Dow Jones Falls On Recession Fears; AI Stock Crashes, Losers Trounce Winners

Dow Jones futures, S&P 500 and Nasdaq Futures all rose after-hours. Dow component Johnson & Johnson rose late after it announced that it would pay $8.9 billion in settlement claims that talc-based products cause cancer.

Stock market gains slowed down Tuesday, as fears of recession grew. The number of job openings has fallen to its lowest level in 21 months, which was much lower than anticipated. The data, while lowering the odds of a Fed rate hike, raises concerns that the U.S. is headed for a recession.

The major indices suffered modest losses and did not show much damage. Megacaps are a big part of the problem. Apple (AAPL), Microsoft(MSFT) barely moved while Meta Platforms(META) rose. But TSLA remained a key supporter.

Overall, growth was good. Some software makers like ServiceNow (NOW), made strong moves. The AI stock fell on the latest short-seller move against C3.ai. C3 continued to fall late.

The overall market breadth was poor. Steelmakers, mining companies, builders of building materials, and heavy construction firms all suffered steep losses. Fears of economic recession are to blame.

The banks also fell, not only regional names like JPMorgan Chase but also the giants. The recent bank woes are likely to result in less lending, especially for commercial real estate. This will weigh on the economy.

In his annual shareholder's letter, JPMorgan CEO Jamie Dimon warned that the bank crisis "is not yet over", with "repercussions for years to come."

Investors rushed to safe havens due to recession fears and a weaker dollar.

SwingTrader is a good place to find ServiceNow and META stocks. Microsoft and Google stocks are listed on IBD's Long-Term Leaders.

This article includes a video that discusses Tuesday's market activity and analyzes NOW stock, Atkore, and C3.ai.

J&J Talc Settlement

Johnson & Johnson agreed to pay $8.9 Billion to settle claims that talc and baby power products cause cancer. J&J's subsidiary LTL Management filed for bankruptcy.

JNJ's stock rose by 3% during late trading. The shares rose just over 1% in a third consecutive session on Tuesday, reclaiming their 50-day line. JNJ is not far off its two-year low.

Dow Jones Futures Today

Dow Jones futures increased 0.1% in comparison to fair value. JNJ shares also rose a little. S&P 500 Futures rose 0.1%, and Nasdaq100 futures rose 0.15%.

Keep in mind the overnight Dow Futures session.

Stock Market Rally

Stock market rallies started off Tuesday little changed but then retreated. The major indexes were modestly down but they masked deeper weakness.

By 10 a.m. The JOLTS survey revealed that job openings in February fell from the downwardly revised 10,6 million of January to just 9,9 million. This is the lowest level in 21 months, and well below expectations. This is something the markets, and Fed chief Jerome Powell, have been waiting for for months. The indexes dropped quickly as recession fears took center stage.

In Tuesday's stock exchange trading, the Dow Jones Industrial Average and S&P 500 both declined by 0.6%. The Nasdaq composite dropped 0.5. The Russell 2000 small-cap index, which is exposed to regional bank stocks, fell 1.8%.

U.S. crude prices rose 0.4% to $80.71 per barrel. This is down from the morning's highs, but still up 11% over the last four sessions.

The yield on the 10-year Treasury fell by more than 9 basis points to 3,335%. The yield on the two-year Treasury fell 15 basis points, to 3.83%.

The odds of an interest rate increase in May fell from 57% to 40% on Monday. The March jobs report is due Friday, with U.S. stock markets closed. This will probably change expectations for a rate hike.

The U.S. Dollar has fallen to its lowest level since February 2.

ETFs

Innovator IBD ETF (FFTY), which tracks growth ETFs fell by 1.5%. The iShares Extended Tech-Software Sector (IGV) edged up just a bit, with the MSFT and NOW stocks being major components. VanEck Vectors Semiconductor ETF(SMH) fell 1.5%.

ARK Innovation ETFs (ARKK) and ARK Genomics ETFs (ARKG) both fell 0.5%, reflecting the more speculative stocks. TSLA is the top holding across all of Ark Invest's ETFs. Ark Invest ETFs have TSLA as their No.

Global Jets (JETS) fell 0.7%. SPDR S&P Homebuilders (XHB) lost 2.7%. Energy Select SPDR ETF XLE retreated by 1.8%, while the Health Care Select Sector SPDR Fund XLV ticked up.

The Financial Select SPDR ETF XLF KRE has fallen by 2.2% and is not far off recent multi-year lows.

AI Stock

AI stock fell 26% in a massive volume to 24,95, wiping out much of the recent big advance for this highly volatile name.

Kerrisdale Capital Management - which previously claimed to be shorting AI stocks - sent a letter, addressed to Deloitte's auditor C3.ai, accusing it of "using accounting techniques that inflate its income statement".

C3.ai responded that the "Kerrisdale Letter" was a transparent and highly creative attempt by an avowed short seller to short a stock.

Overnight, AI shares fell by a solid amount.

Megacap Stocks

Microsoft's stock ended at just below breakeven. Apple's stock fell by 0.3%. META's stock grew by 0.8%. All are extended.

Tesla shares fell by 1.1%, to 192.58. However, they remained above their 21-day line and 50-day line. Analysts fear that further price reductions will be required to boost demand. Shares dropped 6.1% Monday and fell below the 200.76 purchase point. Tesla cut prices in Australia on Tuesday.

Market Rally Analysis

The stock market rallies retreated on Tuesday. But it is not clear whether it was a sign of something more serious or a minor blip.

Investors were more concerned about a recession on Tuesday than they had been for months. They had hoped for weaker economic indicators to stop the Fed from raising rates.

Overall, the major indices showed modest losses and looked normal or even healthy.

For the second session in a row, Nasdaq remained within its Friday trading range. S&P 500, Dow Jones and NASDAQ all retreated after four-day winning streaks.

Apple and megacaps did not move. Chips are down but not damaged.

Analysts upgraded ServiceNow to 476.05, which is moving towards a consolidation buy-point of 494.72. The NOW stock became actionable on Friday after a strong rise above its 50-day level and a break in a downward trend.

The Nasdaq & NYSE saw losers outnumber winners by a margin of more than 2 to 1. Many of the losers, particularly those in the mining, construction, or manufacturing industries, were also hammered. Nucor (NUE), Rio Tinto(RIO), Atkore(ATKR) & Caterpillar (CAT), along with their respective groups, all fell.

Bank stocks, particularly regional plays, continue to struggle.

The market has improved in the last week after several weeks of narrow leading. The Tuesday action is worth watching. It was only one day.

What to Do Now

It was inevitable that the market rally would end in a correction, and one did. The majority of big losers were not leaders, but growth names did okay.

The actions of many groups and stocks demonstrate the importance to be nimble.

Investors should avoid investing in stocks that are overvalued and instead, take small steps to enter the market. Also, they should consider taking partial profits as quickly as possible, especially when dealing with names that are highly volatile like AI stock. Do not let your winners become losers.

It is time to pay attention to your portfolio, the leading indexes and other important stocks. