Dow Jones Futures: Market Retreat Slams Leaders; Intel Lifts Chip Stocks Late, GME Stock Falls On Earnings

Dow Jones futures edged higher late Tuesday, along with S&P 500 futures. Nasdaq futures rose modestly as Intel (INTC) announced plans for two big chip plants in Arizona, lifting gear makers Applied Materials (AMAT), ASML (ASML) and KLA (KLAC), while hitting chip foundry giant Taiwan Semiconductor (TSM).

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Adobe (ADBE), GameStop (GME) and At Home (HOME) headlined key earnings after the close.

The stock market rally retreated Tuesday, as coronavirus concerns slammed cyclicals, travel and other real economy or economic reopening plays, while tech stocks fell despite declining Treasury yields. All the major indexes fell solidly, with small caps and many recent winners suffering significant losses. Crude oil and commodity prices tumbled as coronavirus shutdowns expand in Europe, raising doubts about the global recovery.

As further evidence that Tuesday reflected a shift, for at least one day, toward coronavirus fears: Zoom Video Communications (ZM) and Peloton Interactive (PTON) rallied, though they are near recent lows.

Microsoft stock, Netflix (NFLX), Amazon.com (AMZN) and Google parent Alphabet (GOOGL) rose slightly, though well off session highs. Netflix and Amazon stock are arguably coronavirus plays too, while Microsoft and Google fared well during the pandemic.

Microsoft (MSFT), Netflix and Google stock are flashing tentative buy signals, along with Facebook (FB), while Amazon is trying to reclaim key levels.

Intel Chip Plants Planned

Intel said late Tuesday that it will spend $20 billion on two big chip plants in Arizona. It’s a clear signal under new CEO Pat Gelsinger that the Dow Jones tech giant will continue make its own chips, rather than focus exclusively on semiconductor design.

The hefty Intel spending on new fabrication plants is good news for chip-equipment makers such as ASML, Applied Materials, Lam Research and KLA Corp. ASML stock rose 3%. AMAT stock climbed 4%. LRCX stock advanced 3% and KLAC stock 4%. All four stocks are near early entries, but pulled back Tuesday along with the overall market rally.

Further, Intel will make semiconductors for companies that focus on design, with a new unit called Intel Foundry Services. That’s a direct challenge to Taiwan Semiconductor, the world’s largest chip foundry, which is also building an Arizona plant.

TSM stock fell 3% overnight, signaling a test of its recent lows. Taiwan Semi sank nearly 2% on Tuesday.

As for Intel stock, the chip giant rallied almost 7% overnight to 67.65 after falling 3.3% to 63.48 on Tuesday. INTC stock has a 65.22 buy point from a long double-bottom base on a daily chart, or a 63.64 entry from an awkward cup-with-handle base on a weekly chart.

Intel stock is set to open near its 20-year high set in January 2020.

Adobe stock was little changed overnight after beating views, while At Home stock bounced on its results. GME stock tumbled as the mall-based video game retailer announced strong e-commerce growth and a new top exec, but missed EPS and sales estimates. Meanwhile, Robinhood filed confidential paperwork for an IPO. The stock trading app came under fire earlier this year for restrictions on GME stock trading.

Microsoft stock, Google and Adobe are on IBD Leaderboard. Netflix stock is on SwingTrader. Microsoft and Adobe stock are on IBD Long-Term Leaders.

Biden, Fed Are Changing The Game For Stocks

Dow Jones Futures Today

Dow Jones futures rose a fraction vs. fair value. S&P 500 futures were slightly higher. Nasdaq 100 futures advanced 0.35%. Intel stock gave a lift to futures.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

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

Coronavirus News

Coronavirus cases worldwide reached 124.77 million. Covid-19 deaths topped 2.74 million.

Coronavirus cases in the U.S. have hit 30.63 million, with deaths above 556,000. New U.S. cases have come well off record highs as vaccinations have surged, but are stabilizing as new Covid variants expand and many states ease restrictions. Covid deaths are slowing as many elderly have been vaccinated.

Germany will extend its lockdown through April 18 as coronavirus cases ramp up. France and Italy recent adopted partial lockdowns. Coronavirus vaccinations have been much slower in Europe than the U.K. or U.S.

Stock Market Rally

The stock market rally had a rough session, with the major indexes retreating solidly and leading stocks faring worse.

The Dow Jones Industrial Average fell 0.9% in Tuesday’s stock market trading. The S&P 500 index retreated 0.8%, closing just above its 21-day exponential moving average. The Nasdaq composite lost 1.1%. The Nasdaq 100, buoyed by Microsoft, Google, Amazon and Netflix stock, dipped 0.4%.

The small-cap Russell 2000 sank 3.6%, closing below its 50-day line for the first time since Oct. 30.

The 10-year Treasury yield fell for a third straight session, down six basis points to 1.62%. Crude oil futures sank 6.2% to $57.76 a barrel. Crude oversupply concerns are growing, while Europe’s lockdowns are adding to worries about demand for energy and industrial commodities.

Leading Stocks Hard Hit

Meanwhile, growth stocks as well as travel and cyclical names had a rough outing.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) plunged 4.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) tumbled 4.5%. The iShares Expanded Tech-Software Sector ETF (IGV) edged higher, with major components Microsoft, Adobe and Zoom stock boosting IGV.

