Dow Jones futures tilted higher overnight, along with S&P 500 futures and Nasdaq futures. Midterm election results are coming in while Tesla CEO Elon Musk sold more TSLA shares.
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The stock market rally ran up Tuesday morning, fueled by lower Treasury yields and a declining dollar. The major indexes pared strong gains as Bitcoin and other cryptocurrencies plunged on a surprise Binance-FTX takeover deal. But stocks rebounded somewhat by the close.
Bitcoin-related stocks such as cryptocurrency exchange Coinbase (COIN), trading app Robinhood Markets (HOOD), cryptocurrency custodian Silvergate Capital (SI) and Bitcoin miner Marathon Digital (MARA) sold off.
Looking ahead, the consumer price index looms large.
Key Earnings
Walt Disney (DIS), Occidental Petroleum (OXY), Tesla (TSLA) rival Lucid Motors (LCID) and Array Technologies (ARRY) reported late Tuesday.
Disney stock fell sharply overnight as earnings and fell short, though Disney+ subscriber growth was strong. OXY stock, more than 20% owned by Warren Buffett’s Berkshire Hathaway (BRKB), edged lower on mixed earnings. LCID stock plunged amid weak Q3 results and declining Lucid Air reservations. ARRY stock gapped higher on strong earnings and guidance.
In other news, Meta Platforms (META) will begin sweeping layoffs Wednesday morning, according to multiple reports.
Tesla Stock
Tesla CEO Elon Musk disclosed he sold 19.5 million shares for $3.95 billion on Nov. 4, 7 and 8. That could be to help pay for his recent Twitter deal, though Musk said in early August that share sales then were the last he would need.
Musk’s latest share sales likely helped drive Tesla stock’s recent decline. Increased China subsidies and concerns about Elon Musk’s Twitter reign also may be taking a toll on TSLA stock.
Tesla stock fell 2.9% to 191.30 in Tuesday’s session after tumbling to 186.75 intraday, just above May 2021 lows.
Midterm Elections
Midterm election results are pouring in Tuesday night. Republicans are a virtual lock to retake the House of Representatives. The Senate is up for grabs, but final results in key races could days away.
Either way, President Joe Biden and Democrats will no longer have full control of the White House and Congress. Financial markets tend to do better with gridlock in Washington. Stocks also traditionally fare well in the third year of a presidential term.
So a split Congress could be a positive for Wall Street, and could be good news for defense firms, private prisons and drugmakers. Then again, markets may have already priced some that in.
Dow Jones Futures Today
Dow Jones futures were just above fair value, with DIS stock weighing on blue chips. S&P 500 futures climbed 0.15% and Nasdaq 100 futures rose 0.4%.
The 10-year Treasury yield rose 2 basis points to 4.15%.
China consumer inflation rose less than expected. Wholesale prices fell.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally moved higher Tuesday morning but then gave that back in the afternoon as Bitcoin meltdown spilled over into stocks. The S&P 500 and Nasdaq briefly turned negative before recovering.
The Dow Jones Industrial Average rose 1% in Tuesday’s stock market trading. The S&P 500 index climbed 0.6%. The Nasdaq composite advanced 0.5%. The small-cap Russell 2000 eked out a gain.
Tesla stock sank coming close to its May 2021 lows intraday.
Apple stock and Microsoft edged up 0.4%, Google stock climbed 0.5% and Amazon dipped 0.5%. All are up this week but after tumbling last week.
The 10-year Treasury yield retreated 9 basis points to 4.13%.
The U.S. dollar fell significantly for a third straight day, hitting its lowest levels since late September.
U.S. crude oil prices slumped 3.1% to $88.91 a barrel. Natural gas futures tumbled 11.6%, continuing its huge daily swings.
Bitcoin Dives
Despite the weaker dollar, Bitcoin plunged as the world’s No. 1 cryptocurrency exchange Binance agreed to buy rival FTX, which has faced a liquidity crisis. That are a doubts that the Binance-FTX deal will actually happen, with FTX facing huge withdrawals in the past couple of days. Just a few months ago, FTX and founder Sam Bankman-Fried had looked like potential saviors for other ailing crypto firms.
