Dow Jones futures fell overnight along with S&P 500 futures and Nasdaq futures. The stock market closed mixed on Tuesday, but tech companies led a strong recovery, even as recession fears pushed government bond yields and commodity prices down.
The Dow Jones closed lower but far from lows, while the S&P 500 posted a small gain. The Nasdaq made strong gains, with aggressive growth names such as Roblox †RBLX) and data dog †DDOG) bounce back above their 50-day lines. Apple †AAPL† Amazon.com †AMZN) and Google parent Alphabet †GOOGL) recovered an important short-term level.
Meanwhile, the price of crude oil plunged below $100 a barrel. Gasoline, copper and wheat futures fell sharply, causing significant losses in recent weeks.
The Treasury yield curve has inverted between the two-year and 10-year bonds, a notable recession signal. Markets continue to see aggressive Federal Reserve tightening in its next two meetings, but also expect interest rates to end this year.
NOC stock and UnitedHealth are on IBD standings† DLTR stock has run out SwingTrader† Google stock is enabled IBD Long-Term Leaders† UNH stock is on the IBD 50† Privia Health †PRVA) was from Tuesday IBD Stock of the Day†
The video embedded in this article looked at Tuesday’s interesting market action and analyzed the stocks Dollar Tree, Halozyme Therapeutics and DDOG.
Dow Jones Futures Today
Dow Jones futures fell 0.2% from fair value, fluctuating between small gains and losses. S&P 500 futures fell 0.15% and Nasdaq 100 futures lost 0.1%.
US crude oil futures were up more than 1%, back above $100 a barrel.
Ten-year government bond yields rose by 1 basis point to 2.82%. Two-year yields rose 1 basis point to 2.83%, with the two-to-10 yield curve slightly inverted.
stock market rally
The stock rally sold off Tuesday morning, but recovered to end mixed, at session highs.
The Dow Jones Industrial Average fell 0.4% on Tuesday stock market† The S&P 500 index climbed 0.2%. The Nasdaq composite rose 1.75%. The small-cap Russell 2000 bounced 0.8%.
Apple shares, a Dow Jones, S&P 500 and Nasdaq giant, rose 1.9%, above its 21-day moving average. Google shares were up 4.2% and Amazon 3.6%, which also recaptured the 21-day line and approached their long-running 50-day lines. All three mega-cap technologies are far from workable.
The fear of a recession is keeping the financial markets busy, especially commodities and bonds.
The price of crude oil in the US fell 8.2% to $99.50 a barrel, after already pulling significantly from the peaks of early June. Gasoline futures plunged 9% and continued a rapid decline. Prices at the pump have fallen for 20 days in a row, a trend that should continue.
Copper futures plunged more than 4%, marking a long sell-off. Crop futures are falling sharply.
The yield on 10-year Treasuries decreased by 16 basis points to 2.81%. The two-year yield fell by 2 basis points to 2.82%, so that the yield curve is now slightly inverted.
Ed Yardeni of Yardeni Research has raised his chances of a recession, albeit superficial and short-lived, from 45% to 55%.
the latest set of leading economic indicators suggests weaker convergent indicators are on the way. As a result, we are increasing our probability of a superficial, short-term recession in the US economy to 55% (from 45%). That now makes a recession our base case from which we derive our earnings and stock market forecasts. †
Despite mounting recession risks – and the prospect of significantly lower inflation in the coming months – the Fed is still expected to raise interest rates by 75 basis points in its late July meeting and 50 basis points in its September meetings. However, the markets only saw quarter-point gains in the last two Fed meetings of the year and are now seeing no movement into February 2023.
Below the best ETFsthe Innovator IBD 50 ETF (FFTY) rose 0.15%, while the Innovator IBD Breakout Opportunities ETF (BOLT) 1 cent higher. The iShares Expanded Tech Software Sector ETF (IGV) won 2.6%. The VanEck Vectors Semiconductor ETF (SMH) increased by 0.6%.
