Dow Jones futures fell slightly Tuesday night along with the S&P 500 futures and Nasdaq futures Square (SQ) heading key earnings and Tesla (TSLA) among several EV games that are active overnight.
It was a wild day for the stock market rally, at least for Nasdaq and especially speculative growth names like Tesla stock and China EV rival Nio (NIO). Nasdaq fell more than 3% during the day, but came back for a modest loss. The Bitcoin price threw itself into another straight session.
Square earnings topped impressions, aided by its Bitcoin operations. But net sales and purchase volume lacked estimates. Latest IPOs Upwork (UPWK) and PubMatic (PUBM) also topped the views.
The square stock fell 5% too late. The SQ stock retreated 4.3% on Tuesday after returning from its 50-day line. Upwork shares rose 19% and PubMatic jumped 9.5% overnight after both rose sharply Tuesday from key levels today. UPWK came back from its 50-day line to finish the message higher. PUBM closed for modest losses, but after plunging below a buy point, making it very difficult to hold.
These stocks are showing strength, passing buying points in the midst of turmoil in the market
Nasdaq had looked like it was flashing a vertical breach during the day as it tumbled quickly through its 50-day line. But the strong return to modest losses leaves the market direction unclear. The Dow Jones and S&P 500 wiped out relatively modest losses to close just over break-even. The stock market rally could simply take place in a sector turn, with rising yields and commodity prices spurring a shift to mining, agriculture and financial stocks.
Dow Jones components Larva (CAT), Disney (DIS) and JPMorgan Chase (JPM) advanced, all expanded from recent breakouts. Microsoft (MSFT) rose lower, but returned from its 10-week line and closed above its 232.96 buying point.
The Bitcoin price fell to below $ 45,000 on Tuesday after peaking at $ 58,000 on Sunday. The cryptocurrency recovered to over $ 48,000 overnight. Bitcoin is well above where it was before the market opened on February 8, when Tesla revealed that it had bought $ 1.5 billion dollars of the cryptocurrency.
Tesla rebounds, Workhorse Crashes
Tesla shares fell 2% to 698.84 on Tuesday, but after falling as low as 619. Shares are still down nearly 11% so far this week and 11% below its 10-week line. The TSLA stock rose modestly overnight when ARK Invest’s Cathie Wood said ARK bought “a lot” on Tuesday. It follows a large sheet purchase of Tesla shares on Monday and Wood spoke about the company last week.
Tesla is ARK’s largest holding across its ETFs and is in many ways a marker of the type of speculative growth game that Cathie Wood focuses on.
The nine-share fell 3.1% to 49.11 after slipping as low as 41.66. Shares fell 7.8% Monday and stabbed through its 50-day line. The nine stock edged higher overnight. Nine earnings fall due on March 1st.
But some EV shares performed much worse. Electric van manufacturer Workhorse group (WKHS) lost a major USPS vehicle contract to Oshkosh Corp. (OSH) WKHS inventory cratered 47% and then fell sharply overnight. Oshkosh shares rose 6.1% on Tuesday and then jumped into expanded trading.
Churchill Capital (CCIV) crashed 38%. Luxury EV startup Lucid Motors confirmed it will be announced in a SPAC merger with Churchill Capital late on Monday. CCIV shares had risen 468% since January 8, when Lucid SPAC rumors grew. Churchill Capital rose modestly overnight.
Tesla stock is on the IBD Leaderboard, but cut from a half to a quarter position on Tuesday. Microsoft shares are on Leaderboard and IBD Long-Term Leaders. Disney Warehouse and Caterpillar are on SwingTrader.
Dow Jones Futures today
Dow Jones futures fell 0.15% relative to fair value. The S&P 500 futures fell 0.2% and the Nasdaq 100 futures retreated 0.3%.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze action stocks at the stock market rally on IBD Live.
News about coronavirus
Coronavirus cases worldwide reached 112.62 million. Covid-19 deaths peaked at 2.49 million.
Coronavirus cases in the United States have affected 28.89 million with deaths over 514,000.
Stock market rally Tuesday
The stock market rally started on Tuesday with Nasdaq’s leading sharp losses. But the major indices paired losses while Fed chief Jerome Powell spoke. Powell said there is a link between Fed liquidity and asset prices. But he reaffirmed his commitment to the current aggressive monetary policy and stressed that strong job growth is a primary goal. Powell also said the Fed is looking closely at whether to issue a “digital dollar,” but not significant technical and political issues.
The Dow Jones Industrial Average was a fraction higher in Tuesday’s trading session, just below record highs. The S&P 500 index rose 0.1%. The Nasdaq composite fell 0.5%.
Microsoft stock fell as low as 228.73 intraday and tested the 10-week line, but not with wild dips like many stocks on Tuesday, including Square. Equities also did not underperform early records around 227-228. At the close, the MSFT stock recovered to a loss of 0.5% to 233.27 above the official 232.96 buy point.
Growth stocks generally lost ground, even with large afternoon rebounds.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell by 2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 2.1%. IShares Expanded Tech-Software Sector ETF (IGV) retreated 1.1%, with MSFT stock being the top component. VanEck Vectors Semiconductor ETF (SMH) slipped 1%.
The Ark Innovative ETF, which reflects more speculative history holdings, fell 3.3% and the Ark Genomics ETF 3.05%.
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Stock market analysis
The Nasdaq tumbled intraday to just above the January 29 low, and the level of 13,000 then moved up and down before almost returning to break-even.
We will have to see how the market reacts in the next few days to put Tuesday’s action into perspective.
Maybe Tuesday marks the start of a recovery for Nasdaq and big winners like Tesla and the Nio stock. But sometimes a stock market rally will find support and then break it. That was what happened in the early September sale, with the Nasdaq reducing losses on day two in a recall before throwing on day three to close below its 50-day line.
As the Dow Jones holds up as equities thrive, in many ways it looks like a sharp sector rotation within a market rally.
What should I do now
Investors need to be somewhat defensive, especially when it comes to high-value growth stocks. Nasdaq has been lower over the last many sessions. Meanwhile, many growth stocks have damage that appears after the last few days. Even before the recent withdrawal, there were many good buying opportunities.
One reason to take partial profits when the Nasdaq expanded in late January to early February is to make withdrawals easier to handle. Selling expanded stocks in strength can help you have a core position through withdrawals. If you sold some winners at Tuesday’s low level, those early partial profits raised at least the average selling price.
Do not let a stock fall more than 7% -8% from your purchase price. Yes, if you were to sell to Tuesday’s low, you may regret it, at least for now, but the point is to preserve your capital, not hope for a recovery.
In the meantime, be sure to keep working on watch lists. Recent sessions have shown the value of diversifying leadership. Having a few names like Disney would have made the last few days less painful.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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