Dow Jones futures were barely changed early Wednesday, along with futures for the S&P 500 and futures for the Nasdaq. dow component johnson and johnson (JNJ) rose late, having proposed paying $8.9 billion to settle claims that talc products caused cancer.
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The stock market rally lost ground on Tuesday as recession fears mounted. Job openings fell to a 21-month low, much lower than expected. While the data further lowers the odds of a Fed rate hike, it raises concerns that the US economy is heading towards a recession.
The major indices posted modest losses, without showing much damage. A lot of that reflects megacaps. Apple (AAPL), Microsoft (MSFT) barely moved while metaplatforms (GOAL) bordered higher. So did the parents of Google Alphabet (Google), working towards a point of purchase. tesla (TSLA) fell slightly, extending Monday’s decline after first-quarter deliveries. However, TSLA had key support.
Overall growth held up reasonably well, with some software vendors like service now (NOW) making strong movements. On the downside, AI shares tumbled on the latest move from a short seller vs. C3.ai (AI). C3 kept sliding late.
The overall breadth of the market was weak. Many groups, including steel producers, base metal miners, building materials companies and heavy construction manufacturers, suffered heavy losses. about economic fears.
Banks also fell, especially regional names, but also giants like JPMorgan Chase (JPM). If nothing else, the recent banking problems will likely mean less lending, especially for commercial real estate, which will hit the economy.
JPMorgan CEO Jamie Dimon warned in his annual letter to shareholders on Tuesday that the banking crisis is “not over yet” with “repercussions” for years to come.
Gold and gold stocks had a good day as recession fears and a weak dollar sent investors running for safe haven.
ServiceNow and META stocks are on SwingTrader. Microsoft and Google shares are in IBD Long-Term Leaders.
The video embedded in this article discussed Tuesday’s market action and looked at NOW, Atkore, and C3.ai stocks.
J&J Talc Settlement
After the shutdown, Johnson & Johnson offered to pay $8.9 billion to settle long-standing claims that baby energy and other talc products caused cancer. J&J’s subsidiary, LTL Management, has again filed for bankruptcy.
JNJ shares rose 3% in latest trading. Shares rose just over 1% for the third straight session on Tuesday, recapturing the 50-day line. But JNJ’s stock is still not far from a two-year low.
Dow Jones Futures Today
Dow Jones futures were little changed compared to fair value, even with JNJ shares offering a small boost. S&P 500 futures were flat and Nasdaq 100 futures rose.
The 10-year Treasury yield rose slightly to 3.35%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading at the next regular stock market session.
Join IBD experts as they discuss actionable actions in the stock market rally on IBD Live
stock rally
The stock market rally started little changed on Tuesday but receded, with major indices dipping modestly but masking deeper weakness.
As of 10 a.m. ET, the JOLTS survey showed job openings fell to 9.9 million in February from a downwardly revised 10.6 million in January. That’s the lowest in 21 months and well below views. That’s something the markets, and Fed chief Jerome Powell, have wanted to see for months. But the indices fell rapidly as attention turned to recession fears.
The Dow Jones Industrial Average fell 0.6% in trading on Tuesday, along with the S&P 500 Index. The Nasdaq Composite fell 0.5. The small-cap Russell 2000, exposed to regional banks, shed 1.8%.
US crude oil prices rose 0.4% to $80.71 a barrel, below morning highs, but are up nearly 11% over the past four sessions.
The 10-year Treasury yield fell more than 9 basis points to 3.335%, the lowest closing in nearly 7 months. The two-year yield fell 15 basis points to 3.83%.
The odds of a May rate hike fell to 40% on Tuesday from 57% on Monday. The March jobs report, due to be released on Friday with US markets closed, will likely change rate hike expectations again.
The US dollar sank to its lowest level since February 2.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (ffty) fell 1.5%. The iShares Expanded Technology Software Sector ETF (IGV) just came up, with MSFT and NOW stocking large components. The VanEck Vector Semiconductor ETF (HMS) sank 1.5%.
