Dow Jones futures were little changed Tuesday night, along with S&P 500 futures and Nasdaq futures. The stock market rally suffered losses as crude oil prices and other commodity futures retreated while Treasury yields slumped to a four-month low.
XSoftware and some tech megacaps continued to lead. CrowdStrike (CRWD), Zscaler (ZS), Shopify (SHOP), Bill.com (BILL) and Amazon.com (AMZN) broke out. A widespread ransomware attack gave a boost to cybersecurity plays such as CrowdStrike and ZS stock. The Pentagon canceled a $10 billion JEDI cloud-computing contract with Microsoft (MSFT), a likely win for Amazon.
China Stocks Slammed
China stocks were hard hit as Beijing extended a crackdown on ride-hailing giant Didi Global (DIDI) and two other recent U.S. IPOs, logistics platform Full Truck Alliance (YMM) and job-search app Kanzhun (BZ). That raised regulatory risk concerns for U.S.-listed Chinese companies, especially those like Didi that rely on user data.
DIDI stock plunged nearly 20% to 12.49, while YMM lost 6.7% and BZ 16%, all undercutting their IPO prices, at least intraday. Alibaba (BABA), which paid a record antitrust fine earlier this year, slumped 2.8%, near a 52-week low. Tencent (TCEHY) retreated 3.45% to its worst levels of the year. UP Fintech (TIGR) plunged 14%.
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Energy stocks dominated Tuesday's biggest losers in the S&P 500 index. U.S. crude futures hit a six-year high overnight of $76.98 a barrel following an OPEC+ impasse, but closed Tuesday down 2.4% to $73.37 a barrel. Like crude oil prices, energy stocks have run up sharply in 2021. Most still look in good technical health, though few are in a good buying position right now.
Miners also retreated as copper turned lower, while agriculture stocks slumped as crop futures sold off. Tumbling 10-year Treasury yields hit financials.
Meanwhile, Tesla (TSLA) retreated 2.85% to 659.58, a relatively large drop for a non-China, non-energy stock. That could reflect Beijing's ire vs. the electric-vehicle giant, while the New York Times ran a front-page story on a lawsuit vs. Tesla over an Autopilot-related death of a 15-year-old boy in another car. TSLA stock is now below a recent consolidation formed after moving above its 50-day line and downward-sloping trend line in late June. Shares are close to testing that trend line as well as its 50-day line, which is about to converge with the 200-day average. At this point, investors looking for an early entry in TSLA stock might target last Friday's intraday high of 700.
CrowdStrike, Shopify, Microsoft and Tesla stock are on IBD Leaderboard. SHOP stock and Bill.com are on SwingTrader. MSFT stock is on IBD Long-Term Leaders. CrowdStrike and ZS stock are on the IBD 50. CrowdStrike was Friday's IBD Stock Of The Day, while MNDY stock was Friday's.
Dow Jones Futures Today
Dow Jones futures fell 0.15% vs. fair value. S&P 500 futures lost 0.1%. Nasdaq 100 futures edged higher.
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 Tuesday
The stock market rally had a mixed session, but rallied off lows.
The Dow Jones Industrial Average sank 0.6% in Tuesday's stock market trading. The S&P 500 index dipped 0.2%. The Nasdaq composite rose 0.2%. The big-cap Nasdaq 100, led by Apple (AAPL) and especially Amazon stock, climbed 0.4%. The small-cap Russell 2000, with many energy and financial losers, skidded 1.45%.
The 10-year Treasury yield slid 6 basis points to 1.37%.
Software and tech megacaps fared well, while many other sectors did not.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.3%, weighed down by some China names, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.1%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 1.1%. MSFT stock is a major IGV holding while CrowdStrike and Zscaler are also holdings, but not Shopify stock. The VanEck Vectors Semiconductor ETF (SMH) closed just below break-even.
SPDR S&P Metals & Mining ETF (XME) tumbled 3.1% and Global X U.S. Infrastructure Development ETF (PAVE) gave up 1.7%. U.S. Global Jets ETF (JETS) slid 1.6%. SPDR S&P Homebuilders ETF (XHB) fell 1.4%. The Energy Select SPDR ETF (XLE) gave up 3.25% and the Financial Select SPDR ETF (XLF) 1.6%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 0.7% and ARK Genomics ETF (ARKG) 1.5%. Tesla stock is the No. 1 holding across ARK Invest's ETFs.
