Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. The results of the midterm elections are coming in, while Tesla CEO Elon Musk sold more TSLA shares.
The stock market rally increased Tuesday morning, fueled by lower Treasury yields and a declining dollar. Major indices parried strong gains as Bitcoin and other cryptocurrencies tumbled in a surprise Binance-FTX takeover deal. But stocks rallied a bit at the close.
Bitcoin-related stocks, such as cryptocurrency exchanges base of coins (CURRENCY), commercial application Robinhood Markets (HOOD), cryptocurrency custodian Capital of Silvergate (YES) and Bitcoin miner digital marathon (mara) sold out.
Looking ahead, the consumer price index becomes very important.
walt-disney (DIS), Western Petroleum (OXY), Tesla (TSLA) rival Lucid Engines (LCID) Y Matrix Technologies (ARRY) reported Tuesday night.
Disney shares fell sharply overnight as earnings came in short, though Disney+ subscriber growth was strong OXY stock, over 20% owned by Warren Buffett Berkshire Hathaway (BRKB), with the bottom edge at mixed income. LCID shares tumbled amid weak third-quarter results and Lucid Air Booking Reduction. ARRY shares rose by strong earnings and guidance.
In other news, Metaplatforms (GOAL) will begin mass layoffs Wednesday morning, according to multiple reports.
Tesla CEO Elon Musk revealed that he sold 19.5 million shares for $3.95 billion on November 1. 4, 7 and 8. That could help pay for his recent Twitter deal, though Musk said in early August that stock sales at that point would be the last thing he would need.
Musk’s latest stock sales likely helped fuel the recent slide in Tesla shares. Rising subsidies from China and concerns about Elon Musk’s Twitter reign may also be weighing on TSLA’s stock.
Shares of Tesla fell 2.9% to 191.30 in trading on Tuesday after falling to 186.75 intraday, just above May 2021 lows.
Midterm election results are coming in Tuesday night. The Republicans are a virtual lock to retake the House of Representatives, but it is not shaping up to be a massive Republican wave. The Senate is up for grabs, but final results in key races could be days away.
Either way, President Joe Biden and the Democrats will no longer be in full control of the White House and Congress. Financial markets tend to do better with the deadlock in Washington. Stocks also traditionally do well in the third year of a presidential term.
So a divided Congress could be good news for Wall Street and could be good news for defense companies, private prisons and drug companies. On the other hand, markets may have already priced in some of that.
Dow Jones Futures Today
Dow Jones futures were little changed vs. fair value, with DIS shares weighing on blue chips. S&P 500 futures were up 0.1% and Nasdaq 100 futures were up 0.3%.
China’s consumer inflation rose less than expected. Wholesale prices fell.
Remember that the overnight action in dow futures and elsewhere does not necessarily translate to actual trading in the next regular stock Exchange session.
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The stock market rally surged higher on Tuesday morning, but then gave it back in the afternoon as Bitcoin’s crash spilled over into stocks. The S&P 500 and the Nasdaq briefly turned negative before recovering.
The Dow Jones Industrial Average rose 1% on Tuesday stock trading. The S&P 500 index rose 0.6%. The Nasdaq Composite advanced 0.5%. The Russell 2000 small-cap made a profit.
Tesla shares sank nearing their May 2021 intraday lows.
Apple and Microsoft shares rose 0.4%, Google shares rose 0.5% and Amazon fell 0.5%. They all rose this week, but after falling last week.
The 10-year Treasury yield fell 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 prices fell 3.1% to $88.91 a barrel. Natural gas futures fell 11.6%, continuing their huge daily swings.
Despite the weakness of the dollar, Bitcoin crashed as the number one market in the world. No. 1 cryptocurrency exchange Binance has agreed to buy rival FTX, which has been facing a liquidity crunch. Those are doubts that the Binance-FTX deal will actually happen, with FTX facing large withdrawals in recent days. Just a few months ago, FTX and its founder, Sam Bankman-Fried, seemed like potential saviors to other struggling crypto companies.
