Dow Jones futures rose modestly early Wednesday, along with S&P 500 futures and Nasdaq futures, with crude oil prices and bond yields continuing to climb. The stock market suffered sharp losses once again on Tuesday, as the 10-year Treasury yield jumped to a fresh two-year high.
The Nasdaq, Russell 2000 and Dow Jones broke below recent lows, while the S&P 500 suffered sharp losses in a broad market sell-off.
Apple stock, Qualcomm, CF Industries, Builders FirstSource and Advance Auto Parts are five stocks trying to find support at their 50-day or 10-week line. Apple retreated back to its 10-week line, while QCOM stock and Builders FirstSource found support at their 50-day lines. CF Industries and, to a lesser extent, AAP stock bounced off those key levels.
None of these stocks is actionable, given the current market environment, though CF stock is flashing some positive signals. But all are worth watching closely. The relative strength lines are strong for all five names.
Key Earnings
J.B. Hunt Transportation Services reported earnings after the close. The trucking firm comfortably beat views, with EPS up 58% and revenue up 28%. JBHT stock edged higher early Wednesday. Shares dipped Tuesday but have found support at their 50-day line in recent sessions, unlike many other trucking stocks. The RS line for J.B. Hunt is at new highs.
UnitedHealth Group topped fourth-quarter views early Wednesday. Shares of the Dow Jones health insurer were little changed in premarket action. UNH stock was a strong performer in late 2021, but has retreated this year, falling below its 50-day line.
ASML reported better-than-expected Q4 earnings but revenue was light. The Dutch chip-equipment giant sees 2022 revenue of 20%, saying demand is well above capacity. ASML stock rose modestly before the open. Shares have fallen below their 50-day and 200-day lines, following a long, powerful run.
Bank of America earnings topped views, but revenue came up short. Shares climbed modestly before the open. Money center banks have struggled during earnings season.
Morgan Stanley topped Q4 EPS forecasts, though revenue was just below views. Shares of the investment bank were flat after tumbling Tuesday following disappointing results from Goldman Sachs.
Procter & Gamble narrowly topped Q4 views, with the Dow consumer products giant also raising 2022 sales targets. P&G stock edged higher.
JBHT stock and BLDR stock are on the IBD 50. ASML stock is on IBD Long-Term Leaders.
The video embedded in this article analyzes the market action as well as Apple stock, Builders FirstSource and CF Industries.
Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures advanced 0.5% and Nasdaq 100 futures climbed 0.6%.
The 10-year Treasury yield rose to 1.87%, but off overnight highs U.S. crude oil prices rallied above $86 a barrel, but off overnight highs above $87 as an explosion took an Iraq-Turkey pipeline offline.
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 Tuesday
The stock market started off weak and stayed that way. The Dow Jones Industrial Average fell 1.5% in Tuesday's stock market trading. The S&P 500 index sank 1.8%. The Nasdaq composite dived 2.6%. The small-cap Russell 2000 plunged 3.1%.
The 10-year Treasury yield soared more than 9 basis points to 1.865%, hitting a two-year high. U.S. crude oil prices climbed 1.9% to $85.43 a barrel, the highest close since 2014.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF tumbled 4%, while the Innovator IBD Breakout Opportunities ETF skidded 2.5%. The iShares Expanded Tech-Software Sector ETF fell 1.8%. The VanEck Vectors Semiconductor ETF gave up 4.5%, with QCOM stock a notable holding.
SPDR S&P Metals & Mining ETF lost 1.6%, and Global X U.S. Infrastructure Development ETF shed 2.1%. The U.S. Global Jets ETF descended 1.8%. SPDR S&P Homebuilders retreated 2.85%. The Energy Select SPDR ETF eked out a 0.4% gain, and the Financial Select SPDR ETF fell 2.2%. The Health Care Select Sector SPDR Fund declined 1.4%
Reflecting stocks with more speculative stories, the ARK Innovation ETF retreated 4.15% and ARK Genomics lost 5.6%. Both are trading at 18-month lows.
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Market Analysis
The stock market suffered another punishing loss Tuesday, easily wiping out Friday's rebound from lows, as soaring Treasury yields rocked Wall Street again.
The Nasdaq composite closed below its 200-day moving average for the first time since April 2020, and undercut the Jan. 10 intraday lows. The next obvious support area would be the early-October low.
The S&P 500, already below its 50-day line, also undercut last week's lows. The Dow Jones gapped below its 50-day line and recent lows. The Russell 2000 slumped to its lowest levels since March, close to undercutting a yearlong consolidation.
Losses were broad and deep. Losers crushed winners, with growth stocks pummeled once again.
Many energy stocks reversed lower Tuesday even as crude oil and natural gas prices rose yet again.
Financials slumped, despite soaring Treasury yields. A lot of that had to do with Goldman Sachs selling off on its earnings miss. But rising Treasury yields are a mixed blessing for financials. For one, the spread between short-term and long-term yields isn't widening. That's not great for banks' net interest margins and could indicate concerns for economic growth, which is also not great for banks.
All in all, Friday's rebound from intraday lows now seems like a blip. The major indexes have sold off hard from the Jan. 12 intraday highs, and more broadly since Jan. 3. The Nasdaq has been trending lower in volatile fashion since before Thanksgiving.
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What To Do Now
The stock market continues to deteriorate. Tech and small-cap stocks led the declines, as usual. But there were few safe havens in Tuesday's sell-off — except cash.
Could the market bounce on Wednesday? Sure, the market has had plenty of bounces, some lasting a few days, over the past few weeks. But they haven't lasted.
Investors should wait for clear-cut evidence of a sustained uptrend. You need to preserve your capital — and your mental capital.
Relative strength remains paramount, as well as stocks finding key support, such as Apple stock and Builders FirstSource. Keep in mind that many stocks that had held up well have started to break down. So keep your lists up to date.
Patience is key. Don't jump the gun, but don't walk away. Stay engaged so you're ready to take advantage of the next bullish market move. That could come in a few days or a few weeks or months.
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.
