On Tuesday night, Dow Jones futures, S&P 500 index futures and Nasdaq futures all moved higher. As US Treasury Secretary Janet Yellen warned that the government’s default is imminent next month, US Treasury yields rose and the stock market rebounded sharply. Micron’s earnings were the focus of attention overnight.
X
The S&P 500 Index and the Nasdaq Composite Index plunged below the 50-day moving average, indicating that the characteristics of the stock market rebound have changed.
Leading stocks look worse, and the innovator IBD 50 ETF (FFTY) is expected to record its worst weekly decline since the coronavirus crash.
Tech giants, growth leaders plummet
Tech giants such as Microsoft (MSFT), the parent company of Google letter (Google), while Apple (Apple) Facebook (FB) and Amazon.com fell below recent lows or set recent closing lows, and Nvidia (NVDA), Asmer (ASML), Applied Materials (AMAT) and Serve immediately (now).
Cloud flare (NET) fell to the 50-day SMA on Monday and plunged 7.9% on Tuesday, decisively breaking through the 50-day SMA. NET stock has fallen by 17% in the past four trading days because many software names are under heavy pressure. From biotechnology to testing companies to system manufacturers, medical product stocks continue to struggle.even model Freed from the recent market weakness (INMD) plunged 13%.
Energy stocks performed well. Although crude oil fell from multi-year highs and closed slightly lower, it still maintained its recent gains. Financial stocks also performed well, supported by rising Treasury yields.
ASML, Microsoft, Google, ServiceNow and Nvidia stocks are all on the IBD rankings. Microsoft, ServiceNow, ASML and Google stock are all long-term leaders of IBD, and several others have also experienced difficult meetings.
The video embedded in the article highlights Microsoft, ASML and NET stocks.
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Janet Yellen U.S. Default Warning
Treasury Secretary Yellen told the Senate Banking Committee that the United States is likely to default without raising the debt limit before October 18, and gave a specific date for the first time. At the same time, the government will face a partial shutdown after September 30 with no new funds. Senate Republicans blocked an increase in the debt limit and short-term financing measures on Monday night, saying they want the Democrats to raise the debt limit on their own.
All of this happened when House Speaker Nancy Pelosi planned to vote on the bipartisan infrastructure bill on Thursday. It is not yet clear whether a handful of Republican supporters will offset the defections of the left-wing Democrats, who hope that the infrastructure bill will be linked to a large tax and spending settlement plan that is far from complete.
At the same time, Fed Chairman Jerome Powell and Treasury Secretary Yellen testified at the same Senate banking hearing that inflation will remain at a higher level for longer than previously expected.
Looking ahead, the Fed and the European Central Bank are gradually reducing the scale of asset purchases, but the actual interest rate hike may be one year ahead of schedule.
All of this will help push up U.S. Treasury yields. The 10-year U.S. Treasury bond yield rose by 5 basis points to 1.53%. During the session, the 10-year Treasury bond yield was close to 1.57%, the highest since June.
Micron earnings
Micron Technology (MU) Earnings announced on Tuesday night were better than expected. But the memory chip giant fell sharply.
Micron shares fell 3% overnight. The stock price fell 2.8% to 73.10 on Tuesday, returning below the 50-day line. Since mid-April, MU stock has been in a downward trend.
Micron’s prospects do not bode well for semi-finished products or the overall market rebound, but for applied materials and Forest Research (LRCX). There is little change in AMAT stock and Lam Research in the extended transaction. AMAT shares fell 6.9% on Tuesday, returning below its 50-day line. LRCX shares fell 5% and closed below its 50-day and 200-day antenna.
Dow Jones Futures Today
Dow Jones futures rose 0.1% relative to fair value. Standard & Poor’s 500 index futures rose 0.1%. Nasdaq 100 futures rose slightly.
After the American Petroleum Institute reported an unexpected increase in U.S. inventories last week, crude oil prices, which were slightly lower on Tuesday, fell back overnight. The US Energy Information Administration will release official crude oil and gasoline supply and production data on Wednesday morning.
Keep in mind that overnight movements in Dow Jones Index futures and elsewhere will not necessarily translate into actual transactions in the next regular stock market trading session.
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The stock market rebounded on Tuesday
Amid the widespread sell-off, the stock market rebounded weakly and closed weaker.
