Dow Jones Futures Fall as Market Rally Stuck at Key Levels; Tesla extends the slide

Dow Jones futures fell Thursday morning, while S&P 500 futures and Nasdaq futures fell modestly. The 10-year government rate of 4% again.



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Crypto financial company Silvergate Capital (SI) crashed on plans to shut down and liquidate. American Express ( AXP ) boosted shareholder returns, while MongoDB tumbled on guidance.

The stock market rally had a mixed session on Wednesday, with the major indexes trading around key moving averages.

Chip stocks did well, with Nvidia (NVDA), Advanced micro-devices (AMD), At Semiconductor (ON), Aehr test systems (AEHR) and Monolithic power (MPWR). But shares of NVDA, AMD, Onsemi and Aehr Test Systems fell extended. MPWR stock works on a cup-with-handle base.

Tesla ( TSLA ) fell Wednesday amid two new security probes as well as an analyst downgrade. TSLA stock is down 10% since the investor day on March 1, which didn’t have much news. Stocks continued to slide early Thursday.

SI stock plunged as crypto bank plans to shut down. Database software maker MongoDB (MDB) reported late Wednesday. American Express (AXP) announced a new AXP share buyback and a dividend increase.

NVDA stock is on the IBD Leaderboard. MPWR stock is on the IBD 50, Big Cap 20 and IBD Long-Term Leaders watch lists.

The video embedded in this article discussed the action of the market rally and analyzed Monolithic Power stock, Oracle (ORCL) and C3.ai (AI).

Dow Jones Futures Today

Dow Jones futures fell 0.1% relative to fair value. AXP shares gave a thin boost to Dow futures. S&P 500 futures fell 0.3% and Nasdaq 100 futures fell 0.6%. TSLA stock weighed on S&P 500 and Nasdaq 100 futures, with NVDA stock also falling early Thursday.

The 10-year government interest rate rose 4 basis points to 4.01 per cent.

The Ministry of Labor will release weekly data on unemployment claims at 8:30 a.m. ET Thursday, with the February jobs report Friday morning.

Keep in mind that overnight action 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 actionable stocks in the stock market rally on IBD Live


Silvergate Capital to shut down

After hours, embattled Silvergate Capital said it will wind down operations and liquidate Silvergate Bank. Silvergate is one of the largest lenders to large crypto firms and facilitates transfers between exchanges and market makers. Stocks have been in freefall over the past year as the crypto financial structure tensed. Last week, Silvergate said it would not be able to file its 10-K by the March 16 deadline.

SI stock plunged nearly 40% in premarket trading, after falling 5.8% to a fresh low of 4.91 on Wednesday. Silvergate crashed 57% in March due to the 10K delay. SI stock peaked at 239.26 in November 2021.

Signature Bank (SBNY), which has tried to cut crypto exposure after surging in previous years, fell 9% overnight. SBNY stock is at a two-year low. Coin base (COIN) fell 4%. Coinbase said March 2 that it had switched to Signature Bank to facilitate dollar transfers, away from Silvergate.

Bitcoin fell modestly on the Silvergate Capital news.

AXP share buyback

AXP stock rose slightly overnight after the credit card giant announced it would buy up to 120 million shares, replacing the roughly 36 million remaining in an earlier buyback plan. American Express also raised its quarterly dividend by 15% to 60 cents per share. American Express shares fell 0.3% to 174.83 on Wednesday, re-finding support around the 21-day line. AXP stock has a 182.25 cup-with-handle buy point.

MDB stock fell 11% in extended action after MongoDB earnings topped views but guidance disappointed. MongoDB shares rose 2.3% to 228.70 in Wednesday’s session, just below the 200-day line after rebounding from the 50-day line last Friday. The database software company is working on a short consolidation with a potential buy point at 248.25.

Stock market rally

The stock market rally traded up and down and closed mixed.

The Dow Jones Industrial Average fell 0.2% in Wednesday trading. The S&P 500 rose 0.1%, with ON shares and AMD the top two performers. The Nasdaq composite rose 0.4 per cent. The small-cap Russell 2000 gained a fraction.

U.S. crude oil prices fell 1.2% to $76.66 a barrel. barrel. Copper futures rose 1.4 per cent.

Treasury Yields, Fed Rate Outlook

The 10-year Treasury yield was flat at 3.97% after falling to 3.9% during the day. The 2-year government yield rose 5 basis points to 5.06%. The 6-month Treasury yield rose 2 basis points to 5.31%.

The odds of a 50 basis point rate hike on March 22 rose to 76% from 70% on Tuesday and just 31% on Monday. Fed Chairman Jerome Powell’s testimony on Tuesday that he expects interest rates to go higher than previously expected, and perhaps at a “faster” pace, hit stocks that day.

