Dow Jones futures led moderate premarket declines on Tuesday, with Nike pacing the Dow’s downside on an analyst downgrade. Earnings news factored into early action, lifting Steel Dynamics and Dover toward buy points. Railroad stocks were in motion, as Kansas City Southern spiked on a takeover offer. And IBM topped the Dow Jones today, after reporting its first revenue gain in nearly three years.
Dow futures and S&P 500 futures ebbed 0.3% below fair value. Nasdaq 100 futures dipped 0.2%, with railroad CSX (CSX) up 1.8% to the top of the index. Small caps were trading almost flat, with Russell 2000 futures a fraction below fair value.
Kansas City Southern (KSU) rallied 14%, while Canada National Railway (CNI) dropped more than 7%. A $30 billion takeover bid for Kansas City from Canadian National topped a prior offer from Canadian Pacific Railway (CP). Canadian Pacific shares rose 1.4%.
Cigarette maker Altria Group (MO) dropped more than 7%, following Monday’s 6.1% dive on news that the Biden administration was considering regulating the amount of nicotine permitted in cigarettes. British American Tobacco (BTI) dived more than 3% in premarket trade.
China stocks were under some mild early pressure, but New Oriental Education & Technology (EDU) rose 4% on earnings. Shares are testing resistance at the stock’s 21-day exponential moving average, attempting to start up the right side of a two-month consolidation.
Earnings: Dover, Steel Dynamics Eye Buy Points
In earnings news, regional bank Silvergate Capital (SI) rallied 2.3%. Industrial products maker Dover (DOV) gained 4%, suggesting the stock would open above a 141.41 buy point in a three-weeks-tight pattern.
Steel Dynamics (STLD) jumped to a 1.4% gain in early trade after reporting above-forecast results for the first quarter late Monday. Shares ended Monday’s session less than 3% below a 52.72 buy point in a four-weeks-tight formation.
Dow Jones Today: IBM Vs. Nike
IBM late Monday reported a 4% dip in earnings and a 1% revenue gain, both above analyst projections. It was also the company’s first revenue increase in 11 quarters.
Drug and medical products maker Johnson & Johnson (JNJ) also reported first-quarter sales and earnings above analyst targets. Shares traded down 0.6% shortly after its report.
Nike slumped after Citi downgraded the stock to neutral, from buy. The note said the company faced weakened demand in after China due to the dispute over cotton sourced from Xinjiang, and lowered the stock’s price target to 140, from 160.
Among other Dow stocks, Caterpillar (CAT) is about 2% below a 237.88 buy point in a bullish ascending-base pattern. JPMorgan (JPM) is testing support, about 6% below a 161.79 buy point in a flat base.
LPX Stock Leads IBD 50, Futu Dives
Materials plays led the IBD 50 list in early trade. Wood products supplier Louisiana Pacific (LPX) climbed 0.6%. Ore miner Southern Copper (SCCO) rose a fraction. Louisiana Pacific is extended, with a year-to-date gain of 81%. Southern Copper is below an alternate, early entry of 79.72, and a proper buy point at 83.25 in a nine-week cup base.
China-based Futu Holdings (FUTU), an IBD Leaderboard stock, dived 9.8%, after proposing a follow-on offering of 9.5 million American Depositary Shares.
Bitcoin, CoinBase Slip
Bitcoin prices slipped to just below $56,000 early Tuesday, according to CoinDesk, after recovering some ground lost in a steep dive on Saturday and Sunday. Bitcoin ran up to a new high above $64,800 last week, on Wednesday, ahead of the Coinbase Global (COIN) IPO. Shares dropped below $54,000 on Sunday, but the cryptocurrency remains up more than 90%, after starting the year just above $29,000.
Shares of cryptocurrency exchange Coinbase jumped 36.8% in their first few days of trading last week. The Coinbase IPO priced initially at 250, and Coinbase stock slipped 0.5% early Tuesday.
CAN SLIM rules advise against jumping into IPOs too early, amid all the initial offering speculation and excitement. It is better to sit and watch the new stock’s chart. Waiting for it to form and breakout from an IPO base helps limit downside risk.
Market Vital Signs: Oil, Copper, Bond Yields
Oil prices pressed higher and copper held near 10-year highs early Tuesday, as bonds edged up after a two-day slip.
West Texas Intermediate oil rose 0.7% to above $63 a barrel, its highest level since mid-March and up 10% from a late-March low. At the beginning of March, WTI had hit $65.05, its highest price since January 2020. Copper and oil prices are both important indicators of confidence in the global economy.
Copper jumped 2.3%, to above $4.26 a pound. Prices struck an almost 10-year high at $4.30 on Feb. 24.
Bond yields hovered, with the 10-year yield easing to 1.59%, after a two-day rebound lifted yields to settle at 1.60% Monday, according to CBOE data. Yields last week experienced their worst week since July as traders piled back into bonds, a safe haven shelter. Bond prices and yields move inversely.
The Dow Jones Today And The Daily Grind
While the S&P 500 and the Dow Jones Industrial Average have sawed their way steadily into new highs, the Nasdaq Composite remains shy around the 14,000 level. That was the stumbling block that turned the index back in February. On Monday, after notching two closes narrowly above that line, the Nasdaq dropped back into the thirteens.
That’s not a defeat, but it does raise the question of whether the Nasdaq will fall back to its 21-day exponential moving average, at just above 13,600.
At the same time, in the Russell 2000’s four-week fight to hold support at its 10-week moving average, the index closed just below that line. It may turn and retake support, or may drop back to a test of its late March low, around 2,100.
For more detailed analysis of the current stock market and its status, study the Big Picture.
In the meantime, the S&P Smallcap 600 held its position above both its 50-day and 21-day exponential moving averages. In addition, the Invesco QQQ Trust ETF (QQQ) held in a buy zone above a flat-base buy point at 338.29.
The differences between the Russell 2000 and the S&P Smallcap 600, and between the Nasdaq Composite and the Invesco QQQ Trust, hint at how challenging the stock market’s uptrend has become. Investors watching SwingTrader and Leaderboard will notice the slight adjustments underway to lock-in profit and tune portfolios to zones of market strength — including materials, construction, beverages, leisure products and services, etc. — while the Nasdaq’s powerhouse tech sectors sort themselves out.
The IBD 50 Index and the iShares Russell 1000 Growth ETF (IWF) are both holding reasonable margins above support. The market is exiting the lighter-than-air rebound of March through February, getting back to dealing with gravity, adjusting to the daily grind.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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