Dow Jones futures were little changed overnight, as were S&P 500 and Nasdaq futures. Midterm election results come in as Tesla CEO Elon Musk sold more TSLA stock.
The stock market rally accelerated Tuesday morning, fueled by falling Treasury yields and a falling dollar. Major indices pared large gains as Bitcoin and other cryptocurrencies plunged in a surprise takeover deal from Binance-FTX. But stocks rebounded somewhat at the close.
Bitcoin-related actions such as cryptocurrency exchange Coinbase (COIN), trading app Robinhood Markets (HOOD), cryptocurrency custodian Silvergate Capital (SI) and Bitcoin miner digital marathon (MARA) sold.
For the future, the consumer price index occupies an important place.
waltz disney (SAY), western oil (OXY), You’re here (TSLA)rival Lucid Engines (LCID) and Network Technologies (ARRY) reported Tuesday night.
Disney shares fell sharply overnight as earnings fell short, although Disney+ subscriber growth was strong. OXY stock, more than 20% owned by Warren Buffett’s Berkshire Hathaway (BRKB), fell slightly on mixed earnings. LCID stock plunged amid weak third-quarter results and falling Lucid Air bookings. ARRY stock widened on strong earnings and guidance.
In other news, Metaplatforms (META) will begin laying off Wednesday morning, according to multiple reports.
Tesla CEO Elon Musk revealed he sold 19.5 million shares for $3.95 billion on November 4, 7 and 8. This could be to help pay for his recent Twitter deal, although Musk said in early August that stock sales were the last he would need then. .
Musk’s latest stock sales likely contributed to the recent drop in Tesla stock. Rising Chinese subsidies and concerns over Elon Musk’s reign over Twitter could also impact TSLA’s stock.
Tesla stock fell 2.9% to 191.30 in Tuesday’s session after falling to 186.75 intraday, just above May 2021 lows.
The results of the midterm elections fall on Tuesday evening. Republicans are a virtual lock to retake the House of Representatives, but that’s not shaping up to be a massive GOP wave. The Senate is up for grabs, but final results in key races could be days away.
Either way, President Joe Biden and the Democrats will no longer have full control of the White House and Congress. Financial markets tend to fare better with the deadlock in Washington. Stocks also traditionally do well in the third year of a presidential term.
So a divided Congress could be positive for Wall Street and could be good news for defense companies, private prisons and drugmakers. Again, the markets may have already priced it in.
Dow Jones Futures Today
Dow Jones futures were little changed from fair value, with DIS stock weighing on the blue chips. S&P 500 futures climbed 0.1% and Nasdaq 100 futures rose 0.3%.
Consumer inflation in China rose less than expected. Wholesale prices have fallen.
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 rose higher on Tuesday morning, but then rallied again in the afternoon as Bitcoin’s crash spread to equities. The S&P 500 and Nasdaq briefly turned negative before recovering.
The Dow Jones Industrial Average rose 1% in trading on Tuesday. The S&P 500 index climbed 0.6%. The Nasdaq composite advanced 0.5%. The Russell 2000 Small Cap gained.
Tesla stock fell near its May 2021 intraday lows.
Apple and Microsoft shares edged up 0.4%, Google shares climbed 0.5% and Amazon fell 0.5%. All are up this week but after tumbling last week.
The 10-year Treasury yield fell 9 basis points to 4.13%.
The US dollar fell significantly for a third straight day, hitting its lowest levels since late September.
U.S. crude oil prices fell 3.1% to $88.91 a barrel. Natural gas futures fell 11.6%, continuing their huge daily swings.
Despite dollar weakness, Bitcoin plunged as the world’s No.1 cryptocurrency exchange, Binance, agreed to buy rival FTX, which faced a liquidity crunch. It is doubtful that the Binance-FTX deal will materialize, with FTX facing huge drawdowns over the past couple of days. Just a few months ago, FTX and its founder Sam Bankman-Fried looked like potential saviors for other struggling crypto companies.
Bitcoin crashed to $17,484.20, the lowest since November 2020 and is currently trading around $18,500. The pioneering digital currency crossed the $20,000 mark on Monday night. Ethereum, Dogecoin and other cryptocurrencies also saw similar, if not greater, losses.
The FTX token crashed 80% on Tuesday after massive losses over the past few days and weeks.
COIN stock plunged 10.8% to a four-month low. Binance buying FTX could forge a major new rival for Coinbase, also reeling from Bitcoin’s woes and concerns over crypto-related businesses.
HOOD stock, which includes Bankman-Fried as an investor, plunged 19%. MARA shares fell 5.3% to their lowest level since July. After the close, Marathon Digital reported a bigger-than-expected loss while revenue plunged 75%.
SI stock plunged 23% to the lowest since December 2020.
Tesla still owns Bitcoin, while Elon Musk has owned Dogecoin for some time.
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Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.3%, with MSFT stock a key contributor. ETF VanEck Vectors Semiconductor (SMH) jumped 2.2%.
The SPDR S&P Metals & Mining ETF (XME) rebounded 1.9%. ETF Energy Select SPDR (XLE) edged up 0.1%. The SPDR health care sector fund (XLV) rose 0.5%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) edged down 0.4% and ARK Genomics ETF (ARKG) rose 1.4%. Tesla stock remains one of Ark Invest’s top ETF stocks.
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Market rally analysis
The stock market rally appeared heavily damaged last Thursday following hawkish comments from Fed chief Jerome Powell. But it is bouncing back over the past three sessions, even with Bitcoin’s woes.
The Dow Jones broke through last week’s high after reclaiming its 200-day line on Monday.
The S&P 500 rose a little above its 50-day line, although it is still below its Nov. 1 short-term high.
The Nasdaq, weighed down by Tesla and tech issues, hit resistance at its 21-day moving average. It is still below its 50 day and far from its 200 day lines.
But the Direxion Nasdaq-100 Equal Weighted ETF (QQQE) rose just over 1% to break above its 50-day line.
Falling Treasury yields helped lift stocks on Tuesday, while the falling dollar has been a key driver over the past three sessions.
The midterm election results could spur market moves, but Thursday’s CPI inflation report could be key. Subdued CPI reading could fuel hopes of slower Fed rate hike and lower peak rate. But another high inflation figure could trigger strong selling in stocks and bonds.
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There weren’t many new buying opportunities on Tuesday.
GlobalFoundries (GFS) jumped above a trendline and a handle just too low after earnings.
Albemarle (ALB) cleared an early but quick entry and reached its official buy point, closing just below this key level. However, ALB stock is well above its 50-day line after a huge move off the November 3 intraday lows.
Crocodile (CROX) briefly picked up a buy point as UnitedHealth (UNH) closed in the buy range.
Several LNG stocks are close to buying points.
Technological weakness is always a concern. Chip stocks are bouncing back, with the SMH ETF convincingly above the 50-day line. Megacap technologies such as Apple (AAPL) are trying to rebound, but after huge sales. The same goes for cloud software.
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What to do now
The stock market rally is showing resilience after last week’s steep losses, with the Dow and S&P 500 recovering to key levels. Investors may still want to be cautious, with the CPI inflation report looming. Also, there aren’t a lot of actions that can currently be exploited, although many are in the process of being set up.
Investors must be ready to act, staying engaged and building their watchlists. Growth stocks are still generally overlooked, so be sure to cast a wide net to find stocks and sectors that are emerging leaders.
Be sure to be aware of the winnings, which remain active. Some stocks were big gainers in earnings, while others rebounded powerfully after initially falling. But there were also some high-profile sell-offs, as Disney and Lucid’s stocks showed overnight.
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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