The VanEck Vectors Semiconductor ETF (SMH) sank 2.5%, with several chip names at or near early entries falling back Tuesday. In late trade, SMH rose modestly, with Intel stock, ASML, KLAC and AMAT rallying late and TSM stock retreating.

SPDR S&P Metals & Mining ETF (XME) skidded 5.4% and Global X U.S. Infrastructure Development ETF (PAVE) lost 2.7%. U.S. Global Jets ETF tumbled 4%, its fourth straight loss

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) declined 3.9% and ARK Genomics ETF (ARKG) 2.4%.

Tech Megacaps

Microsoft stock rose 0.7% to 237.58. Intraday, it got to 241.05, just above last week’s high. MSFT stock has a new flat base, a base-on-base formation, with a 246.23 entry. Investors could buy MSFT stock as a rebound from the 10-week line, though they might want to wait for it to get back above 240.

Facebook stock slid 1% to 290.63. That’s still in range from an early entry of 286.89 and closing the gap on the official buy point of 304.77. The relative strength line for FB stock remains low, but is at a 2021 high, reflecting its recent outperformance vs. the S&P 500 index.

Google stock edged up 0.5% to 2,041.33, but closing just below its 21-day line. GOOGL stock has a flat base with a 2,145.24 buy point, according to MarketSmith analysis. But it’s trying to rebound from its 10-week line. Investors could buy shares here or wait for a move above short term highs, around 2,114.

Netflix stock rose 2.3% to 535.09, just reclaiming its 50-day line and breaking a downtrend. NFLX stock has an official buy point of 593.39.

Amazon stock advanced 0.9% to 3,137.50, closing slightly above its 200-day line but hitting resistance at its 50-day. Investors could use 3,434.10 as an early entry for AMZN stock. The official buy point is 3,552.35.

Adobe Earnings

Adobe earnings and revenue topped views.

ADBE stock was little changed in extended trade. Shares rose 1.7% to 460.20 on Tuesday, but hit resistance at its 50-day and 200-day lines. As a Long-Term Leader, investors could buy Adobe stock as it breaks above those key levels, but 506.61 might be a safer early entry. The official buy point is 536.98 for the consolidation going back to early September.

GameStop Earnings

GameStop earnings and revenue slightly missed views. But e-digital revenue surged 175%.

GameStop named Jenna Owens, a former Amazon, Google and McKinsey executive as its chief operating officer. Earlier Tuesday, GameStop said that Frank Hamlin, its chief customer officer, will leave March 31. CFO Jim Bell said last month he’d exit GameStop on March 26. Those departures come as activist investor and Chewy.com (CHWY) co-founder Ryan Cohen pushes for GameStop to be digital-focused.

GME stock sank 15% after GameStop management quickly ended a post-earnings call. GameStop said it might sell some shares and it answered no questions. GameStop stock retreated 6.5% to 181.75 on Tuesday. Shares are below their March 10 peak of 348.50 and the Jan. 28 all-time high of 483. But GME stock closed Tuesday up 865% so far in 2021.

At Home Earnings

At Home earnings and sales topped views. HOME stock jumped 8% overnight. At Home stock fell 7.5% to 30.83 Tuesday after hitting a multiyear high intraday.

At Home earnings come as home furnishings, furniture and remodeling plays are faring well. Williams-Sonoma (WSM), RH (RH) and Wayfair (W) have all broken out, though the latter two pulled back below buy points Tuesday.

WSM stock surged on earnings last week with RH earnings due Wednesday. In the remodeling and home improvement space, Lowe’s (LOW) also has broken out while Floor & Decor (FND) has been setting up.

Stock Market Rally Analysis

The Dow Jones is still above its 21-day line. So is the S&P 500 index, barely. Meanwhile, the Russell 2000 has tumbled below its 50-day line. The Nasdaq is facing resistance at its 50-day, and retreating back below its 21-day line.

Leading stocks across various sectors were hard hit Tuesday. That’s a growing concern. Over the past couple of weeks, different areas of the market have looked strong for a couple of days only to pull back. On Tuesday, there were few bright spots. In the past couple of weeks, most new breakouts or early buy signals have struggled to make headway. That includes chemicals, steel and travel plays.

So perhaps this is the moment when Microsoft, Facebook, Netflix and Google stock start to lead the way. Maybe Intel and chip-gear giants such as AMAT stock power higher. But it could be another head fake.

Stepping back, sideways action is healthy for the market rally. A lot of growth stocks need time to repair. Meanwhile, cyclical stocks, financials and economic reopening plays have rallied a lot over the past several months. An extended pause will let stocks from a wide variety of sectors form new bullish bases.

Choppy Markets Chop Up Investors

But a choppy, sideways market is very difficult to navigate for active investors. Stocks and the major indexes will show just enough strength to tempt investors in and just enough weakness to force them out with losses.

Investors should be cautious in the current environment. It’s OK to have some exposure, but don’t be too concentrated in any one area. For new buys, investors may want to consider taking partial positions from pullbacks or early entries, filling out positions from traditional buy points.

There’s also nothing wrong with being mostly or entirely in cash if you’ve been getting bruised and nicked recently. It’s not just your capital, it’s your psyche. There will be stronger market rallies that offer better opportunities.

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

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

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