Dow Jones futures were little changed overnight, as were S&P 500 and Nasdaq futures. The stock market closed mixed on Tuesday, but tech led a strong rally even as recession fears sent Treasury yields and commodity prices tumbling.
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The Dow Jones closed lower, but far from the lows, while the S&P 500 made a small gain. The Nasdaq has seen strong growth, with aggressive growth names such as Roblox (RBLX) and Datadog (DDOG) bouncing above their 50-day lines. Apple (AAPL), Amazon.co.uk (AMZN) and parent company of Google Alphabet (GOOGL) recovered a key short-term level.
Meanwhile, crude oil prices dipped below $100 a barrel. Gasoline, copper and wheat futures fell sharply, extending deep losses in recent weeks.
The Treasury yield curve inverted between two-year and 10-year bonds, a notable signal of recession. Markets still see aggressive tightening from the Federal Reserve in the next couple of meetings, but also expect rate hikes to end this year.
dollar tree (DLTR), Therapeutic Halozyme (HALO) and PRVA stocks showed bullish action on Tuesday. Meanwhile, Northrop Grumman (NOC) and UnitedHealth (UNH) fell but found key support.
The NOC stock and UnitedHealth are on the IBD ranking. DLTR stock is on SwingTrader. Google stock is on IBD Long-Term Leaders. UNH stock is on IBD 50. Privia Health (PRVA) was Tuesday’s IBD stock of the day.
The video embedded in this article looked at interesting market action from Tuesday and analyzed the stocks of Dollar Tree, Halozyme Therapeutics and DDOG.
Dow Jones Futures Today
Dow Jones futures rose 0.2% from fair value, swinging between slim gains and losses. S&P 500 futures climbed 0.3% and Nasdaq 100 futures advanced 0.4%.
U.S. crude oil futures rose nearly 2%, back above $100 a barrel.
The 10-year Treasury yield edged up 2 basis points to 2.83%. The two-year yield rose 1 basis point to 2.83%, with the two-to-10 yield curve now flat.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally sold off on Tuesday morning but rebounded to finish mixed at session highs.
The Dow Jones Industrial Average fell 0.4% on Tuesday. The S&P 500 index climbed 0.2%. The Nasdaq composite jumped 1.75%. The small-cap Russell 2000 rebounded 0.8%.
Apple stock, a giant in the Dow Jones, S&P 500 and Nasdaq, rose 1.9%, above its 21-day moving average. Shares of Google jumped 4.2% and Amazon 3.6%, also retracing the 21-day line and closing in on their long 50-day lines. The three megacap technologies are far from exploitable.
Recession fears are rocking financial markets, especially commodities and bonds.
U.S. crude oil prices fell 8.2% to $99.50 a barrel after already retreating significantly from highs in early June. Gasoline futures plunged 9%, continuing a rapid decline. Pump prices have fallen for 20 straight days, a trend that is expected to continue.
Copper futures fell more than 4%, extending a long selloff. Future crop prices are down sharply.
The 10-year Treasury yield plunged 16 basis points to 2.81%. The two-year yield fell 2 basis points to 2.82%, meaning the yield curve is now slightly inverted.
Yardeni Research’s Ed Yardeni raised his odds of a recession, albeit shallow and short-lived, to 55% from 45%.
the latest batch of leading economic indicators suggest weaker coincident indicators ahead. As a result, we are increasing our odds of a shallow, short-lived recession in the US economy to 55% (from 45%). This now makes a recession our baseline scenario from which we derive our earnings and stock market forecasts. …
Despite rising recession risks – and the prospect of significantly lower inflation in the months ahead – the Fed is still expected to raise rates by 75 basis points at the end-July meeting and 50 basis points at the September meetings. However, markets only see quarter-point rises in the last two Fed meetings of the year, and now see no movement in February 2023.
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Among the top ETFs, the Innovator IBD 50 ETF (FFTY) edged up 0.15%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 1 cent. The iShares Expanded Tech-Software Sector ETF (IGV) gained 2.6%. ETF VanEck Vectors Semiconductor (SMH) rose 0.6%.
