Dow Jones Futures Fall: GOP Expects to Win House; Elon Musk sells more Tesla shares, Meta cuts jobs

Dow Jones futures were lower on Wednesday morning, along with S&P 500 futures and the Nasdaq. Midterm election results pointed to a GOP House while Tesla CEO Elon Musk sold more TSLA shares. Disney and Meta Platforms were also in focus along with Bitcoin.




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Stocks rallied on Tuesday morning, fueled by lower Treasury yields and a weaker dollar. The major indices posted big gains as Bitcoin and other cryptocurrencies fell in a surprise Binance-FTX takeover deal. But shares rose somewhat at the close.

Bitcoin-related stocks such as cryptocurrency exchanges Coin base (COIN), a trading app Robinhood Markets (HOOD), a cryptocurrency custodian Silvergate Capital (SI) and Bitcoin miner Marathon Digital (MARA) sold out.

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Key income

Walt Disney (FAIRY), Occidental Petroleum (OXY), Tesla (TSLA) competitor Lucid Motors (LCID) oath Array technology (ARRY) announced late Tuesday.

Disney’s shares fell sharply in premarket trading as profits were subdued, although Disney+ subscriber growth was strong. OXY stock, more than 20% owned by Warren Buffett’s Berkshire Hathaway (BRKB), fell slightly on mixed profit. LCID shares fell on weak third-quarter results and Lucid Air’s declining bookings. ARRY shares rose sharply on strong earnings and recommendations.

Evaluate Job Cuts

Facebook parent Evaluate platforms (META) will lay off more than 13,000 employees, or 13% of its workforce, CEO Mark Zuckerberg told employees Wednesday morning, taking responsibility for the company’s failures. The layoffs were widely expected on Wednesday.

Zuckerberg also indicated less spending on infrastructure.

META shares, which recently hit multiyear lows, rose more than 5% in premarket trading.

Arista Networks (ANET), which took over after Meta’s third-quarter report indicated a large amount of expenses, fell modestly.

Tesla stock

Tesla shares rose more than 1% Wednesday morning. Late Tuesday, Tesla CEO Elon Musk reported that he sold 19.5 million shares for $3.95 billion in November. 4, 7 and 8. That could be to pay for his recent Twitter deal, though Musk said in early August that a stock sale was the last thing he needed.

Musk has not yet declared that he is done with his latest round of sales.

Musk’s latest stock sale likely helped drive the recent decline in Tesla stock. Increased subsidies from China and concerns about Elon Musk’s Twitter reign could also weigh on TSLA stock.

Tesla shares fell 2.9% to 191.30 on Tuesday after falling to 186.75 on the day, just above May 2021 lows.

Midterm elections

The results of the midterm elections are still coming. Republicans are likely to retake the House, but the would-be Republican wave was barely a ripple. The Senate is still up for grabs, with a race in Georgia likely headed for a tiebreaker. Another 50-50 Senate is possible.

Whatever the final outcome, President Joe Biden and the Democrats will likely no longer have full control of the White House and Congress. Financial markets tend to do better with gridlock in Washington. Stocks also tend to do well in the third year of a presidential election.

A divided government could be good for Wall Street and good news for defense companies, private prisons and drug makers in particular. Then again, markets may have already priced some of that in.

Dow Jones futures today

Dow Jones futures fell 0.3% versus fair value, as DIS stocks weigh on blue chips. S&P 500 futures fell 0.1%. Nasdaq 100 futures lost 0.1%, even as META and Tesla shares provided gains.

Crude oil futures fell 1%. Natural gas is about 3%. Copper fell by 1%.

Bitcoin slipped again, pushing Bitcoin-related stocks like Coinbase lower.

Consumer inflation in China rose less than expected. Wholesale prices fell.

Remember that overnight action in Dow futures and elsewhere does not necessarily translate to actual trading in the next regular stock market.


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Stock market rally

Stocks traded higher on Tuesday morning, but then gave it back in the afternoon as the Bitcoin meltdown spilled over into stocks. The S&P 500 and Nasdaq briefly turned negative before recovering.

The Dow Jones Industrial Average rose 1% in early trading on Tuesday. The S&P 500 rose 0.6%. The Nasdaq composite rose 0.5%. The small Russell 2000 extended gains.

Tesla shares fell near May 2021 intraday lows.

Shares of Apple and Microsoft rose 0.4%, shares of Google rose 0.5% and Amazon fell 0.5%. Everyone is up this week but after last week’s crash.

The 10-year Treasury yield decreased by 9 basis points to 4.13%.

The US dollar fell significantly for the third day in a row, hitting its lowest level since late September.

US crude oil prices fell 3.1% to $88.91 a barrel. Natural gas futures fell 11.6%, continuing high daily swings.

Bitcoin dives

Despite a weaker dollar, Bitcoin fell as the no. 1 cryptocurrency exchange Binance agreed to buy rival FTX, which has been facing a liquidity crisis. There are doubts that the Binance-FTX deal will actually happen, as FTX has faced a lot of withdrawals in recent days. Just a few months ago, FTX and founder Sam Bankman-Fried looked like potential saviors for other ailing crypto companies.

Bitcoin fell to $17,484.20 on Tuesday, its lowest since November 2020. Although it recovered somewhat on Tuesday afternoon, it is now trading around $17,500 after hitting $17,266 overnight. The pioneering digital currency fell below $20,000 on Monday night. Ethereum, Dogecoin and other cryptocurrencies showed similar or even more losses as well.

The FTX token crashed 80% on Tuesday after massive losses over the past few days and weeks.

COIN shares fell 10.8% to a four-month low. Buying FTX with Binance could forge a major new competitor for Coinbase, which also reeled from Bitcoin’s woes and worries about crypto-related companies.

HOOD stock, which includes Bankman-Fried as an investor, fell 19%. MARA shares fell 5.3% to their lowest since July. After the shutdown, Marathon Digital reported a bigger-than-expected loss while revenue fell 75%.

SI shares fell 23% to their lowest since December 2020.

Tesla still has some Bitcoin, but Elon Musk has held Dogecoin for some time.


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ETFs

Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 0.3%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 0.1%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.3%, with MSFT stock a key component. VanEck Vectors Semiconductor ETF (SMH) rose 2.2%.

The SPDR S&P Metals & Mining ETF ( XME ) rose 1.9%. The Energy Select SPDR ETF (XLE) rose 0.1%. The Healthcare Sector SPDR Fund (XLV) rose by 0.5%.

ARK Innovation ETF ( ARKK ) reflects more speculation, down 0.4%, and ARK Genomics ETF ( ARKG ) rose 1.4%. Tesla shares remain top-ranked among Ark Invest’s ETFs.


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Market rally analysis

Stocks’ rally looked badly damaged last Thursday following hawkish comments from Fed Chairman Jerome Powell. But it is slipping again in the last three sessions, even with Bitcoin’s woes.

The Dow Jones hit last week’s high after regaining its 200-day line on Monday.

The S&P 500 edged slightly higher above its 50-day line, though it remains below the Nov. 1 short term peak.

The Nasdaq, weighed down by Tesla and tech woes, hit its 21-day moving average. It is still below 50 days and far from 200 days lines.

But the Direxion Nasdaq-100 Equal Weighted ETF (QQQE) rose more than 1% to break above its 50-day line.

Falling Treasury yields helped lift stocks on Tuesday, while the falling dollar has been a key driver over the past three sessions.

Mid-term election results could fuel market moves, but Thursday’s inflation report could be key. A comfortable reading of consumer prices could fuel hopes for slower rate hikes swear lower maximum rate. But another hot inflation number could trigger a big selloff in stocks and bonds.


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Leading stocks

There were not many new buying opportunities on Tuesday.

GlobalFoundries ( GFS ) rose above a trendline and a little too low a handle after earnings.

Albemarle (ALB) cleared an early entry, but quickly ran up to its official buy point and closed just below that key level. However, ALB stock is well above its 50-day line after a big move since November. 3 lows within a day.

Crocs (CROX) briefly recovered a buy point meanwhile UnitedHealth (UNH) closed in buying range.

Several LNG stocks are near buy points.

Technical weakness remains a concern. Chip stocks are rallying, with the SMH ETF convincingly above the 50-day line. Megacap technology like Apple (AAPL) are trying to escape, but after heavy selling. The same is true for cloud software.


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What to do now

Stocks are showing resilience after heavy losses last week, with the Dow Jones and S&P 500 regaining key levels. Investors may want to be cautious, however, with the consumer price inflation report looming. Also, there are not a lot of shares that can be done right now, although many are setting up.

Investors should be ready to take action, by staying engaged and building your watch list. Growth stocks are still generally out of favor, so make sure you’re casting a wide net to find stocks and sectors that are bullish leaders.

Be sure to be aware of income, which remains active. Some stocks have been big performance winners, while others have rallied strongly after initially crashing. But there have also been some notable selloffs, as Disney and Lucid shares showed overnight.

Read The Big Picture every day to stay in tune with market trends and leading stocks and sectors.

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

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