Dow Jones futures trended higher overnight, along with S&P 500 futures and Nasdaq futures. Mid-term election results are in as Tesla CEO Elon Musk sold more TSLA shares.
The stock market rally began Tuesday morning, fueled by lower Treasury yields and a falling dollar. Major indices shed strong gains as Bitcoin and other cryptocurrencies plunged on a surprise takeover deal between Binance and FTX. But shares recovered somewhat by the close.
Bitcoin-related stocks such as cryptocurrency exchanges coin base (COIN), trading app Robinhood Markets (HOOD), cryptocurrency manager Silvergate Capital (SI) and Bitcoin miners Marathon digital (MARA) sold out.
Looking ahead, the consumer price index is looming.
Walt Disney (DIS), Western Petroleum (OXY), Tesla (TSLA) rival Lucid engines (LCID) and array technologies (ARRY) reported late Tuesday.
Disney stock fell sharply overnight as earnings, lagging behind despite strong Disney+ subscriber growth. OXY stock, more than 20% owned by Warren Buffett Berkshire Hathaway (BRKB), edged lower on mixed income. LCID stock plummeted on weak Q3 results and falling Lucid Air reservations. ARRY shares rose on strong earnings and forecasts.
In other news, meta platforms (META) will begin sweeping layoffs Wednesday morning, according to multiple reports.
Tesla CEO Elon Musk announced that he sold 19.5 million shares for $3.95 billion on November 4, 7 and 8. That could help pay for his recent Twitter deal, though Musk said in early August that stock sales were the last thing he needed then.
Musk’s recent stock sales likely helped fuel the recent drop in Tesla stock. Increased subsidies from China and concerns about Elon Musk’s Twitter dominance could also impact TSLA stock.
Tesla shares fell 2.9% on Tuesday to 191.30 after falling to 186.75 on the day, just above the May 2021 lows.
The interim results of the elections will be available on Tuesday evening. Republicans are a virtual barricade to retake the House of Representatives. The Senate is up for grabs, but final results in key races could be days away.
Either way, President Joe Biden and the Democrats will no longer have full control of the White House and Congress. Financial markets tend to do better when Washington grinds to a halt. Even in the third year of a presidency, stocks traditionally do well.
So a divided Congress could be positive for Wall Street and good news for defense contractors, private prisons and drug makers. On the other hand, the markets may have already priced in some of it.
Dow Jones futures today
Dow Jones futures were just above fair value, with DIS stock weighing on blue chips. S&P 500 futures were up 0.15% and Nasdaq 100 futures were up 0.4%.
The 10-year government bond yield rose 2 basis points to 4.15%.
Consumer inflation in China rose less than expected. Wholesale prices fell.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
stock market rally
The stock market rally moved higher Tuesday morning, but then reversed again in the afternoon as the Bitcoin meltdown spilled over to stocks. The S&P 500 and Nasdaq briefly turned negative before recovering.
The Dow Jones Industrial Average rose 1% in trading on Tuesday. The S&P 500 index rose 0.6%. The Nasdaq Composite gained 0.5%. Small-cap Russell 2000 posted a profit.
Tesla stock declined and during the day neared its May 2021 lows.
Apple shares and Microsoft rose 0.4%, Google shares rose 0.5%, and Amazon fell 0.5%. Everyone is up this week but after falling last week.
The 10-year government bond yield fell 9 basis points to 4.13%.
The US dollar fell sharply for the third straight day, hitting its lowest level since late September.
US crude prices fell 3.1% to $88.91 a barrel. Natural gas futures fell 11.6%, continuing their huge daily swings.
Despite the weaker dollar, Bitcoin plummeted as the world’s leading cryptocurrency exchange Binance agreed to buy rival FTX, which was facing a liquidity crunch. These are doubts that the Binance FTX deal will actually go through as FTX has faced huge withdrawals over the past few days. Just a few months ago, FTX and founder Sam Bankman-Fried had looked like potential saviors for other struggling crypto companies.
