Dow Jones Futures Fall After Market Rally’s Ugly Reversal; Tesla Slashes Sharp Gain

On Feb 18, 2022

Dow Jones futures fell modestly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally sold off Thursday, with the S&P 500 and Nasdaq hitting resistance at key levels and reversing sharply lower. Treasury yields jumped to fresh three-year highs as Fed chief Jerome Powell said reigning in inflation is “absolutely essential” and signaling a big rate hike early next month.

The ugly market reversal serves as yet warning to investors to reduce already-modest exposure. Be wary of early morning moves, breakouts and especially growth stocks.

On the upside, airlines had a strong session, with United Airlines (UAL) soaring on forecasts for a profitable Q2 and 2022. American Airlines (AAL) also raced higher on results and guidance, but pared gains.

Tesla (TSLA) jumped on big earnings, though TSLA stock closed near session lows. Nucor (NUE) and Steel Dynamics (STLD) also came off intraday highs.

Growth stocks were big losers. Fortinet (FTNT) broke out past a buy point soon after Thursday’s open, but reversed lower. Expedia (EXPE) cleared a trendline Thursday morning, but then reversed lower.

Mining stocks have been big winners over the past year. But they tumbled as Alcoa (AA) and Freeport-McMoRan (FCX) both warned of higher costs and lower production. That followed weak production guidance from several other big miners this week.

Earnings

After the close, robotic surgical system maker Intuitive Surgical (ISRG) and Snapchat parent Snap (SNAP) reported.

Intuitive Surgical earnings slightly beat views. ISRG stock fell solidly overnight. Shares bottomed in late January but are still recovering. Still, the Intuitive Surgical earnings report may provide insight into post-Covid medical procedure trends for other companies, such as Edwards Lifesciences (EW).

Snap missed profit and revenue views, though users rose solidly. SNAP stock initially tumbled, then surged in after hours trade before slashing gains. Shares have tumbled since a rebound fizzled out in early April.

Early Friday, American Express (AXP), Cleveland-Cliffs (CLF), HCA Healthcare (HCA) and Newmont Mining (NEM) are on tap.

Tesla, Nucor, Newmont Mining and EW stock are on IBD Leaderboard. FTNT stock is on IBD Long-Term Leaders. Tesla and CLF stock are on the IBD 50. Fortinet was Wednesday’s IBD Stock Of The Day while EXPE stock was Thursday’s.

The video embedded in this article discussed Thursday’s negative market reversal and analyzed Tesla stock, Marsh & McLennan (MMC) and AvalonBay (AVB).

Why This IBD Tool Simplifies The Sear ch For Top Stocks

Fed Chief Powell: Hike Rates ‘Quickly’

Fed chief Jerome Powell said Thursday that controlling inflation is “absolutely essential.” He added that a 50-basis point hike is ‘on the table’ for the May 3-4 meeting, saying that “moving a little more quickly’ on rate hikes is appropriate.

Fed chief Powell only reinforced what investors already knew. Markets have been pricing in half-point Fed rate hikes for the next few meetings, along with the start of balance sheet cuts.

The 10-year Treasury yield spiked 8 basis points to 2.92%, the highest since late 2018.

Dow Jones Futures Today

Dow Jones futures declined 0.35% vs. fair value. S&P 500 futures lost 0.4 and Nasdaq 100 futures fell 0.45%.

The 10-year Treasury yield rose to 2.95%.

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

Stock Market Rally

The stock market rally came in like a lion but went out like a lamb.

The Dow Jones Industrial Average sank just over 1% in Thursday’s stock market trading. The S&P 500 index retreated 1.5%. The Nasdaq composite tumbled 2.1%. The small-cap Russell 2000 sold of 2.3%.

U.S. crude oil prices rose 1.6% to $103.79 a barrel.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slumped 3.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gave up 2.5%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 3.1%. The VanEck Vectors Semiconductor ETF (SMH) fell back 2.7%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) plunged 5% and ARK Genomics ETF (ARKG) 4.9%. Both are down hard for the week and nearing their March lows. Tesla stock remains the No. 1 holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) dived 6.2%, with FCX stock, Alcoa and Newmont Mining notable holdings. The Global X U.S. Infrastructure Development ETF (PAVE) gave up 1.4%. NUE stock is the top holding in the PAVE ETF, which also owns stakes in Steel Dynamics, Cleveland-Cliffs and Alcoa.

U.S. Global Jets ETF (JETS) added 2.8%, with American Airlines and United Airlines the top two components. SPDR S&P Homebuilders ETF (XHB) fell 1.3%. The Energy Select SPDR ETF (XLE) skidded 3.2% and the Financial Select SPDR ETF (XLF) gave up 1.6%. The Health Care Select Sector SPDR Fund (XLV)…