Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. Dow giants UnitedHealth Group (UNH) and Johnson & Johnson (JNJ) report early Tuesday.
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The stock market rally tried to bounce Monday morning, but quickly turned lower in yet another ugly reversal. The S&P 500 and Nasdaq broke key levels. Treasury yields surged to fresh 2024 highs even amid uncertainty over how Israel will respond to Iran’s drone-and-missile attack Saturday.
Tesla (TSLA) plunged on big layoffs and a slew of other headlines, while Salesforce.com (CRM) dived on reports that it’s in late-stage talks to buy data-management software maker Informatica (INFA).
Meanwhile, Nvidia (NVDA) and Microsoft (MSFT), two megacap AI leaders, fell below some key levels Monday, though they aren’t breaking down yet.
Nvidia stock is on IBD Leaderboard and the IBD 50. Microsoft stock is on the IBD Long-Term Leaders list.
Dow Jones Futures Today
Dow Jones futures fell 0.2%vs. fair value. S&P 500 futures lost 0.3%. Nasdaq 100 futures declined 0.2%.
The 10-year Treasury yield edged down to 4.62%.
Crude oil futures rose a fraction.
China’s economy grew 5.3% in the first quarter vs. a year earlier, better than estimates for 4.6% and up slightly from Q4’s 5.2%. Meanwhile, March retail sales rose 3.1% vs. a year earlier while industrial production climbed 4.5%, both below forecasts.
As for the U.S. economy, investors will get March readings on housing starts and industrial production before the open.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Key Earnings
UnitedHealth, Johnson & Johnson and Morgan Stanley (MS) report early Tuesday.
UnitedHealth and J&J stock are near 2024 lows. Morgan Stanley is between its 50-day and 200-day lines after tumbling last week on reports that regulators are investigating its wealth-management business.
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Stock Market Rally
Friday’s sell-off was an expectations breaker for the stock market rally. Monday was a continuation of that, especially given the downside reversal from a strong open.
The Nasdaq and S&P 500 closed below the 50-day line for the first time since early November, as the stock market rally was just getting underway. The Nasdaq sank 1.8%, finally moving out of the range of the April 4 reversal day. The S&P 500 hit resistance at the 21-day line before retreating 1.2% in Monday’s stock market trading.
The Dow Jones Industrial Average fell 0.7% to the lowest since late January. Salesforce stock tumbled 7.3% as investors did not like the Informatica takeover buzz. That offset Goldman Sachs (GS), which rose 2.9% on earnings.
The small-cap Russell 2000 slid 1.4%, hitting a two-month low.
The broad market had been struggling for some time, with Nvidia, Microsoft and other leading AI and megacap plays propping up the Nasdaq. But with the losses in the prior two sessions, those leaders are getting pulled down.
The Nasdaq has now suffered three big downside reversals in the past several weeks, starting with the Nvidia-led March 8 tumble. In general, the market has rallied on lighter volume while distribution days have mounted.
U.S. crude oil prices dipped 0.3% to $85.41 a barrel.
The 10-year Treasury yield surged 13 basis points to 4.63%, hitting fresh 2024 highs. Friday’s safe-haven flow into Treasuries reversed Monday as Mideast fears ebbed, while robust retail sales drove yields higher.
Market Fear Gauge Rises Again
Notably, the CBOE Volatility index, or VIX, jumped 11% Monday to a 2024 closing high. On Friday, the market fear gauge spiked to its highest levels since late October on Iran concerns. Mideast fears remain higher while spiking yields add to investor anxiety.
But the VIX doesn’t appear to be at extreme levels that might signal a market bottom.
However, the elevated VIX, along with indicators signaling deeply oversold market conditions, do bear watching.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) tumbled 2.75%, with Microsoft and Salesforce two IGV giants. The VanEck Vectors Semiconductor ETF (SMH) shed 1.5%. Nvidia stock is the dominant SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) sold off 4.6% and ARK Genomics ETF (ARKG) 3.8%. Tesla stock is a major holding across Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) dipped 0.2%. The SPDR S&P Homebuilders ETF (XHB) stepped down 1.3%. The Energy Select SPDR ETF (XLE) retreated 0.9% and the Health Care Select Sector SPDR Fund (XLV) edged down 0.2%.
The Industrial Select Sector SPDR Fund (XLI) retreated 0.7%. The Financial Select SPDR ETF (XLF) shed 0.5%, with Goldman a key member.
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Nvidia Stock
Nvidia stock fell 2.5% to 860.01 after reaching 906.13 Monday morning. The AI chip leader fell below its 21-day line and is again testing its 10-week line. NVDA stock has a 974 flat-base buy point.
Nvidia chipmaker Taiwan Semiconductor (TSM) reports early Thursday.
Microsoft Stock
Microsoft stock fell 2% to 413.65, undercutting a prior 420.82 buy point and closing below the 50-day line for the first time since Oct. 6.
MSFT stock has a three-weeks-tight pattern with a 429.37 entry, which would still be relatively close to the 50-day. The Dow tech titan could be working on a new flat base.
Microsoft earnings for fiscal Q3 2024 are due April 25.
Tesla Tumbles On ‘Another Bad Day’
Tesla announced it would cut more than 10% of its global workforce, which would be more than 14,000 jobs. That follows stunningly weak first-quarterly deliveries, with Q1 earnings due on April 23.
Tesla also slashed discounts on the Model Y inventory in the U.S., despite surging inventories.
Those moves could shore up profits and margins, but also suggest further production cuts are likely.
Several top Tesla executives from key projects resigned or were laid off, a bad sign for those efforts.
The next-generation EV has been put on the back burner, Electrek reported Monday. That largely confirms a Reuters report from two weeks ago, despite Musk’s vague denials.
Also, Cybertruck deliveries reportedly have been halted in recent days.
Monday was “another dark day” for Tesla, according to Wedbush analyst Dan Ives, a longtime TSLA bull.
This slew of bad news and uncertainty raises the stakes for the Q1 earnings report on April 23 and the conference call that follows.
Ives stressed in Monday’s note that “The Street wants and NEEDS answers next week on Tesla’s 1Q conference call.”
Tesla stock sank 5.6% on Monday to 161.48, close to recent 11-month low of 160.51.
What To Do Now
The stock market came into the week with the “uptrend under pressure.” Monday’s action certainly didn’t help.
Investors should be scaling back exposure.
Also, earnings season will ramp, hitting full force next week, creating a huge amount of uncertainty.
But stay engaged and keep your watchlists up to date.
A lot of stocks have new bases or are setting up, though most suffered setbacks recently. Focus on those that are holding key levels and showing relative strength. If the market regains momentum soon, these could be the stocks that lead the way.
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.
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