Dow Jones futures were little changed Thursday night, along with S&P 500 futures and Nasdaq futures. The stock market rally had a tough session Thursday. The Dow fell modestly while the Nasdaq suffered its worst loss since late October, as Apple stock, Tesla (TSLA) and many other techs tumbled from resistance areas.
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Soaring Treasury yields were the trigger, though a new Covid shutdown in France and plunging crude oil prices didn’t help. Investors should largely steer clear of tech stocks while investing prudently in other rising sectors.
FedEx (FDX) and Nike (NKE) headlined earnings after the close.
FedEx earnings were better than expected, with EPS and sales growth accelerating for a third straight quarter. FDX stock rose 4% in extended trade after dipping 0.9% to 263.51 on Thursday.
Nike earnings beat while revenue fell short. Nike stock sank nearly 4% overnight, suggesting a test of its 50-day line on Friday. The Dow Jones giant fell 1.1% on Thursday to 143.17. NKE stock has a 148.05 buy point.
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Meanwhile, some big tech and growth stocks hit resistance with the Nasdaq under pressure again. A few examples include Tesla stock, PayPal (PYPL), Pinterest (PINS), Nvidia (NVDA), Apple (AAPL) and Twilio (TWLO).
Volkswagen (VWAGY), which had become greatly extended amid euphoria for its big EV push, plunged 15%. Even now, VWAGY stock is 18.5% above its 10-day line.
Williams-Sonoma (WSM) broke out Thursday, surging 18.5%. WSM stock gapped out of a base on strong earnings and guidance as well as a dividend hike and buyback.
PayPal and Nvidia stock are on IBD Leaderboard. PayPal stock is on IBD Long-Term Leaders. Tesla stock, PayPal and Williams-Sonoma are on the IBD 50. PINS stock is on the Big Cap 20.
Dow Jones Futures Today
Dow Jones futures were 0.2% above fair value. S&P 500 futures were little changed. Nasdaq 100 futures lost 0.1%.
The Biden administration’s first high-level meeting with China got off to a rocky start. Secretary of State Antony Blinken and his Chinese counterpart exchanged sharp barbs to one another in opening statements before the media. The two sides were set to hold hours of private discussions. No results were expected from the meeting, but it does indicate that the two superpowers will continue to have a rocky relationship on a range of issues.
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 122.36 million. Covid-19 deaths topped 2.7 million.
Coronavirus cases in the U.S. have hit 30.35 million, with deaths above 552,000.
The European Medicines Agency said the AstraZeneca (AZN) coronavirus vaccine is not linked to blood clots. That could pave the way for European nations to resume AstraZeneca jabs. Even before the AstraZeneca vaccine suspensions, the EU had badly lagged the U.K. and U.S. in terms of vaccinations.
Many European countries are seeing rising Covid cases rise as a result. Paris and much of France will enter a partial lockdown starting Saturday and lasting for four weeks. Italy reimposed many restrictions on Monday. That will keep Europe’s economic recovery in the slow lane, while the U.S. rapidly rolls back coronavirus restrictions.
The FDA has not yet approved the AstraZeneca vaccine, awaiting results from a U.S. trial. The Biden administration says it’ll ship a few million of stored doses to Canada and Mexico.
Stock Market Rally Thursday
The stock market rally was on the defensive, with the Nasdaq leading the indexes to close near session lows.
The Dow Jones Industrial Average closed down 0.5% in Thursday’s stock market trading. The S&P 500 index fell 1.5%. The Nasdaq composite plunged 3% in higher volume, its worst decline since a 3.7% loss on Oct. 28.
The 10-year Treasury yield jumped 7 basis points to 1.71%. The intraday peak of 1.754% was the highest since January 2020. With GDP growth likely to surge 6%-8% in 2021 as the pandemic fades while fiscal and monetary policy is at full tilt, Treasury yields rising from historic lows makes a lot of sense.
U.S. crude oil prices plunged 7.1% to $60 a barrel, declining for a fifth straight session. U.S. crude inventories rose again last week, the Energy Information Administration reported Wednesday. Gasoline supplies turned higher again after refinery shutdowns hit production for weeks. Meanwhile, Europe’s coronavirus woes will weigh on energy demand there.
Crude oil and solar stocks were hard hit Thursday, headlining the S&P 500’s biggest losers.
Growth Stocks Hit Resistance
Tesla stock skidded 6.9% to 653.16. It’s been hitting resistance around the 21-day exponential moving average, with the 50-day line significantly above that. On Wednesday, TSLA stock reversed higher, closing just above its 21-day.
Apple stock slid 3.4% to 120.53, also retreating from its 21-day line. On Tuesday, Apple popped above the 21-day and a steep downtrend. PYPL stock, TWLO, PINS and Nvidia fell back from their 21-day and 50-day lines, losing 5%-9% on Thursday.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slumped 2.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 3.7%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 3.5%. The VanEck Vectors Semiconductor ETF (SMH) fell 4%%, with Nvidia stock a major component.
Reflecting more-speculative story stocks, ARK Innovation ETF tumbled 5.8% and ARK Genomics ETF 4.7%. Like many of the speculative growth names that they own, both ARK ETFs fell back from their 21-day lines. Tesla stock is the largest holding across ARK Investments’ ETFs.
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Stock Market Rally Analysis
On Wednesday, the Nasdaq rebounded from intraday lows as Treasury yields pared gains following the Federal Reserve meeting and Fed chief Jerome Powell’s comments.
But Thursday’s spike in the 10-year Treasury yield sent the Nasdaq tumbling below the 50-day line after three days above the key level. The Nasdaq and growth stocks may be able to handle rising Treasury yields, but not spiking yields. Much like brave Sir Robin in Monty Python’s “Holy Grail,” the Nasdaq is quick to yell “run away” and flee at the first sign of trouble.
The Nasdaq closed below its 21-day line for the first time since March 10 and undercut Wednesday’s intraday lows.
Bottom line: The composite essentially is still in a correction. As long as the Nasdaq is below its 50-day line — as well as resistance near last week’s highs — investors should largely steer clear of tech and growth names. That’s especially true of those stuck below key levels, such as Tesla, Apple and Twilio, with many others in far-worse shape.
But even techs that have been breaking out or flashing early entries — such as Applied Materials (AMAT), MKS Instruments (MSKI) and some other chip names — are at the mercy of the Nasdaq.
If you have some long-term holds or pilot positions in a couple of techs, that’s OK, but right now investors should focus on what’s working.
Dow Jones Looks Strong, For Now
Out of techs, the stock market rally is still looking healthy. The Dow Jones hit a fresh high intraday, with the S&P 500 and Russell 2000 not far off. Real economy/economy reopening plays continue to break out, extend gains or at least hold up.
If the Nasdaq starts to head toward its recent lows, the broader market is likely to weaken, as the Dow did in early March. Indeed, on Thursday, the Nasdaq’s slide, along with energy prices, triggered sharp losses in the S&P 500 and ultimately dragged down the Dow Jones.
So don’t feel like you have to be heavily invested. Don’t go chasing stocks that are extended from buy zones.
As always, stay flexible and engaged.
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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