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Amazon Stock
Amazon stock jumped 4.7% to 3,675.74, clearing a cup-with-handle buy point of 3,524.96, according to MarketSmith analysis. AMZN stock's buy zone runs to 3,701.21. Shares hit a record high in heavy volume after consolidating for the past 10 months. AMZN stock already flashed an early buy signal on Friday.
The relative strength line for Amazon stock, after lagging for nearly a year, hit a consolidation high on Tuesday's move. The RS line, the blue line in the charts provided, tracks a stock's performance vs. the S&P 500 index.
On Tuesday, the Pentagon announced it was scrapping the $10 billion JEDI contract awarded to Microsoft in 2019. Amazon had challenged the cloud-computing deal. The Defense Department now plans on a new contract, with Amazon and Microsoft the only qualified potential bidders, it said.
AMZN stock had already broken out when the JEDI news broke, giving shares an extra lift. All in all it was a good first day for Andy Jassy, who took over from Jeff Bezos as CEO on Tuesday. Jassy had run Amazon Web Services.
Microsoft stock closed up 1 cent to 277.66 after edging out to a record intraday high. Shares rose 4.8% last week, the sixth straight weekly gain, pushing slightly beyond a 5% buy zone that ends at 276.45.
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CrowdStrike Stock
CRWD stock rose 4.9% to 264.98, clearing a mini-consolidation right at the prior base with a 260.92 buy point. Volume was strong. On June 10, CrowdStrike stock cleared resistance just above 227, offering at least an early entry, running up to the top of the consolidation before pausing.
A new ransomware attack linked to Russian cyber-gang REvil is raising expectations for more government and corporate spending on cybersecurity.
Zscaler Stock
ZS stock popped 4.8% to 225, closing above the 234.04 handle buy point on a weekly chart. On June 10, Zscaler stock jumped above resistance just below 200. Arguable, the 199.60 entry was a legitimate double-bottom buy point.
Shopify Stock
Shopify stock leapt 5% to 1,538.03, a record closing high. Investors could use the original 1,499.85 cup-base buy point as an entry. If one drew a downward-sloping trend line from the June 21 peak of 1,552.23, the entry point would be roughly the same. An alternate entry is 1552.23 + 10 cents. Like CRWD stock, Shopify cleared an early entry in the first half of June, then quickly ran to new highs before pausing in tight fashion.
Shopify earnings and sales growth have boomed during the pandemic, but comparisons are expected to get a lot harder.
Bill.com Stock
Bill.com stock rose 2% to 188.36, breaking a downward-sloping trend line in its handle, offering an early entry. The official cup-with-handle buy point is 192.99.
Bill.com is not yet profitable, but revenue growth is accelerating.
Market Rally Analysis
Looking at the Nasdaq, the stock market rally had a positive session. The tech-heavy index rebounded from modest losses to close slightly higher, while Amazon and several software names broke out. A slim move kept the Nasdaq at 5.5% above its 50-day line, not quite extended. The Nasdaq 100, which had a better day, is now 6.7% above its 50-day.
The S&P 500 dipped, ending a seven-day win streak of mostly slim gains.
The Dow Jones fell, but found support near its 50-day line and closed well off lows. The Russell 2000 tumbled 1.4%, though it did close just above its 50-day line.
China stocks could be under pressure for some time. U.S. investors are likely to demand a higher discount on Chinese stocks, especially new IPOs, due to stepped-up regulatory risk.
Commodity-related stocks are struggling, and energy groups are as well, though to a much-lesser extent.
But while there were losers Tuesday, there were many winners too. In addition to AMZN stock, CrowdStrike and the others highlighted here, medical stocks Dexcom (DXCM), Insulet (PODD) and Progyny (PGNY) flashed various buy signals, though volume was light. Several other names, including some in software, showed intriguing action.
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What To Do Now
It's a stock picker's market, but you have to be choosy. And with sector rotation and daily swings still alive, investors have to make decisions about when to take whole or partial profits, while not letting losses get out of hand.
Sometimes you swing for the fences, other times you might try for a single and "manufacture" a run or two. In 2021, the market has generally favored the latter strategy. If you take a swing and you end up with a big winner, be thankful.
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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