Dow Jones futures rose slightly during the night, along with S&P 500 futures and Nasdaq futures. Stock market growth retreated and government interest rates rose on Tuesday when a top Fed politician called for a “rapid” reduction in the Federal Reserve’s massive balance sheet.
Solar energy company SolarEdge technologies (SEDG) and uranium ETFs North Shore Global Uranium (URNM) and Global X Uranium (URA) flashed with buy signals Tuesday morning, but reduced gains or returned lower as wider markets retreated.
UnitedHealth (UNH) and Eli Lilly (LLY) is rising within buying zones.
As for megacaps, Apple shares, Tesla (TSLA), Microsoft (MSFT) and Google parent Alphabet (GOOGL) everyone withdrew on Tuesday, although the charts look fine. Tesla stock fell back from a trend line but could use a decent break after a quick run. Apple (AAPL) is technically below a point of purchase, but now has a proper handle that offers a new operational point of purchase. Microsoft and Google stocks also now have handles and new buying points on their daily charts.
Tesla, Microsoft and LLY shares are on the IBD Leaderboard. Microsoft stock and Google are IBD long-term leaders. TSLA shares, Microsoft and Google are on IBD 50. Uranium ETF URNM was Today’s IBD share. Google was the IBD 50 stock to watch.
The video embedded in this article discusses the market rally retreat and analyzes the URNM ETF, Google and LLY stock.
Musk joins Twitter Board, steals Trump Thunder
In the meantime Twitter (TWTR) gaped over its 200-day line Tuesday morning to 54.57 on the news that Tesla’s CEO Elon Musk will join the social network’s board. TWTR reduced the gains to up 2% to 50.98. Twitter shares rose 27% on Monday as Musk revealed a 9.2% stake.
Musk’s Twitter move appears to be stealing Donald Trump’s thunder as his Truth Social site faces challenges. Digital World Acceptance Corp. (DWAC), the SPAC merger partner with Truth Social parent company Trump Media and Entertainment, fell 16% to 48 on Tuesday and fell intraday to its lowest point since early December. The DWAC stock slipped 10% on Monday.
Trump’s Truth Social network has been plagued by technical issues with key technology executives leaving Monday. App downloads have dropped. Former President Trump has also not written anything on his own website, removing Truth Social’s main value added from Twitter and Facebook (FB).
All in all, the DWAC stock has lost more than half of its value since hitting 101.87 on March 2nd.
The Fed’s Brainard wants a ‘rapid’ balance cut
Fed Governor Lael Brainard said Tuesday she wants the central bank to start reducing its massive balance sheet soon and at a “fast pace.” Brainard, who has been nominated to become Fed vice president, added: “I expect the balance sheet to shrink significantly faster than in the previous recovery.”
Fed chief Jerome Powell has been signaling for some time that politicians would start reducing his balance sheet, but Brainard’s comments signaled that it is likely to come soon. Brainard had been seen as a little more pigeon-like than Powell, but by 2022 there are no pigeons. On top of the balance cuts, markets have priced expectations for half-point increases at each of the next three meetings.
On Tuesday, Fed Governor Esther George said a 50 basis point increase is an option for the meeting in early May.
Government interest rates rose in line with the recent hawkish Fed signals, with the 10-year interest rate moving back above the two-year interest rate.
On Wednesday, the Federal Reserve will issue minutes of its March political meeting.
Dow Jones Futures today
Dow Jones futures rose 0.1% at fair value. The S&P 500 futures and Nasdaq 100 futures rose higher.
US crude oil prices fell last night.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze powerful stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally retreated Tuesday, closing close to session lows. The Dow Jones Industrial Average fell 0.8% in Tuesday’s trading session. The S&P 500 index fell 1.3 per cent. The Nasdaq composite fell 2.3 percent. Small-cap Russell 2000 also lost 2.3 percent.
US crude oil prices opened higher, but turned lower to fall 1.3% to $ 101.96 per share. barrel. Futures on natural gas rose almost 6 per cent. The European Union is moving towards banning Russian coal imports, but is not going after Russian crude oil or natural gas.
The 10-year government bond yield rose 14 basis points to 2.56% on Brainard’s high-profile balance sheet comments. The two-year interest rate rose 10 basis points to 2.53%, but this means that the yield curve is no longer reversed.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 3.75%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 1.7%. iShares Expanded Tech-Software Sector ETF (IGV) gave up 2.5%, with Microsoft shares as a larger IGV portfolio. VanEck Vectors Semiconductor ETF (SMH) sold 4.3%.
The SPDR S&P Metals & Mining ETF (XME) returned lower to a 2.4% decline. Global X US Infrastructure Development ETF (PAVE) yielded 1.8%. US Global Jets ETF (JETS) fell 1.1 percent. SPDR S&P Homebuilders ETF (XHB) lost 2.1 pct. Energy Select SPDR ETF (XLE) fell to a 1.6% decline. Financial Select SPDR ETF (XLF) fell 0.6 percent. Health Care Select Sector SPDR Fund (XLV) rose 0.2 pct.
