Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally suffered sharp losses on Tuesday, with the Nasdaq and S&P 500 falling below significant levels.
Economic reports revived fears of recession and inflation. A description of Intel (INTC) chip price cuts due to PC weakness slammed Intel stock and rival Advanced Micro Devices (AMD), as well as PC makers and Microsoft (MSFT).
Meanwhile, Exxon Mobil (XOM), Vertex Pharmaceuticals (VRTX), Enphase Energy (ENPH), Google parent Alphabet (GOOGL), and Tesla (TSLA) are five stocks to watch, but for different reasons.
XOM shares rose modestly, flirting with buy signals over the day after the diversified energy giant outperformed most oil and gas games. VRTX shares fell below a buy point. ENPH stock tumbled into a handle as solar stocks dipped. Shares of Google and Tesla fell solidly below the recent buy points.
Google stocks are listed on IBD Long-Term Leaders. Vertex and Enphase stocks are on the IBD 50 and Big Cap 20. Exxon is Tuesday’s IBD stock.
The video in this article highlights stocks of Exxon Mobil, Google, and VRTX.
Dow Jones Futures Today
Dow Jones futures were up 0.1% from fair value. S&P 500 futures were up 0.1%, and Nasdaq 100 futures were up 0.1%.
The 10-year yield fell by four basis points to 3.17%.
Remember that overnight action in Dow futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks during the stock market rally on IBD Live
stock market rally
The stock rally opened higher, boosted by China shortening quarantine times for inbound travelers. But major indices quickly faded, led by the Nasdaq.
The Dow Jones Industrial Average fell 1.6% in trading on Tuesday. The S&P 500 index fell 2%, with ENPH stocks among the worst performers—the Nasdaq composite sold by 3%. The small-cap Russell 2000 lost 1.85%.
Two economic reports hit the market at 10 a.m. ET. The Consumer Confidence Index fell to its lowest point since February 2021 in June, while the expectation measure hit its nine-year low. An index of inflation expectations hit a record high going back to 1987. Meanwhile, the Richmond Fed’s manufacturing index was much weaker than expected, the last negative regional factory report before ISM’s US manufacturing index on Friday.
Intel is reportedly slashing the prices of Alder Lake processors, while orders from PC manufacturers are much weaker than expected. Intel shares fell 2.2%. Arch-rival AMD’s share sold 6.2%, its lowest close in a year and just above the June 17 intraday low. Dell Technologies (DELL) and HP Inc. (HPQ) lost 2.6%. Windows maker Microsoft fell 3.2%.
The US crude oil price rose 2% to $111.76 a barrel. OPEC+ will hold its last meeting on Wednesday
Ten-year government bond yields rose one basis point to 3.21%.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 2.1%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 3.7%, with Microsoft stocks leading the way. The VanEck Vectors Semiconductor ETF (SMH) fell 2.5%, while Intel and AMD had key components in stock.
US Global Jets ETF (JETS) reported strong opening gains and fell 0.8%. SPDR S&P Metals & Mining ETF (XME) and the Global X US Infrastructure Development ETF (PAVE) fell 1.7%. SPDR S&P Homebuilders ETF (XHB) lost 2.1%. The Energy Select SPDR ETF (XLE) gained 2.7%, with XOM stocks being a huge component. The Financial Select SPDR ETF (XLF) lost 1%. The Health Care Select Sector SPDR Fund (XLV), with VRTX shares as a part, fell 1.7%.
As a result of more speculative story stocks, ARK Innovation ETF (ARKK) plunged 5.9% and ARK Genomics ETF (ARKG) 5%. TSLA stocks continue to be a top spot in Ark Invest ETFs.
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Stocks to watch
Exxon Mobil shares rose to 93.24 intraday, moving above the 50-day and 21-day lines and breaking a steep downtrend. That was an aggressive entry. XOM shares closed in gains to close 2.8% to 91.50 but remained above the 50-day line. Exxon stocks were better than many oil and gas games trying to recover from their 200-day lines. Still, investors ideally want to watch XOM stock move sideways for a while and build a new base before attempting to get in.
Vertex shares fell 3.9% to 276.17, below an early entry of 279.23 after hitting a record high of 293.17 on Friday. VRTX stocks could still be in good shape, with Tuesday’s pullback at a lower volume after a string of big gains until last week. But it remains to be seen. The relative strength line for VRTX stocks is still near highs.
Enphase shares fell 7.5% to 190.65 and again found support around the 21-day moving average. ENPH stock still sits in a deep handle in a double-bottom base. The official buy point is 217.33, although investors could use a move above Monday’s high of 210.10 as an early entry. But ENPH stocks and other solar securities are volatile, a more difficult trait to deal with in the current market environment.
China EV giant in buying zone as it grabs Tesla’s crown
Tesla stock fell 5% to 697.99 below the 21-day moving average. On Monday, TSLA stock turned slightly lower after hitting resistance on the 10-week line. Unlike most mega-cap stores, Tesla stock exceeded its late May lows in June. By the end of this week, perhaps Saturday, Tesla will release its second-quarter delivery figures, which should show a substantial decline from the first quarter, following a Shanghai factory shutdown and a slow recovery.
Bloomberg reported that Tesla has laid off hundreds of employees from its Autopilot team as part of sweeping layoffs at the EV giant. CEO Elon Musk, who fears a recession is likely, has repeatedly promised “this year” full self-driving vehicles for nearly a decade. Tesla’s Full Self-Driving, which costs $12,000, is a level 2 driver assistance system, far from a level 5 self-driving system.
Google stock fell 3.3% to 2,240.15, below its 50-day moving average after clearing that key level on Friday. GOOGLE stocks also avoided undercutting May lows during the June market sell-off.
Market Rally Analysis
Major indices started with decent gains on Tuesday but quickly moved lower. The Dow Jones, S&P 500, and Nasdaq composite all fell below their 21-day moving averages.
The Nasdaq and S&P 500 fell below the lows of their follow-up day on Friday. That is a very bearish signal. Research shows there is a 90% chance that the rally will eventually fail if this happens. The rally is not officially over until the indices undercut their recent lows.
The Dow Jones didn’t close below its follow-up lows, but it’s not far off.
On Tuesday, many ugly reversals, and stocks fell back or below key levels.
Many mega caps, not just Tesla stocks and Google, have met resistance around the 50-day or 10-week lines, including MSFT stocks, Apple (AAPL), and Amazon.com (AMZN). So did the XLV and ARKK ETFs.
Leading stocks did not have a good day, with broad weakness. Pharma stocks retreated despite being names for defense growth. Health insurers didn’t lose much ground but put in some bullish opening profits.
Oil and gas stocks could bounce back, but many may need time to recover after bouncing back from lows late last week. XOM stocks look better, but energy names could struggle as the broad market sells out.
Time the Market with IBD .’s ETF Market Strategy
What to do now
With the market rally quickly facing selling pressures, investors should not add exposure, which should already be light. Instead, they may want to pull out some new positions. Many, like VRTX stocks, are likely to be underwater, with the Nasdaq below its FTD low and the S&P 500 almost there.
Like driving in foggy conditions, it’s hard to know what’s in store for the stock market, but the risks are high.
Keep working on watchlists. Stay engaged and ready to act.
Read The Big Picture daily to stay informed about market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for scholarship updates and more.
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