The Dow Jones futures were little changed late Tuesday while the S&P 500 and Nasdaq futures fell slightly. The stock market rally attempt had a tough session on Tuesday as government bond yields pulled back. The Dow Jones hit record highs before retreating while the S&P 500 index regained key levels. The Nasdaq rallied strongly but remains well below recent highs.
New outbreaks come from names of the real economy. Specialty chemicals manufacturer Element solutions ((IT I) and auto giant Stellantis ((STLA) broke out while steel makers Ternium ((TX) and car dealers CarMax ((KMX) extended profits within the buy zones. Microsoft ((MSFT) – less of a high octane, high value name than Tesla stock – has a Buy point as well as several key levels.
Biden Stimulus Bill Vote
Parliament on Wednesday will pass the final pass of the $ 1.9 trillion Biden Boom Bill and vote on the Senate version of the legislation. The Senate passed the Biden Business Act on Saturday with a few changes. After the House vote, the bill will be sent to President Joe Biden’s desk for signature.
The stimulus plan provides $ 1,400 in checks for many Americans, extends unemployment benefits, and helps schools and state and local governments. It also includes significant spending increases on poverty reduction programs, ObamaCare, and private pension bailouts. It also offers a little cash for coronavirus vaccinations and tests.
After the huge Biden stimulus package – coming weeks after a second coronavirus bailout – Congress Democrats are considering an even bigger spending package later this year that will focus on infrastructure. This latter package is also likely to include major tax increases.
The looming flash of spending has boosted interest rates and real economy stocks, with rising government bond yields weighing on growth names.
Dow Jones Futures today
Dow Jones futures were even compared to fair value. S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.3%.
The 10-year Treasury yield was 1.54%, rising in extended trading after Tuesday’s decline.
On Wednesday at 8:30 a.m. ET, the Department of Labor will release the consumer price index for February. The CPI hasn’t moved the Dow Jones futures in a while, but financial markets are signaling concerns about future inflation.
Coronavirus cases reached 118.14 million worldwide. Covid-19 deaths topped 2.62 million.
Coronavirus cases in the US have hit 29.80 million people, with deaths over 540,000.
The stock market rally attempt had a generally encouraging session on Tuesday, although the ending wasn’t great. The yield on 10-year government bonds fell by 6 basis points to 1.53% after rising for several days. That was a catalyst for growth stocks.
The Dow Jones Industrial Average rose 0.1% on Tuesday Stock exchange tradingand faded heavily in the final minutes after briefly hitting another record high. The S&P 500 index fell 1.4%, jumping over its 50-day and 21-day lines. The Russell 2000 rose 2.1% above its 21-day mark.
The Nasdaq network rose 3.7% but is still below its 50-day limit.
Tesla stock was up nearly 20%, its largest percentage gain in 13 months, also driven by the general growth rally strong China sales. The Nio share rose 17%. Nvidia was up 8% and Zoom stock was up 10%. But all four stocks are still well below their 50-day limits and take time to mend their damaged charts. Nvidia stock was able to regain its 200-day average while Zoom was still below it.
TSLA shares and Nio rose slightly overnight.
Under the best ETFs, the innovator IBD 50 ETF (FFTY) fell 4.2%, while innovator IBD Breakout Opportunities ETF (STRUGGLE) gained a little more than 5%, both approaching their 50-day lines. The iShares Expanded Tech-Software Sector ETF (IGV) rose 4.4%, with Microsoft leading the way and ZM shares being a notable component. The VanEck Vectors Semiconductor ETF (SMH) jumped 5.9%, with Nvidia being a major stake.
On the back of more speculative stocks, the Ark Innovation ETF rose 7.65% and the Ark Genomics ETF rose 10.4% after both suffered heavy losses in recent days. Tesla stock is # 1 among ARK Investments’ ETFs.
Shares in buy zones
Element Solutions stock was up 7.2% to 20.24, to top 18.50 Cup bottom Buy point in heavy volume, after MarketSmith analysis. The 5% tracking zone for ESI stocks is 20.48. The relative strength line is at a new high and reflects its outperformance against the S&P 500 index. The manufacturer of specialty chemicals – Touching electric vehicles, 5G, AI and smartphones – recently reported earnings per share of 41% for the most recent quarter.
The Stellantis share rose by 2.6% to 17.56 and thus achieved an entry of 17.31 cup base. Stellantis is the result of a recent merger between Fiat Chrysler and the French company Peugeot. The STLA share lagged ford ((F.), General Motors ((GM) and specially Volkswagen ((VWAGY) but profits are recovering solidly and the RS line is at a new high.
The Ternium share rose 3.9% to 35.43 and was thus above a purchase point of 34.09 cup base with high volume. TX stock originally broke out on March 2nd and fell back a few days later. The stock just closed in the buy range on Monday but fell below entry on Tuesday morning before rebounding.
The CarMax share reached 132 in the course of the day, but fell by 0.3% to 128.82 and was still slightly above the purchase point of 128.68. KMX stock rose 4.85% to 129.17 on Monday. The RS line is high. CarMax profits have rallied as the scarcity of new car supplies fuels used car sales and prices. The used car giant also made a big push into digital sales during the pandemic.
The Microsoft share rose by 2.8% to 233.78 and was thus again above a purchase point of 232.96. The Dow Jones tech giant has also recaptured its 50-day and 21-day moving averages, breaking a brief downtrend.
In many ways, the MSFT stock chart has been very similar to the S&P 500 index over the past few weeks. Buying Microsoft stock near the 50-day line makes sense as a long-term leader. Investors could also take a stake here and then fill the position if MSFT stock completes and completes a fresh consolidation from the 246.13 all-time high of 246.13. The RS line for Microsoft stocks has lagged since July and is no longer at its early February level, but has held up better than many tech names over the past few weeks.
Analysis of the stock market rally
It is difficult to analyze the current attempted rally in the equity markets because the main indices are so divided. It is normal for an index to go up or down, but usually they all tend in the same direction. But that hasn’t been the pattern for the past few weeks.
The stock market rallied across the board on Tuesday. The Nasdaq led with a strong rebound as Tesla stock and many speculative growth names rose after several days of decline. The S&P 500 index rose sharply while the Dow Jones made a small profit after a solid intraday gain.
But the Nasdaq and many hot stocks like Nvidia are still below their 50-day limits. The best one-day gains in history are all in the bear markets, so a big day for growth stocks in a correction doesn’t mean much in itself.
Tuesday was the third day of a stock market rally attempt. Especially for the Nasdaq and growth sectors a The following day Confirmation of the new rally is key. A follow-through could come any day now. A strong gain by Nasdaq from these levels could also push the tech-heavy index up to or above its 50-day and 21-day lines.
The Dow Jones is trading right at record highs despite its lackluster finish. Several other stocks in the real economy entered buy zones. To be honest, if the Dow Jones and cyclical sector typified the stock market, IBD would not have declared a correction last week. With the Dow Jones and related sectors at new highs, it’s easy to argue that this important segment of the market is on an uptrend – and has never been corrected.
The S&P 500 index is also looking healthier and is reaching important levels again. So does the Russell 2000.
Work on your stock watch lists, focusing on relative strength. Among other things, pay special attention to stocks that are close to buy points.
Investors might choose to take some small positions in stocks that break out or flash other buy signals. Aside from a few names like Microsoft, these are usually real economy names. For growth stocks, wait for the next day. Even then, many stocks like Nio, Zoom, or Tesla could take weeks or more to create new buying opportunities.
This is an important day for reading The big picture understand the market direction.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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