Dow Jones futures fell early Wednesday, along with the S&P 500 and Nasdaq futures. The stock market closed mixed on Tuesday, but technicians led a strong recovery even though fears of a recession hit Treasury yields and commodity prices.
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On Tuesday, the Dow Jones closed low, but in good shape, while the S&P 500 made a small gain. The Nasdaq had a strong lead, with aggressive growth names like Roblox (RBLX) and Datadog (DDOG) bouncing above its 50-day lines. Apple (AAPL), Amazon.com (AMZN) and Google Parent Alphabet (GOOGL) regained a key level in the short term.
Meanwhile, crude oil prices fell below $ 100 a barrel. Gasoline, copper and wheat futures fell sharply, prolonging significant losses in recent weeks.
The Treasury yield curve reversed between two-year and 10-year notes, a sign of a notable recession. Markets still see an aggressive tightening of the Federal Reserve in the next two meetings, but they also expect rate hikes to end this year.
Shares of Dollar Tree (DLTR), Halozyme Therapeutics (HALO) and PRVA showed a bullish action on Tuesday. Meanwhile, Northrop Grumman (NOC) and UnitedHealth (UNH) fell, but found key support.
NOC and UnitedHealth shares are on the IBD ranking table. DLTR shares are on SwingTrader. Google shares are in IBD Long-Term Leaders. UNH shares are at IBD 50. Privia Health (PRVA) was the existence of IBD on Tuesday.
The video embedded in this article looked at Tuesday’s interesting stock market and looked at the stocks of Dollar Tree, Halozyme Therapeutics and DDOG.
Amazon News
Amazon said Wednesday it will have a 2% stake in the Grubhub food delivery app, which could increase to 15% over time. Amazon Prime customers will have a free year of Grubhub Plus. Doordash (DASH) fell 5.5% while Uber (UBER), owner of Uber Eats, fell 2%.
Meanwhile, UK competition regulators are investigating whether Amazon’s market practices are “anti-competitive and could result in a worse deal for customers”.
Amazon shares lost a fraction.
Dow Jones futures today
Dow Jones futures fell 0.1% from fair value, ranging from meager gains and losses. Futures S&P 500 and Nasdaq 100 lost 0.1%.
US crude oil futures rose slightly to $ 100 a barrel. Copper futures fell slightly.
The 10-year Treasury yield rose 1 basis point to 2.82%. The two-year yield rose 3 basis points to 2.85%, with the two-to-10 yield curve slightly reversed.
Remember that overnight action on Dow futures and elsewhere does not necessarily translate into actual trading at the next normal stock market session.
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Stock market meeting
The stock market rebound was sold on Tuesday morning, but recovered to finish mixed, at the highs of the session.
The Dow Jones Industrial Average fell 0.4% on the stock market on Tuesday. The S&P 500 index rose 0.2%. The Nasdaq compound rose 1.75%. The small Russell 2000 capitalization bounced 0.8%.
Shares of Apple, a giant Dow Jones, S&P 500 and Nasdaq, rose 1.9%, above its 21-day moving average. Shares of Google rose 4.2% and Amazon 3.6%, also regained the 21-day line and closed on its long 50-day lines. All three megacap technologies are far from actionable.
Fears of recession are affecting financial markets, especially commodities and bonds.
The price of U.S. crude fell 8.2% to $ 99.50 a barrel after falling substantially from the peaks in early June. Gasoline futures fell 9%, continuing a rapid decline. Prices at the pump have fallen 20 days in a row, a trend that should continue.
Copper futures fell more than 4%, extending a long sell-off. Crop futures are falling sharply.
The 10-year Treasury yield fell 16 basis points to 2.81%. The two-year yield fell 2 basis points to 2.82%, meaning the yield curve is now slightly reversed.
Ed Yardeni of Yardeni Research has increased his chances of a recession, albeit shallow and short-lived, from 45% to 55%.
The last batch of key economic indicators suggests weaker matching indicators to come. As a result, we are increasing our chances of a shallow, short-lived recession in the U.S. economy to 55% (45%). This makes the recession now our base scenario from which we derive our earnings and stock market forecasts. ⁇
Despite rising recessionary risks – and the prospect of significantly lower inflation in the coming months – the Fed is still expected to raise rates by 75 basis points at the end of July meeting and 50 basis points at the September meetings. However, markets are only seeing a quarter-point rise in the last two Fed meetings of the year and now see no movement in February 2023.
