Dow Jones futures and S&P 500 futures rose slightly late Wednesday, along with Nasdaq futures, after the stock market sold off sharply Wednesday. The Nasdaq hit key resistance along with Apple (AAPL), Amazon.com (AMZN), Microsoft (MSFT), Advanced Micro Devices (AMD) and Netflix (NFLX). Tesla stock tumbled after Tesla Battery Day and the formal unveiling of the Volkswagen ID.4.
The stock market ended a losing streak Tuesday with a promising advance. But Wednesday’s sharp losses suggest Tuesday’s move was a head fake before a new batch of selling. Of course, the major indexes and leading stocks could bounce back, but the choppy stock market environment is difficult to prosper in.
The Nasdaq composite was turned back just shy of the 50-day and 10-week moving averages. Apple, Amazon, Microsoft, AMD and Netflix stock also hit resistance around those lines. Meanwhile, Tesla (TSLA) plunged after its long-hyped Battery Day failed to excite, while Volkswagen (VWAGY) priced its ID.4 crossover well below the Model Y and even the Model 3.
Blowout Nike earnings helped the Dow Jones and S&P 500, but those indexes fell sharply as well.
Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value, swinging between slim gains and losses. S&P 500 futures climbed 0.25%. Nasdaq 100 futures advanced 0.1%, with Apple and Tesla stock continuing to slide overnight.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session. Dow Jones futures were solidly positive early Wednesday, but that didn’t hold up through regular trading.
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Coronavirus cases in the U.S. have hit 7.13 million, with deaths above 206,000.
Stock Market Action Wednesday
U.S. Stock Market Today Overview
Last Update: 4:18 PM ET 9/23/2020
The stock market opened Wednesday mixed but Apple, Tesla and other big techs drove the major indexes sharply lower. The dollar has risen substantially this week, hurting U.S. multinationals and exporters. Gold prices fell on a strong greenback, slamming gold miners.
The Dow Jones Industrial Average tumbled 1.9% in Wednesday’s stock market trading, even with Nike spiking nearly 9% on earnings. The S&P 500 index fell 2.4%. The Nasdaq composite tumbled 2.7%. All three major indexes undercut Tuesday’s low and nearly undercut recent intraday lows.
This is an important day to read The Big Picture.
Apple stock and AMD fell about 4%, both falling back below their 50-day lines. AAPL continued to edged lower overnight.
Amazon and Netflix fell more than 4% Wednesday, while Microsoft lost 3.3%. All three were turned back from their 10-week lines.
It could be that Apple, Microsoft and FANG stocks are going to take a breather, with different stocks leading. But it would be hard for the stock market to rally significantly without the megacap techs participating.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) retreated 2.5%. The iShares Expanded Tech-Software Sector ETF (IGV) sank 2.7%, with Microsoft among the biggest components. The VanEck Vectors Semiconductor ETF (SMH) shed 2.4%, with AMD stock weighing on chips.
Tesla Stock Dives After Battery Day
Tesla stock plunged 10% to 380.36 on Wednesday, tumbling through its 21-day exponential moving average. Shares fell 5.6% on Tuesday, after CEO Elon Musk downplayed Battery Day expectations, saying new advances wouldn’t hit mass production until 2022. TSLA stock remains above its fast-rising 50-day line and its Sept. 8 low.
Shares fell 3% overnight, moving close to the 50-day/10-week lines.
After nearly a year of anticipation, Tesla Battery Day failed to live up to the massive hype. Elon Musk discussed an array of potential cost savings, but even pilot manufacturing of a new battery is just “close to working,” with mass production a long way off.
Musk didn’t even show the new battery at the event, and said nothing about progress toward a so-called “million-mile battery.” He also didn’t provide much new on the Cybertruck, Semi and Roadster models. Musk said he sees a $25,000 autonomous EV car in two to three years, but that’s what he said two years ago.
VW ID.4 Much Cheaper Than Model Y
Also pressuring Tesla stock: the VW ID.4, the first clear-cut rival to the Model Y.
The VW ID.4 will start at $39,995, or $32,495 after a $7,500 federal tax credit. VW kicked off reservations Wednesday, with U.S. deliveries starting in early 2021. The initial ID.4 will have a 250 mile range, with longer-range versions to follow.
The base Tesla Model Y starts at $49,900, with no tax credit available. The entry Model Y does have a 316-mile range.
Including tax credits, the ID.4 crossover is cheaper than the base Model 3, which has an identical 250-mile range and a $37,990 price tag.
VW expects to start making the ID.4 at its Tennessee plant in 2022. When it starts making them in the U.S. the starting price will drop to $35,000.
The ID.4 is launching in Europe before the end of 2020, with the Model Y not expected to arrive there until the Tesla Berlin plant is operating sometime next year. The ID.4 will debut in China in early 2021, likely just a couple months after the made-in-China Model Y.
The competition, along with dozens of other EVs coming through 2021, could force further big price cuts by Tesla to support demand, especially as production capacity ramps up.
Meanwhile, California Gov. Gavin Newsom signed an executive order Wednesday to ban the sale of new gas-powered cars and trucks by 2035. That would provide a much-bigger market for Tesla, but also spur even-higher competition from other automakers.
Stock Market Chops Up Investors
A choppy market with a downward bias is treacherous for growth investors. When stock market conditions start to brighten, it’s often a false dawn.
Yes, a lot of stocks looked enticing after Tuesday, but it doesn’t take much selling to make them unappetizing again. Few new buys are working, while many big winners from the stock market rally are losing more ground. And no wonder: The Nasdaq has fallen 10 of the last 14 sessions.
The Nasdaq has now hit resistance multiple times at the 50-day moving average. Living under the 50-day line is, at best, living in your parents’ basement. There’s little sunlight.
The lack of market fear, as shown by the CBOE Volatility Index and put/call ratio, suggests more selling may be needed to mark a short-term bottom.
It’s time to play defense and continue to cut exposure.
Wait for the stock market to clearly establish a strong uptrend. As a good first step, look for the Nasdaq and S&P 500 to reclaim their 50-day moving averages.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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