SPDR S&P Metals & Mining ETF (XME) plunged 4.9% and the Global X US Infrastructure Development ETF (PAVE) slipped 1.1%. US Global Jets ETF (JETS) rose 0.2%. SPDR S&P Homebuilders ETF (XHB) won 2.5%. The Energy Select SPDR ETF (XLE) tumbled 4% and the Financial Select SPDR ETF (XLF) fell 0.3%. The Health Care Select Sector SPDR Fund (XLV) fell 0.6%, with UNH shares a major holding.
Due to more speculative story stocks, ARK Innovation ETF (ARKK) jumped 9.1% above the 50-day line. ARK Genomics ETF (ARKG), which closed just above the 50-day mark on Friday, rose 8.2% to a two-month high. Ark Invest does own some RBLX stock in its ETFs.
Stocks to watch
Dollar Tree shares were up 5.5% to 164.84 in above-average volume, rebounding from the 50-day line and breaking a trendline from the late April peak, providing an early entry. DLTR stock has a cup-with-handle base with an official buy point from 166.45. The relative strength line is already at a new high, reflecting Dollar Tree’s outperformance against the S&P 500 index. arch rival Dollar General †DG) is its own purchase range cup-with-handle base†
Privia Health stock opened lower and then bounced off the 21-day line to move higher. PRVA stock rose 7.4% to 31.04 in massive volume, briefly reaching an 11-month high of 33.88. The self-described Uber from doctor’s offices has now extended slightly from a 29.07″ cup base buy point. But investors might view the recent break above the buy point as a high grab with a buy point of 30.25. That high handle can be seen as a normal handle for a longer consolidation dating back to last November.
Halozyme stocks gained 4.2% to 46.33, rebounded from the 50-day line and broke a short but very steep downtrend. That could provide early entry into HALO stocks, which are on a flat base at 48.68 a week to buy. MarketSmith Chart† That flat base could be seen as a handle in a base dating back to February 2021. The RS line for Halozyme stock is at a new high.
Meanwhile, Northrop stock fell 4.5% to 464.36, though it recovered from below the 50-day line intraday. Still, NOC stock nearly destroyed last week’s 4.9% gain that sparked buy signals.
UnitedHealth stock fell 2.35% to 505.24, but closed in the upper half of its range as it found support on its 50-day line. While UNH stock is below the double bottom 507.35 buy point, the stock is not flashing sell signals yet. UnitedHealth could now work on a handle.
Market Rally Analysis
Major indices fell quickly after Tuesday’s open, but recovered to varying degrees.
The Dow Jones closed lower, but well behind its worst level. Shortly before the closing bell, the S&P 500 turned positive. The Nasdaq roared back for solid gains, with Apple shares rising while DDOG shares, Roblox and Ark shares rose sharply, with tumbling Treasury yields likely a big driver.
Datadog rose 7.25% to above the 50-day line. Roblox shares jumped 14% in heavy volume to the best level since late April. But those stocks are well informed.
A stock market rally is still in effect, although it has been under pressure over the past week.
Shares of Apple, Google and Amazon recovered their 21-day lines on Tuesday. All major indices are still below it, although the Nasdaq is close. The 50-day line, early June highs, and many other resistance points are above that short-term level.
In addition to the risks of another downward move in the 2022 bear market, apparently good stocks will flash buy signals and then quickly fall again.
Shares of Northrop and UNH fall into that camp, although they may not be ready. It was certainly not a good day for defense makers and health insurers.
Despite the tough day for health insurers, the medical sector remains the leading sector.
Ideally, the stock market would move sideways for an extended period of time. That would allow more stocks to set up bases, while giving investors more clarity about the Federal Reserve and the economy. But the market is going to do what it is going to do.
What to do now
Tuesday’s stock market action was relatively positive, given fears of a recession raging in the bond and commodities pits. But the market rally is under pressure. There are few good stocks to buy or invest in, and useful stocks are prone to sudden reversals.
For example, investors buying a biotech should keep the position small and be willing to make quick profits and keep any losses small.
When a sustained market rally arrives, investors have plenty of opportunities to ramp up exposure and let winners run. For now, the focus should be on preparing for that next bull market.
Read The big picture every day to stay in sync with market direction and leading stocks and sectors.
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