Dow Jones Futures Fall: Market Rally Stuck At Key Levels; Tesla Extends Slide

Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. Crypto financial firm Silvergate Capital (SI) announced late Wednesday that it’s shutting down. American Express (AXP) boosted shareholder returns while MongoDB tumbled on guidance.

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The stock market rally had a mixed session Wednesday, with the major indexes trading around key moving averages.

Chip stocks fared well, with Nvidia (NVDA), Advanced Micro Devices (AMD), On Semiconductor (ON), Aehr Test Systems (AEHR) and Monolithic Power (MPWR). But NVDA stock, AMD, Onsemi and Aehr Test Systems fell extended. MPWR stock is working on a cup-with-handle base.

Tesla (TSLA) fell amid two new safety probes as well as an analyst downgrade. TSLA stock has dropped 10% since the March 1 Investor Day, which didn’t have a lot of news.

SI stock crashed as the crypto bank plans to shut down. Database software maker MongoDB (MDB) reported late Wednesday. American Express (AXP) announced a new AXP stock buyback and a dividend hike.

NVDA stock is on IBD Leaderboard. MPWR stock is on the IBD 50, Big Cap 20 and the IBD Long-Term Leaders watchlist.

The video embedded in this article discussed the market rally’s action and analyzed Monolithic Power stock, Oracle (ORCL) and C3.ai (AI).

Dow Jones Futures Today

Dow Jones futures dipped 0.1% vs. fair value. AXP stock provided a slim boost to Dow futures. S&P 500 futures declined 0.15% and Nasdaq 100 futures fell 0.25%.

The 10-year Treasury yield rose 1 basis point to 3.98%.

The Labor Department will release weekly jobless claims data at 8:30 a.m. ET on Thursday, with the February jobs report due Friday morning.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Silvergate Capital To Shut Down

After hours, embattled Silvergate Capital said that it will wind down operations and liquidate Silvergate Bank. Silvergate is one of the biggest lenders to major crypto firms and facilitates transfers between exchanges and market makers. Shares have been in free fall for the past year as crypto financial structure buckled. Last week, Silvergate said it would be unable to file its 10-K by the March 16 deadline.

SI stock crashed 44% in late trading, after falling 5.8% to a fresh low of 4.91 on Wednesday. Silvergate crashed 57% on March on the 10-K filing delay. SI stock peaked at 239.26 in November 2021.

Signature Bank (SBNY), which has been trying to slash crypto exposure after ramping up in prior years, fell 7% overnight. SBNY stock is at a two-year low. Coinbase (COIN) fell 2%. Coinbase said March 2 that it had switched to Signature Bank for facilitating dollar transfers, away from Silvergate.

The Bitcoin price didn’t move much on the Silvergate Capital news.

AXP Stock Buyback

AXP stock rose 1.5% overnight after the credit card giant announced it would buy up to 120 million shares, replacing the roughly 36 million remaining on a prior repurchase plan. American Express also hiked its quarterly dividend by 15% to 60 cents a share. American Express stock dipped 0.3% to 174.83 on Wednesday, again finding support around the 21-day line. AXP stock has a 182.25 cup-with-handle buy point.

MDB stock plunged 11% in extended action after MongoDB earnings topped views but guidance disappointed. MongoDB stock rose 2.3% to 228.70 in Wednesday’s session, just below the 200-day line after rebounding from the 50-day line last Friday. The database software firm is working on a short consolidation with a potential 248.25 buy point.

Stock Market Rally

The stock market rally traded up and down, closing mixed.

The Dow Jones Industrial Average dipped 0.2% in Wednesday’s stock market trading. The S&P 500 index edged up 0.1%, with ON stock and AMD the top two performers. The Nasdaq composite rose 0.4%. The small-cap Russell 2000 eked out a fractional gain.

U.S. crude oil prices slid 1.2% to $76.66 a barrel. Copper futures rose 1.4%.

Treasury Yields, Fed Rate Outlook

The 10-year Treasury yield was flat at 3.97% after falling to 3.9% intraday. The 2-year Treasury yield climbed 5 basis points to 5.06%. The 6-month T-bill yield gained 2 basis points to 5.31%.

The odds of a 50-basis-point rate hike on March 22 rose to 76% from 70% on Tuesday and just 31% on Monday. Fed chief Jerome Powell’s testified Tuesday that he expects rates to go higher than previously expected, and perhaps at a “faster” pace, hit stocks that day.

The Fed’s beige book report, released at 2 p.m. ET Wednesday, showed little or no growth in six of the 12 Federal Reserve districts over the past several weeks. Inflation remained widespread, though it was moderating.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.8%, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 0.5%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.2%. The VanEck Vectors Semiconductor ETF (SMH) popped 2.6%. Nvidia stock is the No. 1 holding in SMH, with AMD also a top component. ON stock and Monolithic Power also are in SMH.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) dipped 0.1%. Tesla stock is a major holding across Ark Invest’s ETFs. Cathie Wood’s Ark also owns a lot of COIN stock.

SPDR S&P Metals & Mining ETF (XME) closed up 0.25%. U.S. Global Jets ETF (JETS) ascended 0.45%. SPDR S&P Homebuilders ETF (XHB) climbed 1%. The Energy Select SPDR ETF (XLE) lost 1% and the Financial Select SPDR ETF (XLF) dipped 0.4%. The Health Care Select Sector SPDR Fund (XLV) declined 0.5%.

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Tesla Stock

Tesla stock fell 3% to 182, hitting its lowest level in over a month.

The National Highway Traffic Safety Administration opened two new Tesla safety probes. One covers steering wheels that come off on some 2023 Model Y crossovers due to a missing bolt that holds the wheel to the steering column. The investigation covers an estimated 120,000 Model Y vehicles.

The NHTSA also announced a special probe into a fatal Tesla crash into a parked fire truck on Feb. 18, saying it believed the Model S was operating with an automating driving system. The regulatory agency has a large number of ongoing Tesla crash probes related to Autopilot or Full Self-Driving, including several related to incidents involving stationary emergency vehicles.

Berenberg downgraded Tesla stock to hold from a buy, saying the share price has rebounded to a fair value. The analyst said Tesla price cuts will hit gross margins in the short run, but still sees high margins long term.

Tesla stock has fallen 10.2% since the March 1 Investor Day. While the EV giant did confirm plans for a Mexico plant, it didn’t offer much on a future next-generation vehicle, presumably a low-cost EV.

Still, TSLA stock is down 16.4% from its Feb. 16 high of 217.65, but still up nearly 79% from its Jan. 6 bear-market low of 101.81.

Three factors drove Tesla’s big early 2023 rally. First, investors believed the January price cuts would fuel delivery boom. Second, hopes for big Tesla Investor Day news. Third, the broader, growth-led market rally.

But Tesla is already resorting to significant additional discounts to achieve incremental delivery gains in the first quarter, while Investor Day failed to excite. A rangebound, sliding market since early February hasn’t helped either.

So, in that context, perhaps TSLA stock has been resilient in holding the bulk of its early 2023 gains.

Perhaps Tesla stock will forge a bottoming base, with a buy point that’s above the 200-day line. That could include a test of the 50-day/10-week lines.

Market Rally Analysis

The stock market rally remains closely tied to its moving averages.

The S&P 500 managed to close slightly higher, but just below its 50-day line after undercutting that key level Tuesday. The Russell 2000 broke below its 50-day line intraday to hit its lowest levels since late January before rallying for a wafer-thin advance

The Dow Jones fell, not far from its 2023 lows and 200-day.

The Nasdaq rose modestly but resistance at the 21-day line.

On Friday, the market rally looked like it was emerging from a short-term trading range, only to fall back this week. More broadly, the major indexes are in the lower half of a trading range going back to early February.

Leading stocks fared better Wednesday.

Nvidia, On Semiconductor and chips generally were strong, providing support to the Nasdaq along with a slim Apple (AAPL) gain. But buy signals in this sector are scarce.

Arista Networks (ANET) rose to the edge of buy zone while some software plays such as New Relic (NEWR) and Fortinet (FTNT) gained ground within their post-gap-up consolidations.

Airline stocks maintained altitude, though cruise lines took on water. Homebuilder stocks have held up remarkably well given the rising Treasury yields.

Plenty of other names faded with the market, though leaders didn’t suffer much damage.

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What To Do Now

The market rally is struggling around key levels again.

While leading stocks are outperforming, many recent buys have run into trouble or aren’t making progress. It’s probably best to take a wait-and-see approach until the stock market rally shows renewed strength or breaks lower.

While the S&P 500 and other indexes aren’t far from undercutting recent lows, a couple of good days is all the rally needs to look healthy again. So take this time to prepare your watchlists.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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