Dow Jones futures rose slightly after hours, along with S&P 500 and Nasdaq futures. The ongoing discussions on the debt ceiling are at the center of the concerns. Palo Alto Networks (PANW) increased its profits on Tuesday evening, with Nvidia (NVDA) results expected Wednesday. Therapeutic PTC (PTCT) dove on disappointing clinical trial data.
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The stock market rally retreated on Tuesday as a number of large group stocks suffered heavy losses.
Debt ceiling talks continue with no deal imminent. House Speaker Kevin McCarthy said the two sides were “not close” to a debt ceiling agreement. At the same time, President Joe Biden and House Republicans don’t seem that far apart on provisions to raise the debt ceiling. Meanwhile, the recent upward trend in Treasury yields and the US dollar may finally weigh on equities, along with various signs of weakening consumer spending.
The video embedded in this article reviews Tuesday’s market action and analyzed Alamos Gold (AGI), Meritage Homes (MTH) and Las Vegas Sands (LVS).
Dow Jones Futures Today
Dow Jones futures were up 0.1% from fair value. S&P 500 futures advanced 0.1% and Nasdaq 100 futures climbed 0.2%.
Crude oil futures rose 1%.
Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Earnings
Palo Alto Networks, New relic (NEW), Intuitive (INTU) and Toll Brothers (TOL) reported overnight.
PANW stock rose sharply in extended trade after Palo Alto earnings topped fiscal third-quarter views as revenue came in line. The cybersecurity company rose slightly for fourth-quarter EPS. Shares fell 1.2% to 189.74 in Tuesday’s regular session, back below the 50-day line. Palo Alto stock is working on a buy point of 203.54 from a handful in a long consolidation.
NEWR stock fell overnight, signaling a sharp decline below a buy point and a test of early entries around 76. New Relic earnings topped solidly while revenue slightly topped views of the fourth fiscal quarter. But the data analytics firm guided Q1 and 2024 earnings lower. Shares fell 1.2% on Tuesday to 82.51 but rebounded to close above one point. purchase of 80.98. New Relic shares peaked on March 17 following a report of a possible upcoming private equity offering.
INTU stock fell sharply after hours. Intuit’s earnings beat third-quarter guidance, while revenue lagged. Software maker Turbo Tax fell 0.95% on Tuesday to 449.80. Intuit stock has a buy point of 462.60 from a long consolidation.
TOL stock rose slightly late in the session. The profits of Toll Bros. significantly exceeded the second-quarter fiscal consensus, with the luxury homebuilder also leading in the third quarter. Shares fell 1.5% to 63.75 on Tuesday, breaking below the 21-day line but still above a buy point of 62.71.
Analog devices (ADI) reports early Wednesday. ADI shares fell 1.8% to 187.92 on Tuesday. He paused work on a buy point of 198.35 from a cup base.
Nvidia, Beauty Elf (ELF) and Snowflake (SNOW) report late Wednesday.
Nvidia’s earnings and forecast could have a big impact on the chip sector and AI-related stocks. Tuesday, Nvidia and Microsoft (MSFT), the two biggest names in artificial intelligence today, announced on Tuesday that they would collaborate on AI. Nvidia stock fell 1.6% on Tuesday, falling slightly for a third consecutive session, just below 52-week highs.
ELF stock slid 1.1%, just below its 50-day line after falling 4.3% on Monday. SNOW stock fell 1.85%, stopping near the top of a bottoming base or in a longer consolidation.
NVDA stock is on the IBD rating, while ELF stock is on the rating watch list. AGI stock is on SwingTrader. SNOW stock is on the IBD 50. Alamos Gold was the IBD stock of the day on Tuesday.
PTCT Stock Dives on Trial Data
PTC Therapeutics announced late Tuesday that its treatment with vatiquinone failed to achieve its primary goals in a phase three trial in patients with Friedreich’s ataxia, an inherited condition that affects the body’s nerves. Biotechnology said vatiquinone showed significant benefits for certain secondary measures.
