Dow Jones futures erased early gains and turned lower Wednesday morning in the wake of a key gross domestic product revision, as the major stock indexes looked to add to Tuesday’s stock market rebound. Tesla stock jumped 4% after Chief Executive Elon Musk said he had sold “enough stock.” And an analyst price-target hike didn’t seem to help Apple stock.
Apple (AAPL) was among the Dow Jones leaders, riding slightly lower premarket Wednesday. Fellow Dow component Microsoft (MSFT) inched higher in today’s stock market. Also on the Dow, Home Depot (HD) continues to rebound from support, while Nike (NKE) battled to retake a key level.
Electric-vehicle leader Tesla (TSLA) traded up almost 4% premarket Wednesday. Its rival, Rivian (RIVN), added 0.2%. Lucid Group (LCID) was essentially unchanged. And Chinese EV leaders Li Auto (LI) and Xpeng Motors (XPEV) were each slightly lower ahead of Wednesday’s open.
Among Wednesday’s top stocks to buy and watch, Arista Networks (ANET), Invitation Homes (INVH), Advanced Micro Devices (AMD) and Nvidia (NVDA) are in or near new buy zones. Keep in mind that investors should be cautious with new purchases amid the recent stock market volatility.
Dow Jones Today: GDP Report
Ahead of the stock market open Wednesday, Dow Jones futures dropped 0.1% vs. fair value, while S&P 500 futures fell 0.15%. Nasdaq 100 futures lost 0.2% vs. fair value. Remember that premarket action in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Elsewhere, the 10-year Treasury yield traded down to around 1.47% Wednesday, following its close at just below 1.49% Tuesday.
At 8:30 a.m. ET, the Commerce Department updated its third-quarter GDP estimate. Third-quarter GDP was revised to 2.3%, while the personal consumption expenditures number was revised to 2.0%. Per Econoday, the consensus among economists in their third estimate for third-quarter GDP called for 2.1% growth. Personal consumption expenditures were also expected to match the prior estimate, at 1.7%.
Stock Market Rally
The stock market posted strong gains Tuesday, as the major stock indexes rebounded from Monday’s weakness. The S&P 500 regained support at its 50-day moving average, while the Dow Jones Industrial Average found support at its long-term 200-day moving average.
Despite Tuesday’s strength, the market remains in a tenuous position. During extended periods of volatility and weakness, be extra demanding and focus only on stocks showing exceptional fundamental and technical strength.
The risk level is very elevated at this point and there’s no need to rush back into the market. It’s perfectly acceptable to watch from the sidelines and wait for the market to prove itself amid the recent losses. It’s extremely challenging to navigate a whipsaw market and typically just leads to more losses in your portfolio.
But don’t tune out. Keep track of the leading growth stocks by using the relative strength line. The RS line measures a stock’s price performance vs. the S&P 500. If the stock is outperforming the broader market, then the RS line angles upward. If a stock is performing worse than the broad market, then the line will point lower.
After Tuesday’s session, the Big Picture commented: “The large-cap benchmark benefitted from demand returning to travel-related stocks, as well as sectors such as real estate, health care and medicine, banks, semiconductors and enterprise software. Now, some of the big winners in these areas still look bloodied and bruised.”
For daily stock market commentary, check out IBD’s The Big Picture.
Stock Market Earnings: CarMax, Cintas, Paychex
CarMax jumped more than 4% premarket Wednesday after the company reported strong third-quarter earnings results. The stock closed Tuesday below its 50-day moving average.
Cintas recovered its 50-day line Tuesday, closing about 18% above a flat base’s 369.30 buy point. The company reported better-than-expected results ahead of the open.
Paychex closed just shy of new highs during Tuesday’s 2.1% gain, ending about 7% above a 118.32 entry in a cup base. The company topped estimates, as shares rose about 3% in premarket trade. Analysts expected the company to earn 80 cents per share on revenue of about $1 billion.
Dow Jones Stocks To Watch: Home Depot, Nike
Home Depot stock rallied 0.3% Tuesday, rising for a second straight day, as the home improvement giant continues to rebound from its 50-day support level. Shares are in a buy zone on a rebound from support. Despite recent losses, Home Depot remains the top Dow Jones performer in 2021, up 46.5% year-to-date through Tuesday’s close. HD shares gained 0.2% premarket Wednesday.