The SPDR S&P Metals & Mining ETF (XME) plunged 4.9% and the Global X US Infrastructure Development ETF (PAVE) fell 1.1%. The US Global Jets ETF (JETS) gained 0.2%. The SPDR S&P Homebuilders ETF (XHB) gained 2.5%. ETF Energy Select SPDR (XLE) fell 4% and ETF Financial Select SPDR (XLF) fell 0.3%. The SPDR healthcare sector fund (XLV) fell 0.6%, with UNH shares a major holding.
Reflecting more speculative history stocks, ARK Innovation ETF (ARKK) jumped 9.1%, above its 50-day line. ARK Genomics ETF (ARKG), which closed just above its 50-day mark on Friday, jumped 8.2% to a two-month high. Ark Invest owns RBLX shares in its ETFs.
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Stocks to Watch
Dollar Tree stock rose 5.5% to 164.84 in above-average volume, bouncing off the 50-day line and breaking a trendline from the late-April peak, offering entry anticipated. The DLTR stock has a cup base with handle with an official buy point of 166.45. The relative strength line is already at a new high, reflecting Dollar Tree’s outperformance against the S&P 500 index. Archival General dollar (DG) is a range of purchase from its own cup base with handle.
Shares of Privia Health opened lower, then rebounded from the 21-day line to rise. PRVA stock jumped 7.4% to 31.04 in huge volume, briefly hitting an 11-month high at 33.88. The self-proclaimed Uber of medical practices is now slightly extended from a purchase point of 29.07 cups. But investors might view its recent break above the buy point as a high handle with a buy point of 30.25. This high grip could be considered a regular grip for a longer consolidation dating back to last November.
Halozyme stock gained 4.2% to 46.33, bouncing off its 50-day line and breaking a short but very steep downtrend. This could offer early entry into HALO stock, which has a flat base with a buy point of 48.68 on a MarketSmith weekly chart. This flat base could be considered a handful 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, although it rebounded below the 50-day intraday line. Still, NOC stock nearly wiped out last week’s 4.9% gain that had triggered buy signals.
UnitedHealth stock fell 2.35% to 505.24, but closed in the upper half of its range as it found support at its 50-day line. Although below its basic double bottom buy point of 507.35, UNH stock is not yet showing a sell signal. UnitedHealth might be working on a handful now.
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Market rally analysis
The major indexes fell sharply shortly after Tuesday’s open, but rebounded, to varying degrees.
The Dow Jones closed lower, although far from its worst levels. The S&P 500 turned positive shortly before the closing bell. The Nasdaq roared for solid gains, with Apple stock rising while DDOG stock, Roblox and Ark-like stocks rose sharply, with falling Treasury yields likely a major factor.
Datadog jumped 7.25% above its 50-day line. Roblox stock jumped 14% in big volume to its best level since late April. But these stocks are far from the highs.
A stock market rally is still in effect, although it has been under pressure since last week.
Apple, Google and Amazon stocks recovered their 21-day lines on Tuesday. All major indexes are still below, although the Nasdaq is close. The 50-day line, early June highs, and many other resistance points lie above this short-term level.
Beyond the risks of another leg down in the 2022 bear market, seemingly good stocks will give buy signals and then quickly reverse lower.
Northrop and UNH stocks fall into this camp, although they may not be over. It was certainly not a good day for defense manufacturers and health insurers.
Despite the tough day for health insurers, medical remains the leading sector.
Ideally, the stock market should move sideways for an extended period. This would allow more stocks to set footings, while investors would get more clarity on the Federal Reserve and the economy. But the market will do what it will do.
What to do now
Tuesday’s stock action was relatively positive, given recession fears raging in bond and commodity wells. But the market rally is under pressure. There are few good stocks to buy or create, and exploitable stocks are prone to sudden reversals.
Investors buying, say, a biotech should keep a small position and be prepared to take quick profits and limit losses.
When a sustained market rally sets in, investors will have plenty of opportunities to increase their exposure and let the winners run. For now, the focus should be on preparing for this next bull market.
Read The Big Picture every day to stay in tune 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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These discounters are close to buying points as the risk of recession increases