The Fed’s beige book report, published at 14 ET Wednesday, showed little or no growth in six of the 12 Federal Reserve districts over the past several weeks. Inflation remained widespread, although it was easing.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 0.8%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 0.5%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 0.2 percent. VanEck Vectors Semiconductor ETF (SMH) rose 2.6 percent. Nvidia stock is No. 1 in the SMH, with AMD also a top component. ON storage and Monolithic Power are also in SMH.

Led by more speculative stock stocks, ARK Innovation ETF ( ARKK ) and ARK Genomics ETF ( ARKG ) fell 0.1%. Tesla stock is a large holding across Ark Invest’s ETFs. Cathie Wood’s Ark also owns a lot of COIN shares.

The SPDR S&P Metals & Mining ETF (XME) closed up 0.25 percent. The US Global Jets ETF (JETS) rose 0.45 per cent. The SPDR S&P Homebuilders ETF (XHB) rose 1 percent. The Energy Select SPDR ETF (XLE) lost 1% and the Financial Select SPDR ETF (XLF) fell 0.4%. The Health Care Select Sector SPDR Fund (XLV) fell 0.5 per cent.


Five Best Chinese Stocks to Watch Now


Tesla stock

Tesla shares fell 3% early Thursday.

TSLA fell 3% to 182 on Wednesday, hitting its lowest level in over a month.

The National Highway Traffic Safety Administration opened two new Tesla safety probes. One covers the steering wheel that falls off on some 2023 Model Y crossovers due to a missing bolt that holds the wheel to the steering column. The study covers an estimated 120,000 Model Y vehicles.

NHTSA also announced a special investigation into a fatal Tesla crash into a parked fire truck on Feb. 18, saying it believed the Model S was operating with an automated driving system. The regulator has a large number of ongoing Tesla crash probes related to Autopilot or full self-driving, including several related to incidents involving stationary emergency vehicles.

Berenberg downgraded Tesla stock to hold from a buy, saying the stock price has returned to a fair value. The analyst said Tesla’s price cuts will hit gross margins in the short term, but still sees high margins in the long term.

As of Wednesday’s close, Tesla stock is down 10.2% since the March 1 investor day. While the EV giant confirmed plans for a factory in Mexico, it didn’t offer much on a future next-generation vehicle, presumably a low-cost electric car.

Still, TSLA stock is down 16.4% from its Feb. 16 high of 217.65, but still up nearly 79% from its Jan. 6 market low of 101.81.

Three factors drove Tesla’s big rally in early 2023. First, investors believed that the January price cuts would fuel the supply boom. Second, hope for big Tesla Investor Day news. Third, the broader, growth-led market rally.

But Tesla is already resorting to significant additional discounts to achieve incremental delivery gains in the first quarter, while Investor Day failed to excite. A confined, sliding market since early February hasn’t helped either.

So in that context, TSLA stock may have been resistant to holding on to the bulk of its early 2023 gains.

Perhaps Tesla stock will make a bottom base with a buy point above the 200-day mark. That could include a test of the 50-day/10-week lines.


Tesla kicks off China EV price war; Brutal battle ahead


Analysis of market rally

The stock market rally remains closely tied to its moving average.

The S&P 500 managed to close slightly higher but just below its 50-day line after undercutting that key level on Tuesday. The Russell 2000 broke below its 50-day line intraday to hit its lowest levels since late January before rallying for a wafer-thin advance

The Dow Jones fell, not far from its 2023 and 200-day lows.

Nasdaq rose modestly, but resistance at 21-day line.

On Friday, the market rally appeared to break out of a short-term trading range, but has fallen back this week. More generally, the major indexes are in the bottom half of a trading range that dates back to early February.

Leading stocks fared better on Wednesday.

Nvidia, On Semiconductor and chips were generally strong, providing support for the Nasdaq along with a lean Apple (AAPL) amplification. But buy signals in this sector are scarce.

Arista network (ANET) rose to the edge of the buying zone, while some software plays such as New relic (NEW) and Fortinet (FTNT) gained ground within their post-gap-up consolidations.

Airlines held up even as cruise lines took water. Homebuilder stocks have held up remarkably well given the rising government interest rates.

Plenty of other names disappeared with the market, though leaders didn’t suffer much damage.


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What should I do now

The market rally is again struggling around key levels.

While leading stocks are outperforming, many recent buys have run into problems or are not making progress. It is probably best to take a wait-and-see approach until the stock market rally shows renewed strength or breaks down.

Although the S&P 500 and other indexes are not far from undercutting recent lows, a few good days is all the rally needs to look healthy again. So use this time to prepare your watch lists.

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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