by Dow Jones futures fell after hours, while S&P 500 futures and Nasdaq futures pulled back as government bond yields continued to rise. Tesla Investor Day is underway as Salesforce.com, Snowflake and other software earnings have been a busy overnight session.
The stock market rally was further damaged on Wednesday as the yield on 10-year Treasuries hit 4% intraday. Some leading stocks flashed buy signals on news. But the S&P 500 and Nasdaq fell.
Apple (AAPL) fell below the 200-day line as International Data Corp. global smartphone sales in 2023 now see a slight decline again compared to the previous forecast for a modest increase.
Tesla Investor Day kicked off with anticipation for major announcements. Despite speculation about the unveiling of a new electric car, Tesla (TSLA) executives said at the event that a next-generation platform or vehicle will come at a “later date.” CEO Elon Musk’s “Master Plan 3” involved the world putting a huge push on clean energy.
Late in the event, CEO Elon Musk confirmed that Tesla will build a Mexico plan.
Tesla shares plummeted overnight as Investor Day had few headlines.
Notable software makers Salesforce. com (CRM), Splunk (SPLK), Box (BOX), Okay (OKTA) and Snowflake (SNOW) reported late Wednesday. CRM stock and OKTA were big overnight gains, while SNOW stock, Box and Splunk pulled back.
Dow Jones Futures Today
Dow Jones futures rose 0.15% from fair value. CRM inventory is a Dow component. S&P 500 futures fell 0.4% and Nasdaq 100 futures fell 0.5%. TSLA stock is a large Nasdaq 100 component.
The 10-year Treasury yield rose 2 basis points to 4.01%, above the key level of 4%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
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Tesla Investor Day
The big Tesla Investor Day presentations took place Wednesday night.
The EV giant had said weeks ago it would release more details about a next-generation EV platform at Tesla Investor Day, with much speculation that Tesla would unveil a low-cost model and perhaps give an idea of when production could begin. .
Executives said Tesla is aiming to reduce assembly costs by 50% in its next-generation vehicle platform and reduce the factory footprint by 40%.
But Tesla hasn’t unveiled a next-generation vehicle, saying that will come at a “later date.”
During the Q&A segment, Musk confirmed that “Giga Mexico” is coming. Mexico’s president had said Tuesday that Tesla would make the announcement on Investor Day.
Tesla said its plant in Mexico will build the upcoming next-generation vehicle. But that suggests a hypothetical lower-cost electric car wouldn’t arrive until 2025 or later. Even now, a cheaper Tesla would face competition from a slew of rivals, especially in China.
Tesla says it wants to reduce silicon carbide by 75% for their next-generation power unit. That’s not good news for silicon carbide plays like On Semiconductor (ON), Wolf speed (WOLF) and Aehr test systems (AEHR). All three EV chip stocks fell late.
Tesla was also expected to confirm a Model 3 upgrade.
Tesla stock
TSLA stock fell nearly 6% overnight on Tesla Investor Day. Tesla shares fell 1.4% to 202.77 on Wednesday, holding above the 21-day line.
Stocks are likely to have a cup-and-handle pattern dating back to early November. That would suggest a buy point of 217.75. But investors should probably wait for TSLA stock to clear its 200-day line, currently hovering around 221.
Main income
CRM shares spiked 16% late after revenue from Salesforce surpassed views and gave the software giant bullish guidance and doubled its buyback to $20 billion. Shares of Salesforce rose 2.3% on Wednesday to 167.35, extending the gain from the 200-day line and above the 21-day line. CRM shares are now signaling a gap above a handle cup buying point of 178.94.
SNOW shares fell 7% in extended action as Snowflake’s earnings beat Q4 earnings, but the data analytics company had low revenue in the first quarter and full year. Snowflake also announced a $2 billion share buyback plan. Snowflake shares gained 12 cents to 154.50 on Wednesday, between the 200-day and 21-day lines.
SPLK shares fell 3% after hours as Splunk’s earnings improved, and the database and security software company had low sales in the first quarter and full year. Splunk shares lost 2 cents to 102.48 on Wednesday, holding the 21-day line in a cup-with-handle basis, according to MarketSmith. The official buy point is 110.05.
