Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. Midterm election results come as Tesla CEO Elon Musk sells more TSLA stock.
The stock market rally ran up Tuesday morning, fueled by lower Treasury yields and a declining dollar. The main indexes pared strong gains as Bitcoin and other cryptocurrencies plunged on the surprise binance-FTX takeover deal. But the stock rebounded slightly by the close.
Bitcoin-related stocks such as cryptocurrency exchanges Coinbase (coin), trading applications Robinhood Market (crippled), cryptocurrency custodian Capital of Silvergate (AND) and Bitcoin miners Digital Marathon (danger) sold out.
Looking ahead, the consumer price index is large.
Disney shares fell sharply overnight as its earnings fell short, though The growth of Disney + subscribers it’s strong. OXY shares, more than 20% owned by Warren Buffett Berkshire Hathaway (RKB), edge down mixed earnings. LCID stock plunged amid its weak Q3 results Declining Lucid Air reservations. ARRY stock gap above Strong earnings and guidance.
In other news, Platform Meta (map) will begin sweeping layoffs Wednesday morning, according to several reports.
Tesla CEO Elon Musk revealed he sold 19.5 million shares for $3.95 billion on November 4, 7 and 8. That could help pay for his latest Twitter deal, though Musk said in early August that a further stock sale was the last thing he needed. .
Musk’s latest stock sale appears to have helped lower Tesla’s stock. Increasing Chinese subsidies and concerns over Elon Musk’s Twitter reign could also weigh down TSLA’s stock.
Tesla shares fell 2.9% to 191.30 in Tuesday’s session after falling to 186.75 intraday, above May 2021 lows.
Mid Semester Election
The results of the midterm elections are coming in on Tuesday night. Republicans are a virtual lock to retake the House of Representatives, but it hasn’t been a huge 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 won’t have full control of the White House and Congress. Financial markets tend to do better with gridlock in Washington. Stocks also traditionally fare well in the third year of a president’s term.
So a split Congress could be a positive for Wall Street, and it could be good news for defense firms, private prisons and drug makers. Then again, the market may have priced some of that in.
Dow Jones Futures Today
Dow Jones futures are little changed vs. fair value, with DIS stocks weighing in on blue chips. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.3%.
Chinese consumer inflation rose less than expected. Wholesale prices are down.
Stock Market Rally
The stock market rally moved higher on Tuesday morning but then gave it back in the afternoon as the Bitcoin meltdown spilled over into stocks. The S&P 500 and Nasdaq briefly turned negative before recovering.
The Dow Jones Industrial Average rose 1% on Tuesday stock market trading. The S&P 500 index rose 0.6%. Nasdaq composite advanced 0.5%. The small-cap Russell 2000 eked out a gain.
Tesla shares sank close to their May 2021 intraday lows.
Apple and Microsoft shares rose 0.4%, Google shares rose 0.5% and Amazon rose 0.5%. All are up this week but after tumbling last week.
The 10-year Treasury yield retreated 9 basis points to 4.13%.
The US dollar fell significantly for the third straight day, hitting its lowest level since late September.
US crude oil prices slumped 3.1% to $88.91 per barrel. Natural gas futures tumbled 11.6%, continuing its large daily swings.
Despite the weak dollar, Bitcoin plunged as the No. 1 cryptocurrency exchange in the world Binance agreed to buy rival FTX, which has faced a liquidity crisis. It is doubtful that the Binance-FTX deal will actually happen, and FTX has faced huge withdrawals in the past few days. Just a few months ago, FTX and its founder Sam Bankman-Fried were seen as a potential savior for the ailing crypto firm.
Bitcoin crashed to $17,484.20, the lowest since November 2020 and is currently trading around $18,500. The pioneering digital currency broke below $20,000 on Monday night. Ethereum, Dogecoin and other cryptocurrencies also showed similar or greater losses.
The FTX token collapsed 80% Tuesday after massive losses in the last day and week.
COIN shares plunged 10.8% to a four-month low. Binance buying FTX could forge a major new competitor for Coinbase, also reeling from Bitcoin’s woes and concerns about crypto-related businesses.
HOOD shares, which include Bankman-Fried as investors, dived 19%. MARA shares fell 5.3% to the lowest since July. After closing, Marathon Digital reported a bigger-than-expected loss while revenue fell 75%.
SI shares rose 23% to the lowest since December 2020.
Tesla still owns some Bitcoin, while Elon Musk has held Dogecoin for some time.
including The best ETFsInnovator IBD 50 ETF (FFTY) dipped 0.3%, while the Innovator IBD Breakout Opportunities ETF (out) up 0.1%. iShares Expanded Tech-Software Sector ETFVAT) rose 1.3%, with MSFT shares a key component. VanEck Vectors Semiconductor ETFSMH) increased by 2.2%.
Market Rally Analysis
The stock market rally looked heavily damaged last Thursday in the wake of Fed chairman Jerome Powell’s hawkish comments. But it has bounced back in the past three sessions, despite falling behind Bitcoin.
The Dow Jones cleared the top of last week after reclaiming its 200-day line on Monday.
The S&P 500 rose slightly above its 50-day line, though it was still below the Nov. 1 high.
The Nasdaq, weighed down by Tesla and tech concerns, hit resistance at its 21-day moving average. It is still below 50 days and far from the 200 day line.
Direxion Nasdaq-100 Equal Weighted ETFQQQE) rose just over 1% to above its 50-day line.
Increasing Treasury yields helped lift stocks on Tuesday, while the tumbling dollar has been a key driver in the last three sessions.
Midterm election results may spur market movements, but Thursday’s CPI inflation report may be the key. A tame CPI reading could fuel hopes for a gradual Fed rate hike and lower peak speed. But yet another hot inflation figure can trigger heavy selling in stocks and bonds.
There aren’t many new buying opportunities on Tuesday.
GlobalFoundries (GFS) surged above the trendline and the handle is just too low below earnings.
Albemarle (ALB) cleared the initial entry, but quickly and ran to its official buy point, closing below that key level. However, ALB stock is well above its 50-day line after a big move from intraday lows on Nov. 3.
Some LNG stocks are close to buy points.
The weakness of the technology is still a concern. Stock chip rebounding, with SMH ETF convincingly above the 50-day line. Megacap techs such as apples (AAPL) tried to bounce back, but after a big sale. The same goes for cloud software.
What to do now
The stock market rally was showing resilience after last week’s sharp losses, with the Dow Jones and S&P 500 retaking key levels. Investors may still want to be cautious, with the CPI inflation report looming. Also, not many stocks are currently actionable, although many are set up.
Investors should be ready to take action, by staying engaged and building your watch list. Growth stocks are still generally out of favor, so make sure you cast a wide net to find stocks and sectors that are emerging leaders.
Must be aware of earnings, which remains active. Some stocks have been big earnings winners, while others have rebounded strongly after initially collapsing. But there has also been some high-profile selling, as Disney and Lucid shares showed overnight.
read The Big Picture every day to stay in sync with 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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