Bitcoin crashed to $17,484.20, the lowest since November 2020 and is currently trading around $18,500. The pioneer digital currency broke below $20,000 on Monday night. Ethereum, Dogecoin and other cryptocurrencies showed similar or even-bigger losses as well.
The FTX token collapsed 80% Tuesday after massive losses in recent days and weeks.
COIN stock dived 10.8% to a four-month low. Binance buying FTX could forge a major new rival for Coinbase, also reeling from Bitcoin’s woes and concerns about crypto-related enterprises.
HOOD stock, which includes Bankman-Fried as an investor, dived 19%. MARA stock fell 5.3% to the lowest since July. After the close, Marathon Digital reported a wider-than-expected loss while revenue plunged 75%.
SI stock plunged 23% to the lowest since December 2020.
Tesla still owns some Bitcoin, while Elon Musk has held Dogecoin for some time.
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ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.3%, with MSFT stock a key component. The VanEck Vectors Semiconductor ETF (SMH) popped 2.2%.
SPDR S&P Metals & Mining ETF (XME) rallied 1.9%. The Energy Select SPDR ETF (XLE) edged up 0.1%. The Health Care Select Sector SPDR Fund (XLV) climbed 0.5%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) edged down 0.4% and ARK Genomics ETF (ARKG) rose 1.4%. Tesla stock remains a top holding across Ark Invest’s ETFs.
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Market Rally Analysis
The stock market rally looked heavy damaged last Thursday in the wake of Fed chief Jerome Powell’s hawkish comments. But it’s bouncing back over the past three sessions, even with Bitcoin’s woes.
The Dow Jones cleared last week’s high after reclaiming its 200-day line on Monday.
The S&P 500 rose moved a little higher above its 50-day line, though it’s still below its Nov. 1 short-term high.
The Nasdaq, weighed down by Tesla and tech woes, hit resistance at its 21-day moving average. It’s still below its 50-day and far from its 200-day lines.
But the Direxion Nasdaq-100 Equal Weighted ETF (QQQE) rose just over 1% to edge above its 50-day line.
Falling Treasury yields helped lift stocks on Tuesday, while a tumbling dollar has been a key driver in the last three sessions.
Midterm election results could spur market moves, but Thursday’s CPI inflation report may be key. A tame CPI reading could fuel hopes for slower Fed rate hikes and a lower peak rate. But yet another hot inflation figure could trigger heavy selling in stocks and bonds.
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Leading Stocks
There weren’t a lot of new buying opportunities Tuesday.
GlobalFoundries (GFS) surged above a trendline and a just-too-low handle following earnings.
Albemarle (ALB) cleared an early entry, but quickly and ran up to its official buy point, closing just below that key level. However, ALB stock is well above its 50-day line after a huge move from the Nov. 3 intraday lows.
Crocs (CROX) briefly retook a buy point while UnitedHealth (UNH) closed in buy range.
Several LNG stocks are near buy points.
Tech weakness is still a concern. Chip stocks are rebounding, with the SMH ETF convincingly above the 50-day line. Megacap techs such as Apple (AAPL) are trying to bounce, but after huge sell-offs. The same goes for cloud software.
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What To Do Now
The stock market rally is showing resilience after last week’s sharp losses, with the Dow Jones and S&P 500 retaking key levels. Investors may still want to be cautious, with the CPI inflation report looming. Also, there aren’t a lot of stocks currently actionable, though many are setting up.
Investors should be ready to take action, by staying engaged and building up your watchlists. Growth stocks are still generally out of favor, so make sure you’re casting a wide net to find stocks and sectors that are emerging leaders.
Definitely be aware of earnings, which remain active. Some stocks have been big earnings winners, while others rebound powerfully after initially tumbling. But there have been some high-profile sell-offs as well, as Disney and Lucid stock showed overnight.
Read The Big Picture every day to stay in sync with the 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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