Dow Jones futures and S&P 500 futures edged lower late Tuesday. Nasdaq futures fell modestly on Netflix stock, which headlined after-hours earnings movers. That followed another rough session for the stock market rally.
Growth names and small caps sold off Tuesday, with Futu Holdings (FUTU) crashing after a powerful breakout Monday. But travel plays tumbled too, with steelmakers, miners, energy companies, industrials and financials all retreating.
Tech titans held up reasonably well, with Microsoft (MSFT), Google parent Alphabet (GOOGL) and Facebook (FB) roughly flat. Apple (AAPL) retreated slightly after its ‘Spring Loaded’ product event but has been outperforming in recent weeks. But the strong action in Google stock, Microsoft, etc. has masked recent weakness.
Netflix earnings topped views but subscriber growth of 3.98 million fell well short. Netflix faces a post-pandemic environment amid growing competition from Disney (DIS) and its Disney+ streaming service.
NFLX stock plunged 9% overnight, signaling a move below the 50-day and 200-day lines. Shares reversed lower Tuesday to dip 0.9% to 549.57. Netflix stock has a 559.85 buy point from a tiny handle on a weekly chart, as well as a downward-sloping trend line just below that level. But that may not be relevant if NFLX stock plunges Wednesday.
DIS stock lost a fraction overnight. Disney stock fell 2.5% on Tuesday, dipping below its 50-day line and near the bottom of its flat base.
Roku (ROKU) fell solidly overnight, amid concerns that streaming growth overall will slow. ROKU stock sank 1.7% on Tuesday, continuing to retreat after hitting resistance at its 50-day line.
Other Key Earnings
Intuitive Surgical earnings topped forecasts for the robotic-surgical systems leader. ISRG stock rose 4% to about 842 in extended trade after shares closed down 8 cents to 811.11. Intuitive Surgical stock has an 812.89 buy point from a double-bottom base.
Edwards Lifesciences earnings topped views, with the medical device maker guiding up for Q2 and the full year. EW stock popped 4% in overnight trade. Shares rose 1.2% on Tuesday to 89.63, moving in a buy zone from an 88.30 double-bottom buy point, according to MarketSmith analysis.
CSX earnings missed while revenue topped. CSX stock fell 1.5% in late trade. Shares dipped 0.3% Tuesday after hitting a record high intraday. CSX stock is extended from a buy point.
Tenet Healthcare earnings topped views for the hospital operator. THC stock rose nearly 3% overnight. Tenet stock fell 1% to 52.04 Tuesday, just below its 50-day line but within a short consolidation that’s almost a proper base. The buy point for THC stock is 57.98. But investors could use 54.98, just above Friday’s high, as an early entry along with a 10-week line rebound.
Apple Product Event
Apple debuted some announced some new iPad and Macs with its in-house chips at its “Spring Loaded” product event, as well as launching Air Tag tracking devices. It also plans a podcast subscription service. Apple stock sank 1.3% to 133.11. It’s possible AAPL stock will form a handle on a daily or weekly chart this week. It also could form a three-weeks-tight pattern. Both would offer lower buy points. But for now, the official cup-base entry is 145.19.
Dow Jones Futures Today
Dow Jones futures were just below fair value. S&P 500 futures fell 0.1%. Nasdaq 100 futures retreated 0.4%. NFLX stock and Roku were drags on Nasdaq futures.
Coronavirus cases worldwide reached 143.50 million. Covid-19 deaths topped 3.05 million.
Coronavirus cases in the U.S. have hit 32.53 million, with deaths above 582,000.
Johnson & Johnson (JNJ) has resumed shipments of its one-shot coronavirus vaccine after European regulators deemed it safe with a few new guidelines after reviewing a handful of cases with a very rare but serious blood clotting issue. J&J vaccine shots have been halted in the U.S. for several days due to concerns that health care professionals wouldn’t recognize this type of clotting, which requires a different treatment than more-common blood clots. An FDA panel is expected to recommend resuming the J&J vaccine on Friday, perhaps with certain restrictions or guidelines.
JNJ stock rose 2.3% to 166.48 on the vaccine news and better-than-expected earnings, breaking a trend line and briefly clearing a 167.13 early entry for the Dow Jones giant. The relative strength line for J&J stock is weak and has been in a general slump since 2009.
Stock Market Rally Tuesday
The stock market rally took some serious knocks Tuesday, with broad-based weakness among leading stocks.
The Dow Jones Industrial Average retreated 0.75% in Tuesday’s stock market trading. The S&P 500 index lost 0.7%. The Nasdaq composite sank 0.9%. The Russell 2000 skidded just over 2%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) tumbled 2.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 1.9%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 1.1%. Microsoft stock is the largest IGV holding, while many software stocks had bigger losses. The VanEck Vectors Semiconductor ETF (SMH) slumped 1.4%. ASML and LRCX stock are notable SMH components.
SPDR S&P Metals & Mining ETF (XME) declined just over 3% while the Global X U.S. Infrastructure Development ETF (PAVE) lost 1.1%. U.S. Global Jets ETF (JETS) plunged 4.1%. United Airlines (UAL) results and guidance slammed airline stocks and also other travel-related plays.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dipped 0.9% and ARK Genomics ETF (ARKG) 1.2%, both retreating further from their 21-day and 50-day lines. Roku stock is a top-five holding for ARK Investment.
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Market Rally Analysis
Once again, the stock market rally suffered more damage than the major indexes would indicate. The Dow Jones and S&P 500 retreated for a second straight session after looking almost extended at the end of last week. The Nasdaq composite lost more ground, but found support at its 21-day line and above its March lows.
The small-cap Russell 2000 slumped to its lowest level so far this month. That’s after Monday’s 1.4% retreat to back below its 50-day line.
Leading stocks suffered heavy losses, with many undercutting buy points or breaking key support. Futu stock plunged 23%, crashing below a buy point and its 50-day line after announcing a stock offering late Monday. On Monday, shares soared 16%.
But it wasn’t just a matter of a rotation out of growth stocks. Commodity-related cyclicals also retreated, along with housing-related retailers, chips, software, banks, travel and more. Some leaders look relatively healthy, but a portfolio of “healthy” losers and “unhealthy” losers is not a winning strategy.
What To Do Now
This was already a “hard penny” market, to quote Mark Minervini, even when the major indexes were headed higher. Right now they’re falling.
Investors should be reducing their exposure naturally as they get stopped out of stocks. You might want to cut losses short and consider taking profits in some winners, especially those with fading gains heading into earnings.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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