Dow Jones futures rose slightly late Wednesday, along with S&P 500 futures and Nasdaq futures, after a strong stock market rally Wednesday. The Dow Jones jumped to a new high and the Nasdaq continued to bounce back. Meanwhile, the GameStop (GME) saga is back, with GME stock and other short-squeeze plays skyrocketing Wednesday, with big gains continuing overnight.
Nvidia stock reversed lower overnight despite strong earnings. IIPR stock, Teladoc, NetApp and Progyny declined significantly. All five stocks have been trading near buy points.
Stock Market Rebounds
After a brief morning retreat, the stock market rally extended Tuesday’s afternoon rebound, restoring some confidence. The 10-year Treasury yield, which popped to a 52-week high, pulled back, easing pressure on growth stocks.
Tesla jumped 6.2% to 742.02, extending a recovery after a huge intraday drop Tuesday to 619, and fueling support for EV stocks and speculative growth names overall. ARK Invest bought a lot more Tesla stock on Monday and Tuesday, following a number of buys in the past few weeks. TSLA stock, ARK’s top holding across all its ETFs, is still 6.2% below its 10-week line.
But the Dow Jones Industrial Average led the way Wednesday, amid a continued sector rotation into real economy cyclical names such as Boeing (BA).
The Bitcoin price, which plunged below $45,000 Tuesday morning and rebounded to above $51,000 late that night. Bitcoin traded below $51,000 Wednesday night.
GME Stock Surges
GME stock, which had drifted lower after a stunning rise and fall, spiked 103% to 91.70 on Wednesday. That pushed GameStop back above its 50-day and 21-day lines to its best close since Feb. 3. GME stock closed 81% off its Jan. 28 peak of 483.
GameStop said Tuesday that CFO Jim Bell has resigned. A resurgent GME stock price could give GameStop another chance for a share offering, something AMC Entertainment (AMC) did last month during its short squeeze.
AMC stock popped 18% on Wednesday. AMC rallied 36% on Monday-Tuesday as New York City said it would allow movie theaters to partially reopen in March. Apparel retailer Express (EXPR) leapt 43%.
GME stock shot up 83% in volatile overnight trade. AMC spiked 22% and Express stock 26%.
Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures climbed 0.2%. Nasdaq 100 futures were up 0.1%, as Nvidia stock fell and Moderna rallied.
Coronavirus cases worldwide reached 113.08 million. Covid-19 deaths topped 2.5 million.
Coronavirus cases in the U.S. have hit 28.97 million, with deaths above 518,000.
Moderna said it will begin clinical trials of its coronavirus vaccine designed to better treat the South African variant of the virus. Current vaccines have shown weaker effectiveness vs. the South African mutation, but they generally prevent death and serious illness.
MRNA stock rose solidly overnight. Shares fell 3.6% to 144.79 on Wednesday, just above its 50-day line. Moderna stock has fallen back from a Feb. 8 record high of 189.26.
Stock Market Rally
The stock market rally shored up support among growth stocks, while real economy names added to momentum.
For a second straight day, the Nasdaq fell solidly in the morning, but Wednesday’s drop was far less than Tuesday’s intraday tumble. This time, the Nasdaq tested its 50-day line rather than plunging below it. Meanwhile, the intraday recovery was faster, with the major indexes soon moving into positive territory.
The Dow Jones Industrial Average led the way, rising 1.35% in Wednesday’s stock market trading to a record high. The S&P 500 index gained 1.1%, just below all-time levels. The Nasdaq composite added 1%, still below its 21-day exponential moving average.
The 10-year Treasury yield, which popped above 1.4% for the first time in a year, pared gains to about 1.38%. Rising Treasury yields have pressured growth stocks in the past few weeks.
Among cyclical stocks, Vulcan Materials (VMC) and Ford Motor (F) cleared short consolidations. GM stock extended a rebound from its 10-week line, retaking its 21-day line. General Motors (GM) execs said the automaker is past the chip shortage that’s affecting the industry, adding that they are “highly confident” of meeting 2021 EPS targets.
