Dow Jones futures rose slightly after hours, along with S&P 500 futures and Nasdaq futures. Tesla (TSLA) holds its annual shareholder meeting, but doesn’t offer much big news.
The stock market rally retreated on Tuesday as debt-ceiling fears added to selling pressure at the close. The Nasdaq rallied for most of the session thanks to megacap tech, incl Advanced Micro Devices (AMD), Nvidia (NVDA), Microsoft (MSFT), Amazon.com (AMZN) and parent of Google Alphabet (GOOGLE).
The S&P 500 and Dow Jones retreated most of the day, with the latter closing below the 50-day line. The market area is dark.
President Joe Biden and congressional leaders held new debt ceiling talks at the White House Tuesday afternoon. House Speaker Kevin McCarthy said “we have a lot of work to do,” saying the two sides are far apart. He added that a deal could come this week.
However, the White House announced shortly before the closing bell on Tuesday that President Biden would cut short his upcoming trip to Asia due to debt negotiations. That news, which suggests no victory on the debt limit is imminent, pushed the major indexes to session lows.
Without an increase in the debt, the US could default in early June, possibly on June 1.
Target (TGT), TJX Cos. (TJX) and Dynatrace (DT) report Wednesday morning. TGT stock is struggling below its moving averages. TJX stock is just below the early entry mark. Dynatrace stock has cleared an early entry and pauses just below a traditional breakout.
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Tesla Shareholder Meeting
The Tesla shareholders meeting took place at the Austin EV plant.
Investors in TSLA stock are looking for more details on various issues and products, including the Cybertruck, 4680 battery and an updated Model 3.
CEO Elon Musk said Tesla will bring production Cybertrucks this year, but didn’t give more details on timing and much else.
Musk said he expects the economy to pick up 12 months from now. He also mentions the Optimus humanoid robot.
In a break with longstanding policy, Musk said, “We’re going to try a little advertising and see how it goes.”
Musk also shot down rumors that he might step down as Tesla CEO.
Early Tuesday, Bloomberg reported that Tesla Shanghai is about to begin trial production of a revised Model 3.
Tesla stock was up 1% in late trading. Shares rose 0.1% to 166.52 in Tuesday’s regular session, just below the 21-day line. Tesla stock is also facing resistance at the 50-day line, with the 200-day line above it. If Tesla stock makes some progress, it will have a 207.89 double-bottom buy point.
Dow Jones Futures Today
Dow Jones futures climbed 0.1% versus fair value. S&P 500 futures advanced 0.1% and Nasdaq 100 futures rose 0.15%. Tesla stock is a major S&P 500 and Nasdaq 100 holding.
Note that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Stock Market Rally
The stock market rally was mixed for most of Tuesday’s session, but the Nasdaq turned lower on debt-ceiling concerns.
The Dow Jones Industrial Average fell 1% in stock market trading on Tuesday. The S&P 500 index fell 0.6%. The Nasdaq composite fell 0.2%. The small-cap Russell 2000 retreated 1.4%
Megacaps are key drivers. AMD stock rose 4.2%, briefly topping an official buy point. Nvidia stock rose 0.9% to a new 52-week high. Google stock gained 2.6% and Amazon 2%. MSFT stock advanced 0.7%.
US crude oil prices fell 0.35% to $70.86 per barrel.
Copper prices fell 2.2%, reflecting weaker-than-expected Chinese economic data and a stronger dollar. Gold retreated 1.5% and silver 1.6%.
The 10-year Treasury yield climbed 4 basis points to 3.45%.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.1%, while the Innovator IBD Breakout Opportunities ETF (BATTLE) retreated 2%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 0.3%, with Microsoft stock a leading component. The VanEck Vectors Semiconductor ETF (SMH) closed just below break-even, with AMD stock and Nvidia major holdings.
SPDR S&P Metals & Mining ETF (XME) fell 2.8% and the Global X US Infrastructure Development ETF (PAVE) gave 1.6%. US Global Jets ETF (JETS) decreased by 0.45%. SPDR S&P Homebuilders ETF (XHB) gave 1.2%. The Energy Select SPDR ETF (XLE) retreated 2.5% and the Health Care Select Sector SPDR Fund (XLV) slipped 0.8%.
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Market Rally Analysis
The stock market rally saw divergent action on Tuesday, with megacap tech higher-powered amid a general retreat.
The Nasdaq rose higher, hitting its best levels since late August. The S&P 500 fell just below its 21-day line. The Dow Jones fell below its 50-day line in its worst close since late March.
The breadth was unusually negative due to mixed action in the major indexes.
Losers beat winners by more than 2-to-1 on the Nasdaq and nearly 4-to-1 on the NYSE. The new lows easily surpassed the new highs.
The Nasdaq 100, led by AMD, Nvidia, Microsoft, Amazon and GOOGL stocks, rose 0.1%, closing at its August high. But the First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 0.95%, though it is still above its 50-day.
The Invesco S&P 500 Equal Weight ETF (RSP) fell 1.4% to its worst close since late March. It is now closer to its October bear market low than it is to its 2023 high from early February.
On a positive note, the chip sector is showing renewed strength and improving breadth. The SMH ETF gave up intraday gains on Tuesday, but it still outperformed. AMD stock and Nvidia are clear leaders. But Lam Research (LRCX) and Applied Materials (AMAT) are chip-gear giants making bullish moves, with AMAT earnings due Thursday night. In Semiconductors (ON) and ACLS stock are EV-focused chip plays that have made a comeback. Broadcom (AUG) is near a buy point.
If the chip sector is ready to climb again, that’s a positive sign for the market rally. Semiconductors have a large market cap on their own. Also, chips are basically in everything. So if chips are doing well, that’s a good sign for many industries.
Meanwhile, the software is also evolving. Yes, MSFT stock is part of it, though most of its gains reflect cloud computing and AI. But Salesforce.com (CRM) stock, Service Today (NOW) and Dynatrace are all doing well, with some cloud names making a comeback in recent weeks. ServiceNow announced new AI features on Tuesday in an alliance with Microsoft.
On the downside, the FTC’s move to challenge the Amgen-Horizon deal could set a precedent for blocking many biotech acquisitions. So that could affect biotech stocks for some time.
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What should be done now?
The stock market rally continues to move sideways, with a narrow lead. Do not try to force your way through extreme exposure to this environment. If you’re in the right stocks, like megacaps, you can have decent exposure. If you haven’t had much luck, you may be almost out of cash.
When taking new positions, consider small stakes and focus on early entries. You may want to take some partial income a little early to make sure you have a profit. While some stocks, like Nvidia, have made big gains, many others have risen modestly from a buy point and then pulled back.
Continue working on your watchlists. While there are reasons to be cautious in a volatile market, it won’t take a market rally to show renewed strength either. So you want to be prepared.
Read The Big Picture daily to stay in sync with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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