BOX shares plummeted 10% overnight as Box’s earnings topped out, but the software storage company was low. Shares rose 0.7% to 33.58 on Wednesday, moving off the 21-day line, extending the gain from the 10-week line. Boxstock has been working on a new flat base on top of a previous flat base. The relative strength line for BOX stock is at a multi-year high.
OKTA was up 14% in late trading as the cybersecurity firm beat fourth-quarter views and came in line with fiscal 2024 earnings. Okta stock is expected to fall back above 200 days, which now roughly coincides with an even still valid buy point of 74.28 lows. Shares rose 0.2% to 71.44 on Wednesday, holding the 50-day hold.
Stock market rally Wednesday
The stock market rally had a mixed session, but was generally negative.
The Dow Jones Industrial Average rose in trading on Wednesday. The S&P 500 index fell 0.5%. The Nasdaq composite fell 0.7%. The small-cap Russell 2000 rose 0.1%.
Apple shares, a Dow Jones, S&P 500 and Nasdaq component, fell 1.4% to 145.31, back below the 200-day line and hitting a one-month low. Microsoft (MSFT), Nvidia (NVDA) and Tesla stock were also big cap negatives on Wednesday.
The 10-year Treasury yield rose 8 basis points to 3.99%, reaching 4% at various times of the day. The US production reports for February came with the figures below, which still point to a modest contraction. But China’s manufacturing and services sector data rose sharply, indicating that China’s economic reopening is gaining momentum.
Meanwhile, more Fed officials expressed support or openness to a 50 basis point rate hike. The odds are still favorable for quarter-point rate hikes by the Fed in March, May and June, while markets are divided on a fourth rate hike in July.
Despite rising government bond yields, the US dollar fell on Wednesday as strong data on China fueled risk taking abroad.
The copper price increased by 1.7%.
US crude oil prices rose 0.8% to $77.69 a barrel.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) gained 0.4%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.45%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 0.8%. CRM shares are a major IGV holding company. The VanEck Vectors Semiconductor ETF (SMH) was up 0.1%, with NVDA stocks the core holding.
SPDR S&P Metals & Mining ETF (XME) popped just over 2%. US Global Jets ETF (JETS) rose 0.2%. SPDR S&P Homebuilders ETF (XHB) fell 0.8%. The Energy Select SPDR ETF (XLE) bounced 2%. The Health Care Select Sector SPDR Fund (XLV) fell 0.2%
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) fell 2.3% and ARK Genomics ETF (ARKG) retreated 1.15%. Tesla stock is a top ranking in Ark Invest’s ETFs.
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Analysis of the market rally
The stock market rally had a mixed Wednesday, closing out the lows of the session. But major indices are struggling around key levels as 10-year Treasury yields hit 4%.
The S&P 500 fell further from its 50-day line, nearly reaching its 200-day line Wednesday morning. The Nasdaq fell back below its 200-day line, with the 50-day not far below it.
The Russell 2000 rose for a third straight session despite resistance on the 21-day line.
The lagging Dow Jones hit its worst intraday level since early November before posting a gain.
Leading stocks offered reasons to be hopeful.
First solar energy (FSLR) and Axon Enterprise (AXON) trailed earnings. Freeport-McMoRan (FCX), Wednesday’s IBD Stock Of The Day, flashed a buy signal as a key mine reopened and copper prices recovered.
Most leaders held on or held out, with modest gains or losses. But can that continue if broader trends don’t improve?
The market rally is under pressure. The major indices cannot afford to lose much more ground. On the upside, the S&P 500 should regain its 50-day line, while the 21-day line is an important test for the S&P 500, Nasdaq and Russell 2000.
The direction of 10-year Treasury yields will likely have a lot to do with the fate of the market rally. Friday’s ISM service index could be important, but February’s jobs report isn’t due until the following Friday.
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What to do now
Leading stocks have been resilient during the pullback, with more flashy buy signals in recent days. But if the market continues to struggle, recent buy signals and breakouts are likely to become fakes.
Investors should not try to increase their overall exposure until the S&P 500 and Nasdaq regain their 21-day lines. If you wait and the market improves, some leading stocks will pass you by initially, but there will be plenty of other buying opportunities.
So look for stocks that are usable, but also stocks that are turning bullish.
On the other hand, if the market or your individual positions deteriorate, you’ll want to move further to the sidelines.
In short: be prepared, stay involved and be flexible.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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