Dow Jones futures rose early Wednesday, along with S&P 500 futures and Nasdaq futures. Robinhood Markets, Lyft Akamai Technologies and Airbnb headlined overnight earnings.
The stock market rally saw sharp losses Tuesday following a hot CPI inflation report and negative earnings reactions from Shopify, Arista Networks and others. The major indexes came off opening lows, but faded to fresh session lows in the afternoon. Some leaders rebounded bullishly, but market breadth was very weak.
The Dow Jones undercut a key short-term level with the S&P 500 and Nasdaq nearing that test.
Arista stock is on the IBD 50. The video embedded in the article discussed Tuesday's market action and analyzed Shopify stock, Copart and MercadoLibre.
Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures climbed 0.6% and Nasdaq 100 futures advanced 0.8%.
The 10=year Treasury yield dipped to 4.3% after surging Tuesday.
Bitcoin rose above $51,000, a two-year high, continuing its recent run.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze leading stocks and the market on IBD Live
Earnings
Lyft earnings and guidance impressed. Shares initially gapped up more than 50% Tuesday night until Lyft's CFO said the report greatly overstated the ride-hailing firm's margin expansion forecast for 2024. Lyft stock is still set to jump more than 20%, gapping above the 50-day line and moving toward a 15.95 buy point. On Tuesday, Lyft fell 2.2% to 12.13 on Tuesday.
Lyft rival Uber Technologies announced a first-ever buyback of $7 billion. Uber stock rose more than 4%.
Airbnb earnings appeared to beat views late Tuesday. But ABNB stock fell solidly in extended trade. Shares fell 1.9% to 150.82 in Tuesday's regular session, back below a 153.68 handle buy point. Airbnb stock came off intraday lows of 148.58.
Robinhood earnings beat views, with cryptocurrency transaction revenue up 10%. HOOD stock jumped 15% in premarket trade. Shares slipped 1.4% on Tuesday to 11.84, but rebounding from just below the 50-day moving average. That ended a strong five-day rally for Robinhood stock, which has an official 13.51 buy point.
Akamai earnings were mixed, with revenue guidance light. AKAM stock declined solidly before the open. Shares fell 2.4% to 125.05 on Tuesday, still close to Friday's record high.
Allison Transmission earnings and revenue beat, with growth accelerating. The transmission maker gave positive 2024 guidance. Allison Transmission stock is set to gap up more than 20%, vaulting above a buy zone. ALSN stock fell just over 2% on Tuesday to 61.54, just holding above a 61.53 buy point.
Zillow Group earnings topped. Shares climbed solidly in extended action. Zillow stock fell below its 50-day line on Tuesday, sliding 2.9% to 53.88.
Stock Market Rally
The stock market rally suffered sharp losses after the January consumer price index came in hotter than expected, which pushed Treasury yields higher and Fed rate cut odds lower. Shopify, Arista Networks, Datadog and Marriott Worldwide retreated on earnings or guidance.
The Dow Jones Industrial Average tumbled 1.35% in Tuesday's stock market trading, undercutting its 21-day line after initially finding support there. The S&P 500 index slumped 1.4% and the Nasdaq composite lost 1.8%, both skidding toward their 21-day average until the final minutes of the session.
Market breadth was very weak, with losers outpacing winners by 11-to-1 on the NYSE and nearly 5-to-1 on the Nasdaq.
The small-cap Russell 2000 tumbled nearly 4%, but closing fractionally above the 50-day line.
The Invesco S&P 500 Equal Weight ETF fell 1.7%, below its 21-day line but rebounding in the final minutes from the 50-day line. The First Trust Nasdaq 100 Equal Weighted Index ETF retreated 1.8%. but rallied back above its 21-day.
Leading stocks, with some exceptions like Shopify, fought a good fight, often rebounding from key levels. But many faded in the afternoon.
The 10-year Treasury yield surged 14.5basis points to 4.315%, the highest settlement since Nov. 30. Markets now expect the first Fed rate cut in June. Investors only see four rate cuts in 2024, with that fourth cut by no means locked in.
U.S. crude oil prices rose 1.2% to $77.87 a barrel.
Was Tuesday's retreat a one-off or the start of a more-serious pullback? A Nasdaq test of the 21-day would not be surprising, but the major indexes don't have to stop there. A slide to the 50-day moving averages, or worse, would likely trigger significant losses in growth stocks.
A lot will depend on economic data and key earnings over the next week or so, with Nvidia due on Feb. 21.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF slid 2.2%. The VanEck Vectors Semiconductor ETF gave up 1.85%.
Reflecting more-speculative story stocks, ARK Innovation ETF tumbled 5.6% and ARK Genomics ETF 7%.
SPDR S&P Metals & Mining ETF xx%. SPDR S&P Homebuilders ETF slumped 3.2%. The Energy Select SPDR ETF gave up 1% and the Health Care Select Sector SPDR Fund declined 0.9%.
The Industrial Select Sector SPDR Fund fell 1%. The Financial Select SPDR ETF shed 1.35%. The SPDR S&P Regional Banking ETF slumped 4.2%
Time The Market With IBD's ETF Market Strategy
Market Rally Analysis
The stock market rally suffered significant losses Tuesday.
Investors should look over their positions and see which stocks held up and rebound and which closed low in their ranges.
The weaker names could be your first to cut, especially if the market pullback continues. A deeper pullback or correction would likely end up hitting nearly all the growth leaders, even those that held up well Tuesday.
So you want to have your exit strategies ready. But a pullback also could create new buying opportunities, so you want to have watchlists up to date.
It's definitely a time to be engaged with the market and ready to act.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