PTCT stock plunged more than 20% overnight. Shares were trading at two-year highs after clearing a bottom for good last week.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally got off to a mixed start on Tuesday but gradually lost ground, led by tech.
The Dow Jones Industrial Average fell 0.7% in trading on Tuesday. The S&P 500 index fell 1.1%. The Nasdaq composite fell 1.3%. The small-cap Russell 2000 slipped 0.4%
U.S. crude oil prices rose 1.2% to $72.91 a barrel. Copper prices, a good indicator of global economic activity, fell 0.9% to their worst close in nearly six months.
The 10-year Treasury yield fell 2 basis points to 3.7% after hitting 3.76% intraday. This ended a streak of seven sessions of higher rates.
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Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) slipped 1.6%. PANW stock is one of the top 10 IGV holdings. ETF VanEck Vectors Semiconductor (SMH) lost 1.4%. Nvidia stock is a major SMH holding, with Analog Devices also a component.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) fell 2.2% while ARK Genomics ETF (ARKG) rose 0.2%. Both hit three-month highs intraday.
The SPDR S&P Metals & Mining ETF (XME) fell 0.6%. The US Global Jets ETF (JETS) fell 0.6%. The SPDR S&P Homebuilders ETF (XHB) fell 1.6%. The TOL share is an XHB holding.
The Energy Select SPDR ETF (XLE) rose 1.1% and the Health Care Select Sector SPDR Fund (XLV) fell 1.1%
The Financial Select SPDR ETF (XLF) fell 1.2%. The SPDR S&P Regional Banking (KRE) ETF climbed 1%, hitting resistance at the 50-day line.
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Market rally analysis
The stock market rally suffered significant losses on Tuesday, especially for many leading stocks and groups.
The biggest losses came on the Nasdaq, which looks good after rising significantly in recent weeks. The S&P 500 could move back into its sideways range after hitting 2023 highs late last week. Or it could just pause momentarily before exploding higher.
The Dow Jones fell back below its 50-day line, with the 200-day line not far off.
The small cap Russell 2000 reversed lower after hitting resistance at its 200-day line.
The declines outweighed the rising stocks, but not decisively.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 1.4%, after hitting a three-month high on Monday. It’s still above the 50 day line.
The Invesco S&P 500 Equal Weight (RSP) ETF fell 1.1%, returning below the 200-day line and the 50-day line. RSP needs to show more strength.
The biggest worry on Tuesday was heavy losses for several leading groups, including homebuilders, building materials, casinos, luxury goods, medical products, credit cards and more.
In some cases, the losses did not cause much damage to the cards, such as for Lanthee (LNTH) or FirstSource Builders (BLDR).
But stock LVS, Meritage, Visa (V) and LVMH (LVMUY) all fell below their 50-day lines, undercutting or invalidating buy points.
Meanwhile, tech titans and chip leaders including Nvidia retreated slightly. Some AI stocks retreated after huge gains, while Palantir Technologies (PLTR) continued to operate.
There was no obvious trigger for the market rally to pull back on Tuesday. Negotiations on the debt ceiling continue without any signs of breaking down. Of course, a US default looms if there is no agreement to raise the debt ceiling by early June. Perhaps the rebound in Treasury and dollar yields has finally hit a pain threshold for equities, although speculative stocks did not lead lower. A massive new wave of Covid could be taking shape in China.
In the end, it doesn’t matter why stocks are falling.
Time the Market with IBD’s ETF Market Strategy
What to do now
The stock market rally has been an odd one in recent weeks, with pockets of enormous strength amid overall lackluster market action. Tuesday’s declines in many leading groups raise concerns that market leadership may tighten further.
There weren’t many buying opportunities on Tuesday. The sell-offs of some stocks show that taking at least partial profits on winning stocks is always a good strategy.
This is an uneven market recovery. This could turn into a broad long-term uptrend. Or it could stall or even break down. But as an investor, you have to pay attention to what the market is doing right now.
Keep working on those watchlists.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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