Dow Jones futures rose modestly Tuesday night, along with S&P 500 futures and Nasdaq futures. The stock market rally suffered sharp losses amid rising Treasury yields as Treasury Secretary Janet Yellen warned of a looming government default next month. Micron earnings were in focus overnight.
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The S&P 500 and Nasdaq composite fell below their 50-day moving averages in heavy volume, suggesting a change in character for the stock market rally.
Leading stocks looked even worse, with the Innovator IBD 50 ETF (FFTY) on track for its worst weekly loss since the coronavirus crash.
Tech Titans, Growth Leaders Plunge
Tech titans such as Microsoft (MSFT), Google parent Alphabet (GOOGL), Apple (AAPL) Facebook (FB) and Amazon.com undercut recent lows or set recent closing lows, as did Nvidia (NVDA), ASML (ASML), Applied Materials (AMAT) and ServiceNow (NOW).
Cloudflare (NET), which tumbled to its 50-day line on Monday, dropped 7.9% on Tuesday, decisively breaking the 50-day line. NET stock has now plunged 17% over the past four sessions, as software names have come under heavy pressure. Medical product stocks — from biotechs to testing firms to system makers — continued to struggle. Even InMode (INMD), which had shrugged off recent market weakness, tumbled 13%.
Energy stocks fared well, holding on to recent gains even as crude oil backed off multiyear highs to close slightly lower. Financials also did fine, with rising Treasury yields providing support.
ASML, Microsoft, Google, ServiceNow and Nvidia stock are all on IBD Leaderboard. Microsoft, ServiceNow, ASML and Google stock are all IBD Long-Term Leaders, with several others also having rough sessions.
The video embedded in this article highlights Microsoft, ASML and NET stock.
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Janet Yellen U.S. Default Warning
Treasury Secretary Yellen told the Senate Banking Committee that a U.S. default is likely without a debt limit hike by Oct. 18, giving a specific date for the first time. Meanwhile, the government faces a partial shutdown without new funding after Sept. 30. Senate Republicans blocked a debt-limit hike and short-term funding measure late Monday, saying they want Democrats to raise the debt limit on their own.
All of this comes as House Speaker Nancy Pelosi plans a Thursday vote on the bipartisan infrastructure bill. It’s unclear if a small number of GOP supporters will offset defections by left-wing Democrats, who want the infrastructure bill tied to a big tax-and-spending reconciliation package that is far from finished..
Meanwhile, Fed chief Jerome Powell, testifying at the same Senate Banking hearing as Treasury Secretary Yellen, said inflation would remain higher for longer than previously anticipated.
The Federal Reserve and European Central Bank are inching toward scaling back asset purchases, though actual rate hikes are likely a year away at the earliest.
All of that is helping to push up Treasury yields. The 10-year…
Read More: Dow Jones Futures: Market Sells Off Amid Yellen Default Warning;