Dow Jones retail leader Nike is tracing a new flat base that has a buy point at 179.20, according to IBD MarketSmith chart analysis. Shares are fighting to retake their 50-day line following Tuesday’s 6.15% earnings-fueled advance. NKE stock moved up 0.25% premarket Wednesday.
Stocks To Buy And Watch: Arista, Invitation Homes, AMD, Nvidia
Arista Networks is in a buy range above a flat base‘s 134.24 buy point, closing further above the entry after Tuesday’s 2.7% gain. The 5% buy area goes up to 140.95. ANET stock shows a strong 97 out of a perfect 99 IBD Composite Rating, according to the IBD Stock Checkup. Shares were unchanged premarket Wednesday.
Arista pulled back on Friday, bouncing firmly off support at its short-term 10-day moving average, then reversing sharply higher. The stock’s RS line is at new highs, indicating significant stock market outperformance during the recent weakness in the major stock indexes.
Chip giants Advanced Micro Devices and Nvidia closed back above their respective 50-day moving averages following Tuesday’s strong rebounds, placing the stock market leaders in new buy areas. Remember that a volatile stock market should keep you in a more conservative mindset.
AMD stock moved down 0.2% premarket Wednesday, easing after Tuesday’s 6.2% rise. Meanwhile, graphics-chip maker Nvidia was flat, after Tuesday’s 4.9% gain.
EV Stocks: Li Auto, Xpeng, Lucid Motors, Rivian
Li Auto continues to work on the early stages of a new base following the 7%-8% loss-cutting sell rule below a cup-with-handle base’s 34.93 buy point. Shares are below their 50-day line and are finding support around the long-term 200-day moving average. Shares moved down less than 1% premarket Wednesday.
Xpeng Motors triggered the round-trip sell signal from a 48.08 buy point during early December’s sharp sell-off. XPEV shares rebounded from their 200-day line Tuesday, but remain squarely below the 50-day line. Wait for the stock to form a new base, which would offer a new entry. Shares fell 0.5% Wednesday morning.
Lucid Motors shares looked to add to Tuesday’s 0.1% gain, tilting slightly higher Wednesday morning. LCID stock remains extended past a 28.49 buy point in a cup-with-handle base, but huge gains have faded. Shares are trying to find support at their 50-day line, but are still below that level.
Recent initial public offering Rivian was essentially unchanged premarket Wednesday, looking to add to Tuesday’s 7.6% advance. RIVN shares closed Tuesday about 46% off their post-IPO highs, rebounding from Monday’s all-time lows. Continue to wait for an IPO base to form before considering a purchase. Recent sharp losses are a significant setback in the stock’s basing process.
Tesla stock rallied 4% premarket Wednesday after CEO Elon Musk said that he had sold “enough stock” to reach his plan to sell 10% of his shares in a podcast interview with the Babylon Bee. On Tuesday, Musk sold close to 584,000 shares and exercised two million more options, according to regulatory filings. The stock looked to add to Tuesday’s 4.3% gain. On Monday, the stock closed at its lowest level since Oct. 21. Last week, the stock broke down through its key 50-day support level.
Shares traded as high as 1,243.49 on Nov. 4, but the stock ended Tuesday about 25% off its 52-week high.
TSLA shares remain sharply above a 764.55 buy point in a cup with handle. The EV giant is working on a new base, but with the stock just off recent lows, the current formation needs more time develop before a correct buy point emerges.
Dow Jones Leaders: Apple, Microsoft
Among Dow Jones stocks, Apple stock snapped a three-day losing streak Tuesday with a 1.9% gain. The stock is about 13% above a 153.27 buy point out of a cup-with-handle base, according to IBD MarketSmith chart analysis. Early Wednesday, Citigroup upped its price target on Apple stock from 170 to 200, while reiterating a buy rating. Shares inched lower premarket Wednesday.
Software giant Microsoft is trying to retake its 50-day line amid Tuesday’s 2.3% rally. MSFT shares inched higher premarket Wednesday.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.
YOU MAY ALSO LIKE: