The S&P 500 briefly hit a new high on Tuesday morning before retreating. The Nasdaq, which set a closing high on Monday, also slipped, as did the Dow Jones and Russell 2000. Freeport-McMoRan (FCX) and other mining stocks were the big losers, with copper prices plummeting. On the positive side, oil inventories continued to rise along with US crude prices.
Tesla (TSLA) has fallen back under key support as the EV title seeks direction. Microsoft (MSFT) hovers just below a point of purchase.
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Oracle profits rose 28%, better than expected and the fourth consecutive quarter of accelerating growth. Fiscal fourth quarter revenue grew nearly 8%, the best gain in six years, although helped by easy comparisons. For the current quarter, Oracle has guided analysts’ sales estimates below.
ORCL stock fell sharply under the extended trade. Stocks fell 1.2% on Tuesday to 81.60, just above their 21-day exponential moving average. Oracle stock, which peaked at 85.03 on June 8, is in a range from a buy point of 80.82 to a tight three-week pattern.
Roblox stock fell 7% in overnight trading. After the close, Roblox released metrics for May that signaled a slight drop in user numbers in the previous month. Daily active users reached 43 million last month, up 28% from the previous year, but down 1% from April. Hours engaged increased 9% from a year earlier and 1% from April. The company estimated that revenue more than doubled year over year to reach $ 149 million to $ 151 million.
RBLX stock had climbed 2.3% to 89.80, finding key support at the 21-day line. But it could be the prelude to another key test on Wednesday. RBLX stock broke the buy point of 77.89 on May 21, to hit 103.87 on June 4.
Microsoft and RBLX stocks are listed on the IBD rankings. Microsoft’s stock is on the long-term leaders.
Focus on the Fed meeting
Federal Reserve policymakers are expected to leave interest rates and asset purchases in place at the end of the two-day Fed meeting at 2 p.m. ET. The only question is whether the statement by the Fed, or Fed Chief Jerome Powell, at his 2:30 p.m. ET press conference, will signal that the central bank will start talking about cutting back on purchases of ‘bonds later this year. Policymakers have already spoken of tapering.
Many on Wall Street are betting that the tapering talks won’t start until the end of July-September, whether at a Fed meeting or the Jackson Hole Monetary Symposium.
Retail sales fell 1.3% in May, although April spending was revised up. The report signaled a shift towards restaurants and clothing and a move away from pandemic-era spending such as home improvement. Housing related retailers such as HR (HR) et Home deposit (HD) has receded as consumers abandon their spending habits in the event of a pandemic.
The New York Fed’s Empire State Index showed factory growth slowed more than expected in June.
The producer price index rose more than expected as wholesale inflation continued to rise. But as long as economic activity and employment are lighter than expected, the Federal Reserve is unlikely to worry about falling behind.
The recent sell-off of lumber and copper futures will likely alleviate fears of escalating price pressures.
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Dow Jones Futures Today
Dow Jones futures were just above fair value. S&P 500 futures edged up and Nasdaq 100 futures climbed 0.1%.
Keep in mind that overnight action on futures contracts on Dow and elsewhere doesn’t necessarily translate into actual trades in the next regular trading session.
Bitcoin traded around $ 40,000 on Tuesday night. Intraday, Bitcoin briefly exceeded $ 41,000, at the top of a range of $ 30,000 to $ 41,000 in recent weeks. Tesla CEO Elon Musk tweeted on Sunday that the electric vehicle maker continues to hold a lot of Bitcoin and may resume Bitcoin transactions in the future.
Even if Bitcoin convincingly exceeds the $ 41,000 level, there could be a significant amount of overhead. Bitcoin peaked at $ 64,829.14 in mid-April, but the bulk of its selling started in early May.
Bitcoin could move significantly on any Fed news Wednesday, especially if the US dollar reacts.
Coinbase (COIN) fell 2.9% to 232.21, falling from its 21-day line. COIN stock rebounded from a closing low on June 8 as the price of Bitcoin rallied.
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Stock exchange rally
The stock rally retreated on Tuesday, but the declines were relatively modest.
