Dow Jones futures fell Thursday morning, along with S&P 500 futures and Nasdaq futures. Tesla stock fell on new price cuts Thursday, signaling another test of key levels. Walmart (WMT), Twilio (TWLO), Tilray (TLRY) and Fastly (FSLY) were key earnings movers.
The stock market rally had a mixed session Wednesday, with the Dow Jones hitting record highs while many growth names struggled, though they pared losses. Tesla (TSLA) rebounded Wednesday from key support as ARK Funds’ Cathie Wood said she’s been buying more Tesla stock as “our confidence in Tesla has grown.”
But overnight Tesla announced price cuts for its base Model 3 and Model Y in the U.S., along with sharp price cuts in Japan. Price cuts have been common for Tesla, in a sign of weakening demand. Tesla stock fell modestly early Thursday, back toward key levels.
Apple (AAPL) closed below support on Wednesday and kept sliding before Thursday’s open.
Meanwhile, communications software maker Twilio, Canadian pot producer Tilray, edge networking leader Fastly, Chinese search giant Baidu (BIDU), genomics tools maker 10X Genomics (TXG), fertilizer specialist Mosaic (MOS), lithium miner Albemarle (ALB) and chip design software maker Synopsys (SNPS) were key earnings late Wednesday.
Twilio stock was a big winner overnight, while Mosaic rose modestly and Tilray pared overnight gains. ALB stock, Baidu and Synopsys fell slightly. Walmart and Fastly stock retreated solidly while TXG stock was not active.
Generally these stocks are not close to buy points, either being too extended or well off highs. Mosaic stock cleared a short consolidation on Tuesday.
Apple stock and Tesla are on IBD Leaderboard.
Dow Jones Futures Today
Dow Jones futures fell 0.4% vs. fair value. S&P 500 futures sank 0.4%. Nasdaq 100 futures retreated 0.7%, with Tesla and Apple weighing on tech futures.
The Bitcoin price surged above $52,000 on Wednesday, a day after topping $50,000 for the first time. Bitcoin traded below $52,000 early Thursday. Ark Funds’ Wood, who has been buying Bitcoin-related plays, said the cryptocurrency could hit $200,000 if more corporations join Tesla in buying Bitcoin.
Cumulative coronavirus cases worldwide reached 110.51 million. Covid-19 deaths topped 2.44 million.
Coronavirus cases in the U.S. have hit 28.45 million, with deaths above 502,000.
Fed Signals No Bond Taper For ‘Some Time’
Strong retail sales and other economic data early Wednesday appeared to undercut growth stocks around the open. A stronger economy is good news, all things being equal. However, the strong reports ease pressure to pass a huge new stimulus, though a big package is still likely. Also, the 10-year Treasury yield has been surging in recent weeks, moving slightly higher on Wednesday.
However, the Federal Reserve isn’t in any hurry to take the punchbowl away. Federal Reserve officials didn’t expect to start scaling back their huge asset-buying program for “some time,” minutes from the January Fed meeting showed on Wednesday. While some Fed officials may have concerns about asset prices, Fed chief Jerome Powell and the central bank are focused on reviving economic growth and employment. The Fed meeting minutes made it clear that policymakers will keep pouring cheap money into financial markets and the economy.
Stock Market Rally Wednesday
The stock market rally started off poorly, at least for growth stocks, getting worse as the morning went on. But ARK Funds’ Wood talked up Tesla stock. At 2 p.m. ET, the Fed meeting minutes were released.
The Dow Jones Industrial Average rose 0.3% in Wednesday’s stock market trading as industrials, financials, fertilizer makers and other real economy stocks fared well. The S&P 500 index closed just below fair value. The Nasdaq composite fell 0.6%, near session highs after tumbling 1.7% intraday.
Tesla Price Cuts
Tesla cut the price of its Model 3 Standard Range Plus to $36,990 from $37,990.while the Model Y SR+ price is now $39,990, down from $41,990. The Model SR+ was launched in January. Even at the new, lower price, the Model Y SR+ is more expensive than the Ford Mustang Mach-E and the soon-t0-launch ID.4.
Meanwhile, Tesla raised the price of the Performance variant of the Model 3 and Model Y by $1,000, to $55,990 and $60,990 from $59,990.
In Japan, Tesla slashed Model 3 prices by as much as 24%.
Tesla has cut European prices multiple times in the past few months.
Tesla stock fell 2% before Thursday’s open, suggesting a move back to the 10-week line.
On Wednesday, Tesla stock fell as low as 762.08 intraday, nearly touching its 50-day line and undercutting the 10-week average. But shares rallied to close up 0.2% to 798.15. Wood said she’s still buying shares of the EV maker. Wood also again expressed “confidence” in Tesla’s potential for ride-hailing and self-driving. She has been a longtime booster of Tesla’s self-driving efforts, even as autonomous experts step up criticism and more rivals test actual self-driving vehicles.
