The Dow Jones fell modestly early Wednesday, with the S&P 500 and Nasdaq near a key level amid stronger-than-expected economic data. Meanwhile, Roku and GitLab were early winners. Meta stock and Tesla retreated from key levels and possible entries.
The stock market rally lost modest ground Tuesday as Treasury yields rebounded. The major indexes didn't fall too hard thanks to megacaps such as Microsoft, Meta Platforms and especially Tesla. But market breadth was noticeably weak as The Dow Jones and Russell 2000 indexes fell back below their 50-day lines.
Meta, Tesla and MSFT stock, along with General Electric and MongoDB are trading close to buy points.
Early Movers
Early Wednesday, Roku said it will cut 10% of staff and raised its third-quarter revenue outlook to a range of $835 million to $875 million from its prior target of $815 million. Analysts had expected $829 million. The streaming media play also sees a smaller adjusted loss in earnings before interest, taxes, depreciation and amortization, or EBITDA. ROKU stock gapped up 8%, but off early highs.
Late Tuesday, software makers Zscaler and Asana reported earnings, along with software developers platform GitLab.
ZS stock sank more than 2% Wednesday, despite better-than-expected Zscaler earnings and a strong outlook. Zscaler stock has formed a choppy consolidation with an entry around 162.67 or 164.29. ZS stock climbed 275% to 162.74 on Tuesday.
Asana stock plunged 13% even though earnings topped estimates. The work management software maker has a 26.27 consolidation buy point. ASAN stock edged up 5 cents to 21.64 on Tuesday, just below the 50-day line. Asana earnings could be important for peers Monday.com and Smartsheet, with the latter reporting on Thursday.
GTLB stock popped 3% on surprise GitLab earnings and revenue above views. Shares climbed 1.2% to 49.74 on Tuesday. GitLab stock has a 54.60 buy point from a cup base within a larger consolidation.
META stock is on IBD Leaderboard. Microsoft stock is on the IBD Long-Term Leaders list. MDB stock and Zscaler are on the IBD 50.
The video embedded near the top of this article discusses Tuesday's market action and analyzes Oracle, Toll Brothers and GE stock.
Dow Jones Today
The Dow Jones fell 0.5%. The S&P 500 retreated 0.8% and the Nasdaq declined 1%.
The Dow is falling further below its 50-day line. The S&P 500 is undercutting that key level, while the Nasdaq is just above its 50-day.
Stocks extended losses after a surprisingly strong ISM services index at 10 a.m. ET. The ISM services index rose 1.8 points to 54.5, defying expectations for a 0.3 point fall to 52.4. Readings over 50 signal growth.
The 10-year Treasury yield edged up to 4.29%.
At 2 p.m. ET, the Federal Reserve will release its Beige Book report of anecdotal economic conditions.
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Stock Market Rally
The stock market rally felt the impact of rising Treasury yields Tuesday, though the Nasdaq in particular resisted the selling.
The Dow Jones Industrial Average fell 0.6% in Tuesday's stock market trading. The S&P 500 index retreated 0.4%, with TSLA stock the No. 1 performer. The Nasdaq composite edged down 0.1%. The small-cap Russell 2000 tumbled 2.1%.
U.S. crude oil prices climbed 1.3% to $88.69 a barrel as Saudi Arabia said it would extend its voluntary production cut of 1 million barrels per day through the end of the year. Crude futures have surged 9.9% in an eight-session win streak.
The 10-year Treasury yield popped 9 basis points to 4.27% after a similar gain Friday.
With U.S. yields rising and more weak economic data out of China and Europe, the dollar had another strong session.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF fell 0.5%. The iShares Expanded Tech-Software Sector ETF advanced 0.45%, with Microsoft stock a major component. The VanEck Vectors Semiconductor ETF rose 0.2%.
Reflecting more-speculative story stocks, ARK Innovation ETF climbed 0.9% while ARK Genomics ETF fell 1.8%. Tesla stock is the No. 1 holding across Ark Invest's ETFs.