Bitcoin crashed to $17,484.20, the lowest since November 2020 and is currently trading around $18,500. The pioneering digital currency broke below $20,000 on Monday night. Ethereum, Dogecoin and other cryptocurrencies also showed similar or even bigger losses.
The FTX token crashed 80% on Tuesday after massive losses in recent days and weeks.
COIN shares fell 10.8% to a four-month low. Binance’s purchase of FTX could forge a new major rival for Coinbase, which is also reeling from Bitcoin’s troubles and concerns over crypto-related businesses.
Shares of HOOD, which includes Bankman-Fried as an investor, sank 19%. MARA shares fell 5.3% to the lowest level since July. After the close, Marathon Digital reported a larger-than-expected loss while revenue fell 75%.
SI shares fell 23% to the lowest level since December 2020.
Tesla still owns some Bitcoin, while Elon Musk has had Dogecoin for some time.
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Between Best ETFsthe Innovator IBD 50 ETF (FFTY) fell 0.3%, while the Innovator IBD Breakout Opportunities ETF (COMBAT) rose 0.1%. The iShares Extended Technology Software Sector ETF (VAT) rose 1.3%, with shares in MSFT a key component. The VanEck Vector Semiconductor ETF (SMH) burst 2.2%.
SPDR S&P Metals & Mining ETF (XME) rose 1.9%. The Energy Select SPDR ETF (XLE) rose 0.1%. The SPDR Fund of the Select Sector of Health Care (XLV) rose 0.5%.
Mirroring more speculative historical stocks, ARK Innovation ETF (ARKK) fell 0.4% and ARK Genomics ETF (ARKG) rose 1.4%. Tesla shares remain one of the top holdings in Ark Invest ETFs.
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Market recovery analysis
The stock market rally looked badly damaged last Thursday in the wake of aggressive comments from Fed chief Jerome Powell. But it is recovering in the last three sessions, even with the Bitcoin problems.
The Dow broke through last week’s high after retracing its 200-day line on Monday.
The S&P 500 rose a bit above its 50-day line, although it is still below its Nov. 1 level. 1 short-term high.
The Nasdaq, weighed down by Tesla and technology issues, found resistance at its 21-day moving average. It is still below its 50 days and far from its 200-day lines.
But the Direxion Nasdaq-100 Equal-Weight ETF (QQQE) rose a little over 1% to break above its 50-day line.
Falling Treasury yields helped lift stocks on Tuesday, while the dollar’s decline has been a key factor over the past three sessions.
The mid-term election results could spur market moves, but Thursday’s CPI inflation report may be key. Dovish CPI reading could fuel hopes for slower Fed rate hikes Y a lower top rate. But another hot inflation figure could trigger strong selling of stocks and bonds.
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There were not many new buying opportunities on Tuesday.
GlobalFoundries (GFS) rallied above a trend line and handle too low after gains.
shelter him (SUNRISE) cleared an early entry, but quickly and raced to its official buy point, closing just below that key level. However, ALB shares are well above their 50-day line after a big move since November 1st. 3 intraday lows.
crocodiles (CROX) briefly picked up a buy point while United Health (UNH) closed in buying range.
Several LNG stocks are close to buying points.
Technological weakness remains a concern. Chip stocks are rallying, with the SMH ETF convincingly above the 50-day line. Megacap technologies like Apple (AAPL) are trying to recover, but after huge sell-offs. The same goes for cloud software.
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What to do now
The stock market rally is showing resilience after last week’s heavy losses, with the Dow Jones and S&P 500 retaking key levels. Investors may still want to be cautious, with the CPI inflation report coming up. Also, there are not many actionable actions currently, although many are being set up.
Investors must be ready to act by staying committed and creating their watch lists. Growth stocks are still largely out of favor, so make sure you’re casting a wide net to find stocks and sectors that are emerging leaders.
Definitely be on the lookout for earnings, which remain active. Some stocks have been big gainers, while others have rallied mightily after an initial drop. But there have also been some high-profile sell-offs, as Disney and Lucid stocks showed overnight.
Read The panorama every day to stay in sync with market direction and major stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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