Futures are rising steadily; Musk suspends Twitter deal
Dow Jones futures rose solidly early Friday, along with S&P 500 and Nasdaq futures. Tesla CEO Elon Musk said the deal on Twitter was “temporarily suspended”, causing TWTR stock to crash ahead of the open.
The stock market saw large intraday swings on Thursday, with the S&P 500 nearly entering a bear market before the major indices rebounded to close a narrowly mixed close, while battered small caps and historic stocks rebounded.
Apple (AAPL) and Tesla stock, the two megacaps that had held up reasonably well until about last week, continued to come under pressure on Thursday. Apple stock fell to its lowest level in seven months. You’re here (TSLA) fell below its February low of 700 to its worst levels since late August, although it has pared losses considerably.
Musk suspends Twitter deal
Elon Musk tweeted early Friday that he was temporarily suspending his “Twitter agreement pending details supporting the calculation that spam/fake accounts indeed represent less than 5% of users.” Musk refers to a Twitter estimate that spam and bot accounts account for less than 5% of total users.
Twitter stock tumbled 16% to around 38. That’s well below the buy price of $54.20. It is even below the price of 39.31 on April 1, before Musk belatedly revealed that he had built up a large stake in TWTR shares.
Twitter stock had in recent days fallen to 45.08 amid speculation that Musk could walk away from the deal or renegotiate the price. The sharp decline in Tesla stock, partly related to fears that Musk will have to sell more shares for the Twitter deal, has raised fears of such a scenario.
“This is a full circus show on Friday the 13th,” Wedbush analyst Dan Ives said on CNBC’s Squawk Box. “Now the first reaction from the street is going to be that he’s looking for a way out of this deal.”
Musk faces a $1 billion severance fee if he backs out of the $43 billion deal.
Tesla stock jumped early on Friday.
Digital World Acquisition Corp. (DWAC), the SPAC partner of Trump Media & Entertainment Group, which runs the struggling Truth Social network, rose sharply ahead of the opening.
Dow Jones Futures Today
Dow Jones futures were up 0.75% relative to fair value. S&P 500 futures climbed 1.1% and Nasdaq 100 futures jumped 1.65%.
The 10-year Treasury yield climbed 8 basis points to 2.9%.
Crude oil prices rose almost 2%.
Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Stocks to Watch
Northrop Grumman (NOC), Penske Automotive (PAG), dollar tree (DLTR) and Cigna (CI) are all worth watching. All have 52-week relative strength lines or record highs, reflecting their outperformance relative to the S&P 500 Index.
The NOC stock is slightly below its 50-day moving average, but in a cup base with a shallow handle. PAG forges a handful at the top of a long consolidation. DLTR stock is struggling around its 50-day line, with a possible entry on the trendline. According to MarketSmith analysis, Cigna shares are trading tightly in a long cup-with-handle basis.
Penske Automotive raised its quarterly dividend Thursday night by 3 cents to 50 cents per share. It also increased its PAG stock buyback plan, which had $46.3 million remaining, to $250 million.
DLTR stock is on the IBD Leaderboard watchlist.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market Thursday
The stock market had a wild trading session. The major indices hit fresh lows in 2022 and also traded solidly higher at various times, before finally closing narrowly mixed.
The Dow Jones Industrial Average fell 0.3% in stock trading Thursday. The S&P 500 index fell 0.1%. The Nasdaq composite rose less than 0.1%. The small-cap Russell 2000 jumped 1.25%.
U.S. crude oil prices erased early declines to close 0.4% higher at $106.13 a barrel.
Gold, copper and palladium suffered significant losses. Growing concerns about global economic growth are weighing on oil and industrial commodities.
The yield on 10-year Treasuries fell 10 basis points to 2.82%, the fourth straight decline after reversing from a 3-year high at 3.17% on Monday.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) closed flat, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 0.9%. ETF VanEck Vectors Semiconductor (SMH) rose 0.5%.
The SPDR S&P Metals & Mining ETF (XME) slipped 2.15% and the Global X US Infrastructure Development ETF (PAVE) rose 0.8%. The US Global Jets ETF (JETS) fell 2.1%. The SPDR S&P Homebuilders ETF (XHB) jumped 3.4%. ETF Energy Select SPDR (XLE) climbed 0.4% and ETF Financial Select SPDR (XLF) fell 0.75%. The SPDR healthcare sector fund (XLV) gained 1%
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) jumped 5.6% and ARK Genomics ETF (ARKG) 5.1%. Many beaten technicians rallied on Thursday after massive losses in recent days and weeks. The TSLA share remains the No. 1 position among Ark Invest ETFs
Apple stock, a heavyweight in the Dow Jones, S&P 500 and Nasdaq, weighed heavily on major indexes, falling 2.7% to 142.56. That’s after falling 5.2% on Wednesday. As recently as Tuesday, the RS line was hovering around record highs, even though AAPL stock had fallen below its 200-day line. Now the RS line is down sharply.
On Thursday, Apple’s iPhone maker Foxconn warned of slowing demand for consumer electronics, including smartphones. Last month, Taiwan semiconductor (TSM), which makes chips for Apple and many others, also cited slowing demand for consumer electronics.
AAPL stock rose nearly 2% early Friday.
Tesla stock fell 0.8% to 728. During the day, shares fell to 680, undercutting the low of 700 on February 24, and returning to levels not seen since August. TSLA stock hit 1,092.22 intraday on April 21 after earnings, but has since plunged. The RS line for Tesla stock is just above recent lows.
It’s worth noting that Tesla stock couldn’t rebound on Thursday, given the gains of many other downed EV stocks and ARK-like plays, but the selloff in recent weeks isn’t unusual. .
Tesla stock jumped more than 5% early Friday, thanks in part to the rebound in futures, but also to Musk’s suspension of the Twitter deal.
Five best Chinese stocks to watch now
The stock market looked for direction on Thursday. With Apple shares erasing big losses and Tesla rising mid-morning after breaking lows, it looked like the major indexes were finally going to rebound.
But Apple and Tesla quickly faded as key indices quickly sold off to new lows. The S&P 500 came within a few points of a 20% decline to hit a bear market. The Nasdaq is down more than 30% from its all-time high in November.
The major indexes rallied over the past 40 minutes, with the Nasdaq sneaking into the green as the closing bell rang. Tesla stock pared its losses, while Apple pared only its last big drop.
While the major indices soared, small caps and highly valued growth stocks staged a strong relief rally. But those stocks have suffered massive losses in recent weeks.
The progressives narrowly beat the decliners in Thursday’s session, but the trend has been very negative for the past few days and weeks. New lows erased new highs.
As investor fears shifted from inflation to growth concerns — in part due to Fed rate hikes to contain inflation — even commodity stocks faltered. Oil and gas stocks are an area of strength, but some have faltered as even many leaders struggle for support at their 50-day lines.
Time the Market with IBD’s ETF Market Strategy
What to do now
The market needs much more than an hour-long bounce, or a good day or two. It needs several strong sessions to indicate some sort of sustained rally. Even that could end up being just a bear market rally towards the 21 or 50 day lines before reversing again.
There is no reason to get involved in this market other than long term winners.
Work on your watchlists. Focus on stocks with high relative strength, such as Northrop, Dollar Tree and Cigna. Note the ones that set up near buy points, but don’t dwell too much on that yet. If this market correction/bear market continues for a while, resilient stocks will have time to form better patterns over time.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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