Today
Dow Jones futures fell 0.3% against fair value. S&P 500 futures fell 0.4% and Nasdaq 100 futures fell 0.6%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they discuss actionable stocks in the stock market rally on IBD Live.
Coronavirus cases worldwide reached 115.76 million. Deaths from Covid-19 exceeded 2.57 million.
Coronavirus cases in the US have reached 29.45 million, with deaths exceeding 531,000.
Stock Market Rally Wednesday
The stock market rally sold out, closing at session lows. The names of the real economy were kept as the tech giants retired and the speculative names were sold.
The Dow Jones Industrial Average fell 0.4% in trading on Wednesday after being slightly positive for most of the session. Boeing shares were a key winner of the Dow, but Apple (AAPL) and Microsoft (MSFT) weighed on the blue chips. The S&P 500 Index fell 1.3%, again below its 21-day line but remaining just above its 50-day line. The Nasdaq Composite fell 2.7%, breaching its 50-day line and undermining its February 23 low.
The 10-year Treasury yield rose 6 basis points to 1.47% after falling in recent days. The strong uptrend in long-term sovereign bond yields has put pressure on the stock market rally, especially speculative growth.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slipped 3.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) slumped 3.25%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 4.1%, with Zoom Video and NOW in notable component stocks. The VanEck vectors Semiconductor (SMH) ETF lost 3.15%. NVDA shares are one of the main shares of SMH.
Reflecting more speculative story stocks, Ark Innovation ETF (ARKK) fell 5.9% and Ark Genomic Revolution ETF (ARKG) 6.3%. Both cut recent lows, with ARKK closing below them.
Tesla is the largest holding in Ark Investment ETFs, including ARKK. Shares of Teladoc and Roku are also among the top five Ark holdings, while Ark bought a lot of Zoom shares on Tuesday. Ark also has a sizable stake in many smaller and less liquid names. It will be difficult to get out of them, especially with Ark Invest revealing much of your daily purchases and sales.
Boeing shares briefly break
Dow Jones Giant Boeing (BA) rose 2.4% to 228.56. Intraday, the shares reached 235.40, breaking a buy point of 229.71 cup with handle on a weekly chart. Citigroup shares rose 3% to 70.38, outperforming a base purchase point of 69.52 cups, according to MarketSmith analysis. But the Citi breakup comes weeks after the Goldman sachs (GS), JPMorgan Chase (JPM) and even Wells fargo (WFC).
Avient stock was up 5%, breaking a cup base in high volume. Shares of Flagstar were up 3%, bouncing higher from their 10-week line as they built the right side of their flat base. FBC was Wednesday’s IBD stock of the day. Avient’s shares were Tuesday’s.
Amazon, Zoom Video Break 200 days
Shares of Amazon, Zoom Video, Teladoc, Datadog and TWOU fell below their 200-day moving averages. AMZN shares fell 2.9% while the other four fell 3.75% -9.5%. For Zoom and Datadog shares, it was their first close below 200 days.
Amazon shares are one of the few trillion dollar companies.
Zoom’s stock is perhaps the ultimate coronavirus game, though Amazon and Teladoc have also thrived on the pandemic, along with cloud-based Datadog and 2U. As vaccines increase and Covid restrictions are eased, investors are betting that domestic high-value companies will see slower growth.
Shares in Teladoc, Datadog and 2U hit new highs just a few weeks ago.
Shares of Tesla fell 4.8% to 653.20, the lowest close since December 23, but above last week’s intraday low of 619. Shares of Roku fell 5.2%, Nvidia 4.5% and ServiceNow 6.1%.
Stock market rally ‘almost dead’
Is this a violent stock market rotation out of growth or the beginning of a technology-driven market correction? Looking strictly at the Nasdaq and tech leaders, this looks like a stock market correction. But the Dow Jones and cyclical sectors held up well, while the S&P 500 is still just barely above its 50-day line.
The market rally may be “almost dead”, to quote Miracle Max from “Princess Bride”, but it is still “slightly alive”. But where is Miracle Max to relive the rally? At this point, any weakness would most likely push the rally “almost dead” to “all dead”. On the other hand, it would take a lot for the market rally to fully revive, just like Wesley from the Princess Bride.
This is an important day to read The Big Picture and stay in sync with the direction of the market and major stocks and sectors.
One thing is for sure, growth, especially speculative growth, is in disgrace. Stocks could recover quickly or within several weeks or months, while some may never recover.
Don’t focus on 2020 winners like Zoom or Datadog stocks if your performance is poor right now.
I’m glad we focused on the leaders from last year to last year. This year I think we should focus on this year’s leaders. What you think?
– JC Parets (@allstarcharts) March 3, 2021
Investors should be defensive, at least with tech names. If your stocks are losing, it is either out of sync with the market or the market itself is out of sync. Consider investing more in mining, industrial, agricultural and financial stocks. But if the entire market decisively recovers, the recent relative winners are likely to collapse as well.
Cash is king in a correction, and keeping a large amount in the current market climate is a good choice.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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