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ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.15%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose one cent more. The ETF of the iShares Extended Technology Software (IGV) sector gained 2.6%. The VanEck Vectors Semiconductor ETF (SMH) rose 0.6%.
The SPDR S&P Metals & Mining ETF (XME) fell 4.9% and the Global X US Infrastructure Development ETF (PAVE) fell 1.1%. US Global Jets ETFs (JETS) were up 0.2%. SPDR S&P Homebuilders ETF (XHB) gained 2.5%. The Energy Select SPDR ETF (XLE) fell 4% and the Financial Select SPDR ETF (XLF) fell 0.3%. The SPDR Fund for the Selected Healthcare Sector (XLV) sank 0.6%, with UNH shares a significant stake.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) rose 9.1%, above its 50-day line. ARK Genomics ETF (ARKG), which closed on Friday just above its 50 days, rose 8.2% to a two-month high. Ark Invest has some RBLX shares in its ETFs.
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Actions to see
Dollar Tree shares rose 5.5% to 164.84 in volume above average, recovering from the 50-day line and breaking a trend line from the end of April peak, offering a early entry. DLTR shares have a cup base with a handle with an official point of purchase of 166.45. The relative strength line is already at a new high, reflecting Dollar Tree’s superior performance over the S&P 500 index. Archrival Dollar General (DG) is a buying range from its own handle base with handle.
Shares of Privia Health opened lower and then recovered the 21-day line to go up. PRVA shares rose 7.4% to 31.04 in a large volume, briefly reaching an 11-month high of 33.88. The self-described Uber of medical offices is now expanding slightly from a 29.07-cup point of purchase. But investors could treat their recent break above the point of purchase as a high handling with a point of purchase of 30.25. This tall handle could be seen as a regular handle for a longer consolidation since last November.
Shares of Halozyme gained 4.2% to 46.33, recovering from its 50-day line and breaking a short but very sharp downtrend. This could offer an early entry into HALO shares, which has a flat base with a 48.68 buy point on a weekly MarketSmith chart. This flat base could be seen as a handle on a base dating back to February 2021. The RS line for Halozyme shares is at a new high.
Meanwhile, Northrop shares fell 4.5% to 464.36, although they recovered from the 50-day intraday line. Still, NOC shares nearly eliminated the 4.9% gain last week that sparked buy signals.
UnitedHealth shares plunged 2.35% to 505.24, but closed in the top half of their range as they found support on their 50-day line. Although below its 507.35 double-bottom base buy point, UNH shares are still not flashing any sell signals. UnitedHealth could be working on a handle now.
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Analysis of market concentration
Major indices fell sharply shortly after Tuesday’s opening, but rebounded, to varying degrees.
The Dow Jones closed lower, albeit far from its worst levels. The S&P 500 turned positive shortly before the closing bell. The Nasdaq was once again looking for solid gains, with shares of Apple rising, while shares of DDOG, Roblox and Ark-type rose sharply, with falling Treasury yields probably a big boost.
Datadog jumped 7.25% above its 50-day line. Roblox shares rose 14% in high volume to their best level since late April. But these actions are well on their way to maxims.
A stock market rebound is still in effect, although it has been under pressure over the past week.
Shares of Apple, Google and Amazon on Tuesday regained their 21-day lines. All major indices are still below, even though the Nasdaq is close. The 50-day line, early June peaks and many other resistance points are above this level in the short term.
Beyond the risks of another downward stage in the 2022 bear market, seemingly good stocks will blink buy signals, and then fall again rapidly.
Shares of Northrop and UNH fall on this camp, though they may not be over. It was certainly not a good day for defense officials and health insurers.
Despite the hard work of health insurers, medicine remains the leading sector.
Ideally, the stock market would move sideways for an extended period of time. This would allow more stocks to lay the groundwork, while investors would have more clarity about the Federal Reserve and the economy. But the market will do what it does.
What to do now
Tuesday’s stock market action was relatively positive, given fears of the recession worsening at the breasts of bonds and commodities. But the market rebound is under pressure. There are few good stocks to buy or set up, and actionable stocks are prone to sudden setbacks.
Investors who buy, for example, a biotechnology, should keep the position small and be prepared to make quick profits and maintain small losses.
When a sustained market rally is achieved, investors will have many opportunities to increase exposure and let the winners run. For now, the focus should be on preparing for the next bullish market.
Read The Big Picture every day to keep in sync with market leadership and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.
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These discounts are close to the points of purchase as the risk of recession grows