Mirroring more speculative historical stocks, the ARK Innovation ETF (ARKK) fell 0.5% and ARK Genomics ETF (ARKG) fell 0.4%. TSLA stocks are the number one position among Ark Invest ETFs.
SPDR S&P Metals and Mining ETF (XME) slipped 2.5%% and the Global X US Infrastructure Development ETF (TO PAVE) fell 3.75%. US Global Jets ETF (JETS) decreased by 0.7%. SPDR S&P Home Builders ETF (XHB) yielded 2.7%. The Energy Select SPDR ETF (XLE) fell 1.8% and the SPDR Fund of the Selected Health Care Sector (XLV) scored higher.
The SPDR Financial Select ETF (XLF) decreased by 0.9%. Shares of JPM, one of the top holdings, fell 1.3%. The SPDR S&P Regional Banking ETF (KRE) plunged 2.2%, not far from recent multi-year lows.
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AI Actions
AI shares fell 26% to 24.95 on massive volume, erasing much of a recent breakthrough for the highly volatile name.
Kerrisdale Capital Management, which had previously said it was shorting AI shares, sent a letter to C3.ai’s auditor, Deloitte, accusing the AI ​​company of “using accounting methods that have the effect of inflating its balance sheet.” results”.
C3.ai, in a response, said that the “Kerrisdale Letter appears to be a highly creative and transparent attempt by a self-professed short seller to short the stock.”
AI shares fell 6% in overnight trading.
Mega-Cap Stocks
Apple shares fell 0.3% and Microsoft finished just below breakeven. META shares rose 0.8%. They are all extended.
Shares of Google rose 0.3% to 104.72, near a cup-handle buy point of 106.69, according to MarketSmith analysis.
Tesla shares fell 1.1% to 192.58 but remained above their 21-day and 50-day lines. Shares fell 6.1% on Monday, back below a buy point of 200.76, as analysts fear more price cuts will be needed to boost demand. On Tuesday, Tesla cut prices in Australia.
Market recovery analysis
The stock market rally pulled back on Tuesday, but it’s not clear if it was the start of something serious or not a big deal.
After waiting for months for weaker economic data to put an end to the Fed’s rate hikes, investors on Tuesday feared a recession more than the Fed.
The major indices posted modest losses overall, looking normal or even healthy.
The Nasdaq traded within the trading range on Friday for the second session in a row. The S&P 500 and the Dow Jones fell after four days of winning streaks.
Apple shares and megacaps did not budge. The chips were rejected but do not appear damaged.
Software shares were leading on Tuesday, with ServiceNow rising 2.5% to 476.05 getting an update from analysts, moving towards a consolidation buy point of 494.72. NOW shares were actionable on Friday from a strong move above its 50-day line and breaking a downtrend.
But the losers beat the winners on Tuesday more than 2-1 on the Nasdaq and the New York Stock Exchange. And many of the losers got hit, especially in the mining, construction, or manufacturing fields. Nucor (NEW), red river (River), Atkore (ATKR) and Caterpillar (CAT) fell, along with the shares in their groups.
Bank stocks, especially regional plays, are still struggling.
Market breadth had improved over the past week, after several weeks of narrow leadership. So Tuesday’s action is worth watching. But it was only one day.
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What to do now
The market rally was set for a pullback and it did. Most of the big losers weren’t leaders, while growth names generally did well.
So investors need not overreact. But the action in many groups and individual actions shows the importance of being agile and controlled.
This is not a crazy bull market, so investors should enter the uptrend gradually and avoid buying extended stocks. They should also consider continuing to take partial gains quickly, especially with highly volatile names like AI stocks. Don’t let winners become losers.
This is definitely a time to engage, paying close attention to major indices, major stocks, and your own portfolio. Keep working on your watch lists.
Read The Big Picture every day to stay in sync with market direction and major stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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