Dow Jones futures rose modestly Tuesday night, along with S&P 500 futures and Nasdaq futures. The stock market rally retreated Tuesday, hitting resistance at a natural area after Monday’s big bounce. But the major indexes also found support at natural levels.
Growth stocks did not have a good day. Zoom Video (ZM) and Target (TGT) suffered nasty reversals following earnings. Tesla (TSLA) rivals Nio (NIO), Xpeng (XPEV) and Li Auto (LI) sold off on news as EV stocks struggle while traditional auto giants General Motors (GM) and Ford (F) make bullish moves.
Meanwhile, Rocket Companies (RKT) lived up to its name. RKT stock shot up 71% to 41.60, hitting a record high as the heavily shorted mortgage lender became the latest social media-driven squeeze play. Rocket stock jumped 10% on Friday following strong earnings, then 11% on Monday. In overnight trade, RKT stock retreated 8%.
Maravai earnings beat views as the company makes a compound for the Pfizer (PFE) and BioNTech (BNTX) coronavirus vaccine. Maravai sees 2021 revenue more than doubling. MRVI stock skyrocketed 20% overnight, signaling a new high after shares closed down 3.9%.
Veeva earnings and revenue topped estimates while the company gave a bullish guidance. VEEV stock rose slightly in extended trade. Shares fell 2.2% on Tuesday, around the 50-day line after a late February breakout failed.
FuboTV reported a wider-than-expected loss but beat on revenue and subscriber growth. FUBO stock fell in overnight trade. Shares rose 8% Tuesday, retaking the 50-day line and breaking a downtrend in a very deep handle in a very deep consolidation. The sports-focused streaming operator is moving to get into the online sports betting game.
Dow Jones Futures Today
Dow Jones futures were 0.2% above fair value. S&P 500 futures rose 0.25%. Nasdaq 100 futures climbed 0.35%.
Coronavirus cases worldwide reached 115.28 million. Covid-19 deaths topped 2.55 million.
Coronavirus cases in the U.S. have hit 29.37 million, with deaths above 529,000.
The White House now says there will be enough coronavirus vaccine available for every American by the end of May. The Biden administration had sought to keep expectations low, even as vaccinations ramped up in January and February and with the Johnson & Johnson (JNJ) one-shot treatment just rolling out.
Stock Market Rally
The stock market rally gave up some of Monday’s strong broad-based gains. The Dow Jones Industrial Average fell 0.5% in Tuesday’s stock market trading. The S&P 500 index retreated 0.9%. The Nasdaq composite slid 1.7%.
Growth stocks took the brunt once again.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.65%, while the Innovator IBD Breakout Opportunities ETF (BOUT) sank 2.3%. The iShares Expanded Tech-Software Sector ETF (IGV) slumped nearly 2%, with Zoom stock a notable component. The VanEck Vectors Semiconductor ETF (SMH) tumbled 3.1%.
Reflecting more-speculative story stocks, Ark Innovation ETF sank 2.3% and Ark Genomics ETF 1.9%.
Zoom Video, Target Reverse
Zoom Video earnings crushed views late Monday while the videoconferencing giant gave bullish revenue guidance. Target earnings also beat amid booming digital sales.
Zoom stock jumped 7.4% Tuesday morning — after rising more than 10% overnight — but reversed lower almost immediately. ZM stock closed down 9% to 372.79, below its 50-day line. It’s not clear why Zoom sold off. But investors need to sell on technicals, not wait for negative fundamental news to be obvious.
Target stock also rose solidly soon after Tuesday’s open, rebounding from its 50-day line and clearing a downtrend, two solid buy signals. But TGT stock reversed lower after Target management said it would spend heavily to beef up fast-growing online operations. Target stock closed down 6.8%, undercutting the low of its flat base.
EV Stocks Lose Charge
Nio stock plunged 13% to 43.29. That’s the lowest close since Dec. 14. Late Monday, Nio reported a wider-than-expected fourth-quarter loss. The premium EV maker had lower February deliveries vs. January amid the Lunar New Year shutdowns and celebrations. Nio also said chip shortages are taking a toll.
Xpeng stock and Li Auto stock tumbled 11% and 8.2%, respectively. Xpeng and Li Auto also reported lower February sales amid New Year celebrations, though deliveries were up triple digits vs. a year earlier.
Tesla stock fell 4.45% to 686.44, hitting resistance near a steep downtrend. Shares jumped 6.4% on Monday. TSLA stock is well below its 50-day line.
GM, Ford Stock Rev Higher
GM stock climbed 3% to 54.11. On Monday, General Motors rose 2.4%, extending Friday’s bounce from the 10-week line but also just getting above its 21-day line, a downward-sloping trend line. Those factors offered an early buying opportunity, but it’s starting to look a little extended now.
Ford stock leapt 4.8% to 12.55, soaring past buy points of 12.14 and 12.25 and clearing last week’s three-year high. The relative strength line for Ford stock is at a 52-week high.
Both GM and Ford are benefiting from strong SUV and truck sales while spending heavily on EVs cheers investors.
Stock Market Analysis
On Monday, the Nasdaq rebounded above its 50-day line, closing just above its 21-day exponential moving average and just below very recent highs. The Dow Jones and S&P 500 jumped from their 50-day lines, clearly retaking their 21-day lines, not far from all-time levels. Monday’s volume was well below average and Friday’s levels, though.
On Tuesday, the Nasdaq fell from its 21-day line. It closed near session lows, giving up more than half of Monday’s 3% gain, right back to its 50-day line. The big-cap Nasdaq 100 did undercut its 50-day. The Dow Jones and S&P 500 index fell modestly, finding support at their 21-day lines.
With major indexes essentially hitting resistance and support at natural areas, it’s hard to make too much of Tuesday’s action. The stock market rally remains under pressure.
What To Do Now
Investors should likely keep exposure relatively low and be cautious about any new buys while the market direction remains in flux.
If the Nasdaq breaks above the 21-day line and short-term highs, then investors might start being more aggressive. If the Nasdaq breaks decisively below last week’s lows, the rally would likely be over, triggering a solidly defensive stance.
Investors should be watching real economy sectors and may want to have at least some of their portfolio dedicated to such stocks. They may lead the next leg of the market rally. Diversifying your leading stocks reduces possibility of a massive portfolio loss from being too concentrated in speculative growth.
However, if the market falls into a correction, most stocks are likely to struggle. Relative strength in a market correction can still be an absolute loser.
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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