This is TSLA stock’s first 50-day/10-week test since its November breakout. That could be a buying signal, though Thursday’s premarket action isn’t hopeful. However, Tesla stock remains below its 21-day exponential moving average, an area of resistance in recent days.
Apple stock fell 1.8% to 130.84 on Wednesday, closing below its 50-day and 10-week lines. Shares are sliding further and further from a 138.89 cup-with-handle buy point. The relative strength line for Apple stock continues to fade. It’s not flashing a huge sell signal yet — it’s just 1.2% below its 10-week line — unless you’re down 7%-8% on your purchase price.
Apple stock fell 1% early Thursday.
Growth stocks had a rough outing, with richly valued software names and speculative stocks taking hits, even though they pared losses.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) sank 1.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 2%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 1%. The VanEck Vectors Semiconductor ETF (SMH) sank 1.9%.
Walmart earnings fell short of views while revenue and same-store sales beat. The Dow Jones retail giant gave modest guidance. Walmart stock fell 5%.
Twilio earnings beat views while revenue guidance was strong. Twilio stock leapt 10% early Thursday, signaling a record high. TWLO stock sank 2.3% on Wednesday to 411.65.
Tilray reported a smaller-than-expected loss, including a slim EBITDA profit, while sales narrowly beat. Tilray stock rose 5% in premarket trade, off overnight highs amid multiple analyst downgrades. TLRY stock tumbled 9% to 31.51 on Wednesday, far below its Feb. 10 peak of 67.
Fastly earnings narrowly beat quarterly views but its guidance ranged from in line to slightly below consensus. FSLY stock retreated 6% in overnight trade. Fastly stock sank 2.7% to 94.85 on Wednesday, a fifth straight decline. Shares have been in a wide-and-loose consolidation that looks more suspect in the current stage of the stock market rally.
Baidu earnings easily topped forecasts but sales missed. Baidu stock fell 2% early Thursday, reversing modest overnight gains. BIDU stock dropped 5.4% on Wednesday, snapping an 11-day winning streak that rose to a record high.
10X Genomics reported a huge loss but sales rose 49%, topping views. 10X stock was not yet active overnight. TXG stock sank 2.5% on Wednesday after reversing lower from a record high on Tuesday.
Mosaic earnings easily beat the consensus. MOS stock climbed 2% in extended action. Mosaic stock dipped 0.7% on Wednesday after clearing a short consolidation on Tuesday.
Synopsys earnings beat fiscal Q1 views. SNPS stock dipped 1% overnight. Synopsys slid 2.4% on Wednesday after reversing lower from a record high Tuesday. SNPS stock is extended from a 246.79 flat-base buy point, according to MarketSmith analysis.
Albemarle earnings topped forecasts. ALB stock fell 2% in extended trade. Albemarle stock fell 2.9% on Wednesday, undercutting its 50-day line after reversing lower Tuesday to below its 21-day line. Investors could buy an ALB stock rebound from the 50-day line, but should probably wait for a move above the 21-day or even Tuesday’s intraday high of 171.35.
Stock Market Rally Analysis
Whether you want to call Wednesday’s session a pullback or rotation, the stock market rally saw movement out of leading stocks Wednesday.
Is this just another 1-day pause or the start of a one-week pullback or something more serious? The Nasdaq is now 6.2% above its 50-day moving average. That’s off recent highs but still slightly extended. The Nasdaq didn’t even close below its 10-day line. A retreat to the 21-day exponential moving average or even the 50-day line could still be seen as a relatively modest pullback, especially if the market bounced back. However, there’s always the possibility that this pullback will be deeper and longer lasting.
The Nasdaq never touched its 21-day line Wednesday, but many growth names were down 5% or more, adding to Tuesday’s losses.
Market Playtime Is Over
Powerful stock market rallies are great, but they can breed bad habits. Over the past 10 months, if you leveraged hard, bought the hottest names, added on pullbacks and didn’t worry about messy consolidations, then your portfolio saw huge gains.
Investors who bought the dip in the Nasdaq or Tesla stock were rewarded once again on Wednesday, at least for a few hours. Perhaps growth stocks will run right back to record highs yet again.
But if you trade like it’s a wild, unstoppable stock market rally long term, your portfolio is going to blow up.
It’s time to buckle down and adopt some proper sell rules and focus on top stocks building good-looking bases.
Remember, those top stocks and quality bases may not be in traditional growth names. If nothing else, investors should expand their horizons to cyclicals and financials.
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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