Growth Stocks Generally Higher
Growth stocks were generally higher, but still mixed.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.8%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged down 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 1%. The VanEck Vectors Semiconductor ETF (SMH) leapt 3.2%. NVDA stock is a big SMH component
Reflecting more-speculative story stocks, Ark Innovation ETF dipped 0.5%, even with top holding Tesla stock rebounding. Ark Genomics ETF edged up 0.2%.
ARK Innovation saw a record withdrawal of $456 million on Monday, following months of huge inflows. ARKG also big withdrawals Monday. While ARK’s biggest holdings are in liquid names like Tesla, Roku (ROKU), Square (SQ), Baidu (BIDU) and Teladoc stock, it holds big stakes in a lot of smaller stocks. Exiting those positions, especially with ARK disclosing daily buys and sells, would be tricky.
ARK didn’t buy more Tesla stock Wednesday, but did acquire 660,000 shares of Workhorse Group (WKHS), which crashed 47% Tuesday and sank 8% Wednesday after the EV delivery vehicle maker lost a big USPS fleet contract.
Nvidia stock initially rose but then reversed lower, off 2% to 567. Nvidia earnings and sales beat, while guiding higher on current-quarter revenue. On Wednesday, NVDA stock rose 2.5% to 579.96 after again testing the most-actionable entry point of 560.07. The official buy point is 587.76. Investors also could use as 615, just above the Nvidia stock all-time high of Feb. 16, as an entry.
Progyny stock plunged 10% in extended trade. The fertility benefits specialist slightly beat views but guided low on Q1 and full-year revenue. PGNY stock rose 4% to 53.34 on Wednesday, clearing a three-weeks-tight buy point of 51.98.
IIPR stock retreated 5% overnight as the profitable pot REIT missed views. Shares jumped 5.6% to 220.16 on Wednesday, briefly clearing a three-weeks-tight entry of 221.13. IIPR stock tumbled to and rebounded from its 50-day line on Tuesday.
Teladoc stock fell 6% in overnight trade, threatening to test its buy point once again. The telehealth leader reported an in-line adjusted loss but beat on revenue. Shares dipped 0.6% to 254.53, continuing a pullback from a January breakout, closing near the top of the prior base. TDOC stock briefly undercut the 50-day line and 236.76 buy point on Tuesday.
NTAP stock sank 7% in extended trade. NetApp earnings and sales beat but its guidance failed to impress. NTAP stock rose 3.2% to 71.57. Shares have been finding support at key levels this week, just above a buy zone. But NTAP stock threatens to fall below the 66.10 buy point.
Stock Market Rally Analysis
While the stock market is forward looking, Wednesday’s action was important for understanding the Nasdaq’s big Tuesday bounce. At the time it wasn’t clear if Tuesday was just a continuation of a general pullback or the start of the rebound. With Wednesday’s stock market rally gains, Tuesday’s action looks more like the latter. But with the Nasdaq still below its 21-day line, growth stocks may not be free and clear.
Also, NYSE and especially Nasdaq volume were down vs. Tuesday, suggesting a possible lack of conviction. Of course, much of Tuesday’s volume came on the afternoon rebound.
Ideally, the stock market rally would move sideways for a few weeks, letting leading stocks form new bases or find bullish support at 10-week lines. But the market is going to do what it’s going to do. That could mean rangebound trading, or it could mean a quick run to record highs or undercutting Tuesday’s lows.
It’s still not a time to be especially aggressive, in part because few quality stocks are flashing buy signals from proper bases. Investors should be reviewing their portfolio in the wake of recent events and trends. Are you too concentrated in speculative growth names that are prone to wild swings? Do you have any cyclical stocks, capitalizing on that recent trend?
If you do make new position trades, be more selective. Insist on quality companies clearing sound bases.
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