Dow Jones: Financials Surge as Investors Pull Back From Tech

Dow Hits Record as Money Moves Out of Tech and Into Banks

The Dow Jones Industrial Average hit a fresh intraday record Tuesday, up 497.89 points or 0.96% to 52,168.92 at 17:13 GMT. The S&P 500 slipped 16.74 points or 0.22% to 7,537.55. The Nasdaq Composite fell 130.66 points or 0.49% to 26,553.28. This is not a selloff. This is rotation. Money left technology and went straight into financials and industrials on the second straight day of falling crude prices.

Financials and Industrials Took the Money Tech Gave Back

Financials led every sector Tuesday, up 1.52%. Industrials gained 1.26%. Materials rose 0.77% and utilities added 0.76%. That is broad buying across economically sensitive names on the same day technology dropped 1.53%.

JPMorgan Chase rose 3.7% and Bank of America gained 2%. The two biggest banks in the country running while the Nasdaq sells off tells you where the money is going. That is not a market getting defensive. That is a market picking new leaders.

SpaceX Keeps Running Higher

SpaceX jumped another 12% on Tuesday and briefly passed Microsoft in market capitalization. It actually passed Microsoft at $2.93 trillion before pulling back. That is a $135 IPO stock that has climbed 62% in a few sessions and just traded above the second most valuable company in the world. It is also now ahead of Amazon at approximately $2.66 trillion.

The Cursor acquisition at $60 billion and Musk saying SpaceX could hit $1 trillion in annual revenue by 2030 are the kind of numbers that get a sell rating from CFRA on valuation alone. A stock that runs 62% off its IPO and briefly passes Microsoft is not trading on what the numbers say today. It is trading on what the buyers think the numbers look like in five years.

Stocks in the News

Olin fell 6.4% on an all-stock deal to acquire Huntsman at approximately $2.43 billion. Huntsman dropped 16.9% on the discount. Yum Brands rose 2.2% after selling Pizza Hut for $2.7 billion. Energy stocks slipped 0.43% as crude dropped more than 5% on the U.S.-Iran ceasefire extension.

Daily Nasdaq Composite Index (IXIC) Technical Analysis

The Nasdaq Composite is trading lower late in the session on Tuesday after hitting its highest level since June 4 at 26788.62. This price was well below the record high at 27190.21, but since the index is still holding above the key retracement zone support at 26346.05 to 26085.30, we can’t call it a potentially bearish secondary lower top yet.

The short-term range is 27190.21 to 24980.38. Its 50% to 61.8% zone is the key area to watch. In my opinion, trader reaction to 26346.05 to 26085.30 will determine the near-term direction.

Holding above it will indicate the presence of buyers. They are going to try to build a support base at the zone that serves as a launching pad for another breakout to the upside and a new all-time high.

A sustained move under this zone will signal the presence of sellers. This could trigger a near-term break into the 50-day moving average at 25396.92. If this fails, the main bottom at 24980.38 will be next. Not only is this support, but it’s also the trigger point for an acceleration to the downside.

What to Watch

The Fed decision Wednesday is the event. Rates stay at 3.50% to 3.75%, nobody is debating that. What the market needs to hear is how Fed Chair Kevin Warsh reads the inflation picture now that crude has dropped more than 10% in two sessions. CME FedWatch shows 42% odds on a December rate hike, down from where it was a week ago. Inflation is still above the Fed’s 2% target and one hawkish comment from Warsh about persistent price pressures could stall this rotation before it gets established.

The S&P 500 posted 19 new 52-week highs and just two new lows. The Nasdaq Composite is holding above the key retracement zone at 26346.05 to 26085.30. As long as that zone holds, buyers are in control and the all-time high at 27190.21 stays in play. Rotation into financials and industrials can carry this market higher without technology leading.

More Information in our Economic Calendar.