The Dow Jones futures were stable late Tuesday, as were the S&P 500 futures and the Nasdaq futures. The stock market rally was technically mixed on Tuesday, but tech stocks took significant losses. Treasury Secretary Janet Yellen after closing tried to go back on previous comments when she said interest rates may need to rise “a little”.
The Nasdaq fell to its 50-day line during the day, while the Russell 2000 closed precisely at this key level. Trillion dollar stocks Apple ((AAPL), Amazon.com ((AMZN), Microsoft ((MSFT) and Google Parents alphabet ((TogetL) sold out. It did Nvidia ((NVDA) and other chip names. service now ((NOW), Adobe ((ADBE) and other software games fell as well as Tesla ((TSLA) and other EV manufacturers.
On the upside are steel and mining stocks like Steel dynamics ((STLD) has generally done well. Agricultural, transportation, housing and retail companies, as well as oil companies and financial institutions such as Goldman Sachs ((GS).
The Dow Jones managed to make a profit. The S&P 500 fell slightly but held its exponential 21-day moving average even as big-cap tech like Apple stock dragged the benchmark index down.
Conclusion: The rally on the stock markets looks once again divided. The names for technology and growth look weak, while the names for old economics do well.
Yellen warns of higher interest rates
Treasury Secretary Yellen admitted that the Federal Reserve may need to raise interest rates as the government unleashes more massive spending.
“It may be that interest rates have to rise a bit to ensure that our economy does not overheat,” Yellen said at a business seminar.
After the exchange closed, Yellen tried to at least go back a little on her “something” comment. She said she “does not forecast or recommend” any rate hikes. Yellen added that she was not worried about inflation.
The U.S. government has spent $ 5.3 trillion on Covid-related incentives since March 2020, including a $ 1.9 trillion package that was passed shortly after President Joe Biden took office. Thanks to high government spending and coronavirus vaccinations, the U.S. economy is recovering rapidly, nearing pre-pandemic peak levels in the first quarter. Employment growth is also booming.
But the Biden government is pushing for an additional $ 4 trillion in spending. President Biden has proposed funding these two packages with tax increases for top earners, including nearly doubling the tax rate on investment income as well as corporate income tax increases.
Tax hikes aimed at corporate and capital gains, as well as higher interest rates, would likely be negative for the stock market.
Yellen headed the central bank before the current Fed chairman Jerome Powell. Powell and current policymakers have signaled that they want to see a lot more economic strength before they even talk about curbing asset purchases with rate hikes in the future. But Yellen’s comments raise expectations that “taper talk” could begin at the Fed meeting in June.
However, the 10-year government bond yield fell slightly on Tuesday.
Adobe, Microsoft, Nvidia, ServiceNow and Google stocks are active IBD ranking. Adobe, ServiceNow and Microsoft stocks are IBD long-term guide. Steel Dynamics and Goldman shares are operational SwingTrader. Goldman Sachs and Tesla stocks are on the line IBD 50.
Apple, Microsoft, and Goldman stocks are in the Dow Jones Industrial Average.
Dow Jones Futures today
Dow Jones futures fell from fair value. The S&P 500 futures remained unchanged. Nasdaq 100 futures lost 0.1%.
Coronavirus cases reached 154.92 million worldwide. Covid-19 deaths topped 3.23 million.
Coronavirus cases in the US have hit 33.26 million people, with deaths over 592,000.
Stock market rally
The stock market rally had a mixed session, but you’d have to be an optimist to see the glass as a half-full Tuesday.
The Dow Jones Industrial Average closed session highs and was just above break-even on Tuesday Stock exchange trading. The S&P 500 index gave up 0.7%. The Nasdaq compound fell 1.9% but reduced losses and was slightly above its 50-day moving average. The major indices fell out of the open and Yellen’s interest rate commentary was followed by intraday lows.
Big Cap Tech’s break-in
Apple fell 3.5% and found support after 50 days. The Amazon share fell 2.2% and fell further below the buy points. Microsoft stock fell 1.6%, testing a recent buy point. Facebook ((FB) and Google share lost 1.3% and 1.55% respectively, although their charts look better.
Adobe stock fell 2.5%, falling towards the 50-day and 200-day lines. NOW stock was down 1.4%, falling 14.1% in the last five sessions since winning. ServiceNow is gradually losing sight of its long-term averages.
Tesla stock fell 1.65% to 673.60 on Tuesday after falling 3.5% on Monday. The TSLA share no longer has 780.89 Buy point because the center of the handle is now below the center of the base. Tesla stock is now well below its March highs.
Under the best ETFs, the innovator IBD 50 ETF (FFTY) declined 1.45%, while the innovator IBD Breakout Opportunities ETF (STRUGGLE) decreased by 1.9%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 2.4% with Microsoft, Adobe, and ServiceNow stocking notable components. The VanEck Vectors Semiconductor ETF (SMH) fell 1.2% despite reducing intraday losses. The Nvidia share is an important SMH holding.
Reflective stocks with more speculative stories, ARK Innovation ETF (ARKK) fell 3.55%, testing its 200-day line for the first time since April 2020. ARK Genomics ETF (ARKG) slipped 3.1%. Tesla stock is Cathie Wood’s largest stake in ARK Investments. But ARK-type stocks struggled across the board, and Wood would often raise his stakes when they fell.
Market rally analysis
The stock market rally has weakened considerably in the last few meetings. After a few weeks of broad strength the market rally has returned to the forked rally in March.
The Nasdaq found support at its 50-day line and below its mid-March high. Titans like Apple and Amazon, who until recently masked underlying tech sector weakness, were no haven on Tuesday. Chip stocks, the first tech sector to pick up, have been lagging behind for a few weeks and are looking increasingly damaged. Software games like ServiceNow and Adobe Stock, which just looked promising in late April, have plummeted across multiple sessions. Tesla bearing needs the repair shop again and it’s in better shape than other EV manufacturers.
This is a completely different picture for the Dow Jones and the S&P 500. The Dow was even able to make a profit on megacaps like Apple stocks, which weigh on blue chips. The S&P 500 found support on its 21-day line, even with losses from Apple, Amazon, Nvidia, Tesla stocks and more.
Maintaining the 50-day line will be vital for Nasdaq and Russell 2000.
Investors should reduce their exposure to technology and growth names. Many have triggered automatic sell signals or round profits. If you have big winners in growth names over the longer term, consider cutting your stakes down to core positions.
In addition to financial data, shipping and some industries, games related to housing and commodities were also used for buying opportunities. They benefit from a booming economy
Look for the real leaders and buy them on solid breakouts or bullish withdrawals. Rio Tinto ((RIO), Caterpillar ((CAT), Deere ((DE), FedEx ((FDX), Nutrien ((NTR), Goldman stock, Granite construction ((GVA) and Azek ((AZEK) are located in or near purchase areas.
Rio Tinto and Granite Construction are on David Ryan’s “SIR DOG” list of stocks to highlight IBD Live on Tuesday, definitely an episode worth watching again.
However, given the renewed split in the market rally, investors should be careful if they are too exposed. Perhaps the old business names will lead and the technical names will at least provide support. However, there is a danger that the Nasdaq and Russell 2000 will drag the stronger sectors down, turning a divided market rally into a full correction.
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