Bitcoin crashed to $17,484.20, its lowest level since November 2020, and is currently trading around $18,500. The pioneer digital currency broke below $20,000 on Monday evening. Ethereum, Dogecoin and other cryptocurrencies showed similar or even bigger losses.
The FTX token collapsed 80% on Tuesday after massive losses over the past few days and weeks.
COIN stock fell 10.8% to a four-month low. Binance’s purchase of FTX could forge a major new competitor for Coinbase, which is also reeling from Bitcoin’s woes and concerns about crypto-related businesses.
HOOD stock, which includes Bankman-Fried as an investor, plummeted 19%. MARA stock fell 5.3% to its lowest level since July. After the close, Marathon Digital reported a bigger-than-expected loss while revenue plummeted 75%.
SI shares plunged 23% to their lowest level since December 2020.
Tesla still owns some Bitcoin, while Elon Musk has held Dogecoin for a while.
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Among the best ETFs, Innovator IBD 50 ETF (FFTY) fell 0.3%, while Innovator IBD Breakout Opportunities ETF (BOUT) gained 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) was up 1.3% with MSFT stock a key component. The VanEck Vectors Semiconductor ETF (SMH) is up 2.2%.
SPDR S&P Metals & Mining ETF (XME) is up 1.9%. The Energy Select SPDR ETF (XLE) was up slightly, up 0.1%. The Health Care Select Sector SPDR Fund (XLV) rose 0.5%.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) fell 0.4% and ARK Genomics ETF (ARKG) rose 1.4%. Tesla stock remains a top position among Ark Invest’s ETFs.
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Analysis of the market rally
Last Thursday’s stock market rally looked badly damaged following hawkish comments from Fed Chair Jerome Powell. But it’s been recovering for the past three sessions, even with Bitcoin’s woes.
The Dow Jones broke last week’s high after retaking its 200-day moving average on Monday.
The S&P 500 edged slightly higher above its 50-day moving average, although it is still below its Nov. 1 short-term high.
The Nasdaq, weighed down by Tesla and technical issues, found resistance at its 21-day moving average. It is still below its 50-day mark and a long way from its 200-day mark.
But the Direxion Nasdaq-100 Equal Weighted ETF (QQQE) is up just over 1%, beating its 50-day moving average.
Falling Treasury yields helped shares rise on Tuesday, while a falling dollar has been a key driver over the past three sessions.
Mid-term election results could drive market moves, but Thursday’s CPI inflation report could be crucial. A tame CPI read could fuel hopes of slower Fed rate hikes and a lower peak rate. But yet another hot inflation number could trigger heavy selling in stocks and bonds.
Why this IBD tool makes finding top stocks easy
There weren’t many fresh buying opportunities on Tuesday.
GlobalFoundries (GFS) rose above a trend line and a just too low level after the gains.
Albemarle (ALB) cleared an early entry but quickly, running to its official buy point and closing just below this key level. However, ALB stock is well above its 50-day moving average after bouncing sharply off the Nov. 3 intraday lows.
Crocs (CROX) briefly regained a buy point while UnitedHealth (UNH) closed in buying range.
Several LNG stocks are located near buy points.
Tech weakness is still an issue. Chip stocks rebound, with the SMH ETF convincingly above the 50-day moving average. Megacap technologies such as Apple (AAPL) are attempting to rebound but after huge sell-offs. The same applies to cloud software.
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The rally in equity markets is showing resilience after last week’s sharp declines, with the Dow Jones and S&P 500 returning to key levels. Investors may still want to be cautious given the forthcoming CPI inflation report. Also, there aren’t many stocks to exploit right now, although many are lining up.
Investors should be ready to take action by staying engaged and building your watch lists. Growth stocks still aren’t popular in general, so make sure you cast a wide net to find stocks and sectors that are emerging leaders.
Be sure to note the earnings that remain active. Some stocks were big winners, while others rallied strongly after initial falls. But there were also some high-profile sell-offs, as seen in Disney and Lucid stocks overnight.
Read The Big Picture every day to keep up to date 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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