SPDR S&P Metals & Mining ETF retreated 1.3% and the Global X U.S. Infrastructure Development ETF slumped 2.7%. U.S. Global Jets ETF descended 1.7%. SPDR S&P Homebuilders ETF sold off 3.9%. The Energy Select SPDR ETF climbed 0.5% and the Health Care Select Sector SPDR Fund gave up 1%.
The Industrial Select Sector SPDR Fund fell back 1.7%, with GE stock a significant XLI component.
The Financial Select SPDR ETF sank 1%. The SPDR S&P Regional Banking ETF lost 2.3%.
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Stocks Near Buy Points
Microsoft stock lost a fraction Wednesday morning. Shares rose 1.5% on Tuesday to 333.55, moving above the 50-day moving average for the first time in a month. But it wasn't a decisive move above that key level and Tuesday's volume was light. With a little more strength, the Dow Jones tech titan could be actionable. MSFT stock has a 336.78 consolidation buy point, according to MarketSmith analysis.
META stock flirted with an early entry, but reversed slightly lower, back below the 50-day. Shares climbed 1.3% to 300.12 on Tuesday, finally closing above the 50-day after hitting resistance there for several sessions. Investors could use a move above Friday's high of 301.74 as an early entry. The internet giant is on track to have a base with a 326.29 buy point at the end of this week.
Tesla stock fell nearly 4% Wednesday morning, back below the 50-day. Shares bounced from the 21-day moving average on Tuesday and just retook the 50-day with a 4.7% pop to 256.49. Shares tumbled 5.1% on Friday after Tesla unveiled a Model 3 upgrade in China but also slashed Model S, Model X and Full Self-Driving prices. Investors could use last week's high of 261.18 as an early entry for TSLA stock, which has a 299.29 official buy point.
GE stock climbed slightly Wednesday morning. General Electric on Tuesday fell 1.2% to 112.88, nudging below the 21-day line and just above the 50-day/10-week lines. General Electric has a 117.96 buy point from a flat base, its first real consolidation since a January breakout. Investors could use 115.85 as an early entry for GE stock.
MongoDB stock fell more than 1%. On Tuesday, MDB stock edged up 0.3% to 394.13, holding the 50-day line. On Friday, shares gapped up on strong earnings, hitting 414 intraday. But MDB stock closed up 3% to 392.88, near session lows. The database software firm has a 439 buy point, but investors could use Friday's high as an early entry from the 50-day and a trendline.
Market Rally Analysis
On Tuesday, the stock market rally showed resilience in the face of higher Treasury yields, at least on the surface. Tesla stock and other megacaps limited losses in the major indexes.
But breadth was anemic, especially given the relatively slim losses on the big-cap indexes. Losers led winners by nearly 3-to-1 on the Nasdaq and by 7-to-2 on the NYSE. New lows beat new highs.
The Russell 2000 tumbled back below its 50-day line. The Invesco S&P 500 Equal Weight ETF skidded 1.2%, far worse than the S&P 500, after closing a whisker below the 50-day on Friday.
The Dow Jones fell slightly below its 50-day.
The Nasdaq and S&P 500 still have some distance above the 50-day line, but not that much.
Energy stocks did well while the broad tech sector held up OK. But housing plays had a rough outing, with homebuilders and related names among the biggest losers Tuesday. Steelmakers, industrials and travel plays also retreated.
Clearly, stocks are taking their inverse cues from Treasury yields. If yields continue to rise, the market rally is likely to run into trouble.
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What To Do Now
With losers dominating Tuesday, there weren't many buying opportunities, a shift from last week. But many stocks are on the cusp of being actionable, including Tesla, Meta, GE and a number of others. Make sure they are on your watchlists.
Be ready to keep adding exposure, but don't get stuck in a bullish mindset. You have to be prepared to step back if the market or a specific position falters.
Further, read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on X/Twitter at @IBD_ECarson for stock market updates and more.