The Dow Jones Industrial Average slipped 0.3% in stock trading on Tuesday. The S&P 500 Index edged down 0.2%. The Nasdaq composite fell 0.3%. Small cap Russell 2000 plunged 0.3%.
The 10-year Treasury yield was stable at 1.5% before the Fed meeting. The Treasury benchmark yield edged up on Monday after hitting a three-month low last week as inflation fears receded.
Copper futures fell more than 4% on Tuesday. Mining stocks sold off, with FCX stock falling 4.7%. FCX stock was the second worst performance in the S&P 500 on Tuesday.
Crude oil prices exceeded $ 72 per barrel for the first time since October 2018.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.9%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.7%. The iShares Expanded Tech-Software Sector (IGV) ETF fell 1.4%, with shares of Microsoft and Oracle being the two main components. ETF VanEck Vectors Semiconductor (SMH) lost 0.9%.
The SPDR S&P Metals & Mining ETF (XME) fell 0.5% as steelmakers wiped out some notable intraday losses. The ETF Global X US Infrastructure Development (PAVE) rose 0.4%. The US Global Jets ETF (JETS) slipped 0.5%. The SPDR S&P Homebuilders ETF (XHB) rose 0.35%. The Energy Select Sector SPDR (XLE) ETF jumped 1.9%.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) fell 2.7% and ARK Genomics ETF (ARKG) fell 2.3%. ARKK is again below its 200 day line while closing just above its 50 day line. ARKG is still above the two key levels. Tesla shares are the main asset among ARK Invest ETFs. The COIN share is also a notable participation of ARK Invest.
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MSFT stock fell 0.6% to 258.36 on Tuesday. That’s just below a buy point of 263.29 cups, according to MarketSmith analysis. The shallow cut pattern is part of a base-on-base formation. Around 1.9% above the 10 week line, Microsoft stock is exploitable as a long-term leader
The relative strength line for Microsoft stocks is still outside its July 2020 high. But it’s not far from its April consolidation high. The RS line, the blue line in the charts provided, tracks a stock’s performance against the S&P 500 Index.
Tesla stock fell 3% on Tuesday to 599.36, again below its 200-day moving average and key level of 600. Although outside of its May lows, TSLA stock remains some little limited to a range, as well as below its 50 day line. The RS line for Tesla stock remains near seven-month lows.
Market rally analysis
The stock rally dipped slightly on Tuesday, but looks good. A little bit of caution before announcing a Fed meeting is perfectly natural. The S&P 500 hit record highs, closely followed by the Nasdaq and the Russell 2000, all up for several weeks. The Dow Jones is lagging a bit, testing the 50 day line. But even blue chips are close to all-time levels.
Sector rotation continues, with miners suffering heavy losses. Housing-related retailers are under increasing pressure, reflecting a shift in consumer spending habits.
The recent trend in growth stocks remains intact. But that could still change, especially if talk of Fed tapering or economic data pushes the 10-year Treasury yield higher.
Don’t double down on beaten stocks
A number of hard-hit and highly valued tech stocks have signaled signs of lows, with big gains in recent weeks. CAN SLIM investing typically focuses on stocks that are forming bullish bases after a previous uptrend. Among the big winners of 2020 that are promising to be strong, we can cite Cloudflare (NET) and CrowdStrike (CRWD).
But if you plan to get into stocks that are trying to bounce back from 50%, 60%, 70% declines, keep them a relatively small part of your overall portfolio. Yes, these stocks can rack up big daily gains. And if you bet well, you can reap huge payouts over the next few weeks or months. However, these stocks can also rack up huge daily losses. If the Nasdaq falls 2% to 3%, it is likely that many popular names will fall by 5%, 10% or more.
Since the Nasdaq has rallied for several weeks and potentially hits resistance at record highs, investors may want to suspend further lower stock purchases until the index goes strong. technicality is clearly reaching a new peak.
Over the longer term, some of these former leaders will rebound to new heights relatively quickly, while others could take years. Some may never do.
Read The Big Picture every day to stay in tune with the market direction and major stocks and sectors.
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