The Dow Jones Industrial Average fell 1.6% in Tuesday’s stock market trading. The Standard & Poor’s 500 Index fell 2%. The Nasdaq Composite Index fell 2.8%, the biggest drop since March. The small-cap Russell 2000 Index fell 2.25%.
Apple’s share price fell 2.4%, which was not completely lower than last week’s intraday low, but set its worst closing price since July 2. At that time, AAPL’s stock price broke through the bottom of the cup.
Microsoft shares fell 3.6%, and Google shares fell 3.7%, both falling below the 50-day line and last week’s low.
FB stock fell below its 50-day line on September 20 and has been falling back. On Tuesday, it fell 3.7%, lower than last week’s low.
AMZN, which is still struggling to recover from the disappointing second-quarter earnings report, fell 2.6% to return to the 200-day line.
NVDA’s stock price fell below its 50-day line and last week’s low, falling by 4.4%. ASML’s stock price became a large-cap semiconductor superstar in 2021, and it gapped down by 6.6%. This is the first decisive 50-day reserve price since March.
NOW shares fell 5.7% and closed below the 50-day line for the first time since early June.
ETF
Among the best ETFs, Innovator IBD 50 ETF (FFTY) fell 5.4%, while Innovator IBD Breakout Opportunities ETF (BOUT) fell 3.9%.
The iShares Expanded Tech-Software Sector ETF (IGV) fell 3.6%, falling below the 50-day line to the lowest level since the rebound on August 19. MSFT stock and ServiceNow are key components of IGV, and NET stock is also a shareholding. VanEck Vectors Semiconductor ETF (SMH) fell 4%. Nvidia stock and chip equipment manufacturers ASML, AMAT, and LRCX are all notable components.
In addition to growth, industry ETFs generally fell, but the decline was small.
The SPDR S&P Metals & Mining ETF (XME) fell 0.5%, and the Global X US Infrastructure Development ETF (PAVE) fell 1.5%. The US Global Jet ETF (JETS) fell 1.3%. SPDR S&P Homebuilders ETF (XHB) fell 2.5%. Energy Select SPDR ETF (XLE) rose slightly by 0.3%, while Financial Select SPDR ETF (XLF) fell 1.65%.
ARK Innovation ETF (ARKK) gave up 3.8% and ARK Genomics ETF (ARKG) gave up 4.2%, reflecting the more speculative story of stocks. ARKK is at its lowest level since early June, while ARKG is approaching its May low.
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Market rebound analysis
The stock market rebounded late last week that looked like a recovery, but now it shows that the major stock indexes and leading stocks are actually hurt. The S&P 500 Index has been finding support at its 50-day line for several months and now appears to be encountering resistance at key levels. The Nasdaq Index did not completely undercut last week’s lows — the large-cap stock Nasdaq 100 Index did — but closed near the intraday low, the worst closing price since August 19.
Despite the energy and financial components, the Dow Jones and the small-cap Russell 2000 index still fell sharply. The Dow Jones Index is moving away from its 50-day line, and the Russell 2000 Index closed below a fraction of that key level.
FFTY did not break below the 50-day line, but it has fallen by 7.6% so far this week. That’s right, it’s only Tuesday, and FFTY is suffering its worst weekly loss since the coronavirus crash in March 2020. From the master to the backbone of the organization, growth brands are being hit hard. Even companies that have been looking for key support, such as NET stocks, ASML, Microsoft and Google, have not done so now.
Energy, fertilizer, finance and tourism-related stocks performed relatively well. Perhaps we are in the midst of an industry rotation for growth stocks, although there is a big difference between the rotation in the overall upward trend and the rotation when the market is down. In addition, the fall in energy prices and Treasury yields is not surprising, even if only in the short term.
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What to do now
If you hold stocks that perform well, especially in energy, banking, or other seemingly healthy industries, you may not need to take any action. But for growth stocks and your overall investment portfolio, you need to take a defensive approach. The recent breakout or 50-day SMA rally has failed. The big winners are cutting revenue. It’s time to reduce your exposure and wait for a healthy market to rebound.
The stock market rebound may rebound soon, with major stock indexes roaring above the 50-day line. Even so, in this case, investors should gradually scale down.
But for now, focus on defense. But you should always be ready to attack. Modify your watch list again.
Read the big picture every day to keep up with the market direction and leading stocks and industries.
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