As a result of more speculative history stocks, the ARK Innovation ETF (ARKK) fell 5.6%, falling below its 50-day line. ARK Genomics ETF (ARKG) sold from 5.3%, just kept the 50 days. The Tesla stock remains No. 1 across Ark Invest’s ETFs.
Five best Chinese stocks to see now
Apple stock fell 1.9% to 175.06 and fell back below a double-bottomed 176.75. But the AAPL stock has now formed a handle on a daily chart, giving it a buy point of 179.71. Strictly speaking, the iPhone giant had control of a weekly chart after last week, but it was thin. With the daily handle cut out, investors should probably focus on that entrance.
The relative strength of Apple stocks is at an all-time high.
MSFT shares fell 1.3% to 310.88. The software and cloud computing giant now has a handle with a buying point of 316.05. The center of the handle is just above the center of the base, so there is some resistance over the head.
Google stock fell 1.7% to 2,811.82. It gives the GOOGL stock a handle on its cup base on a daily chart with a buy point of 2,875.95. The internet giant had control of its weekly chart with the same post, just like Apple, though Google was a little more comprehensive. The RS line for Google shares is not far from heights, but has been moving sideways since the end of July.
SolarEdge shares rose as high as 344.61, but turned around to trade down 2% to 328.69. The SEDG stock again cleared a buy point of 335.67 cup-with-handles according to MarketSmith. There is no doubt that the company with solar energy products has some big fluctuations during the day. Investors could consider starting a position in the SEDG stock if it again finds support at its 21-day moving average.
The TSLA stock retreated 4.7% to 1,091.26 on Tuesday after rising 5.6% on Monday after record-breaking first-quarter delivery figures. The Tesla stock has a buy point of 1,208.10 cups. Intraday, the stock reached 1,152.87, a three-month high, crossing just a shallow trend line. After rising sharply since March 14, the Tesla stock was able to use a real break with a significant handle that actually shakes out some weak holders.
Analysis of market rally
The stock market rise retreated Tuesday with heavy losses among tech and small-cap names.
The large indices appear to form handles after a large run-up. So far, the Dow, S&P 500 and Nasdaq seem to be functioning normally. If the S&P 500 and Nasdaq fall below their 21-day moving average, that would be more worrying.
But there is remarkable weakness beneath the surface.
Technology stocks look weak. Yes, Apple stock is approaching record highs. Microsoft and GOOGL shares are close to buying points, though both have not made progress over the past many months.
Meanwhile, chip inventories have fallen amid reports of weaker demand for PCs and consumer electronics. Software and other highly valued growth names are being hammered due to rising government interest rates. Tesla is one of the only three-digit PE stocks to have blossomed, an award that is both impressive and worrying.
Shipping stocks are also weak. Truck, train and other “land” charterers continue to sell out, while ocean-going container and dry cargo ships are now also losing ground.
On the positive side, energy and commodities continue to perform well, whether it be oil and gas deposits, coal miners, solar energy stocks or uranium ETFs. But they are prone to large intraday fluctuations and reversals from heights, as URNM and SEDG stocks showed on Tuesday.
Defense stocks such as Lockheed Martin (LMT) consolidates after spikes early in Russia’s Ukraine invasion.
Medical stocks are quietly doing very well, offering defensive growth, often with low to modest PE ratios. These include health insurance companies such as UNH shares as well as drug manufacturers as well as LLY shares. Edwards Lifesciences (EW) and Shockwave Medical (SWAV) works on the right side of bases. AbbVie (ABBV) has been developing steadily for several months, although well extended.
Insurance shares such as AIG (AIG) hangs at point of purchase. Insurance companies can do well in an environment of rising interest rates and are not particularly worried about the yield curve.
Property storage REITs are doing well despite rising rates. Warehouse manager Prologue (PLD) is in a buying zone. Extra space storage (EXR) is among those who carve out possible handles on new bases.
Time The Market With IBD’s ETF Market Strategy
What should I do now
The stock market rise does not show distress on the major indices. But investors should focus on what works, not on sectors that they find particularly attractive. The energy and raw material rooms continue to perform well. Doctors from a number of groups are doing well.
If you already have significant exposure to these areas, you may just want to sit tight.
If you are in a range of growth stocks, you should probably cut back. Simply cutting back on losers or exciting winners who forgo winnings can bring down your growth exposure without any overt portfolio management.
Overall, investors should probably take a cautious approach. See how the market retreat plays out before taking big new positions. Continue to refine your watchlists. If the market rally regains momentum, you can take advantage of the best stocks. If market growth really starts to falter, you will be ready to cut your modest exposure further.
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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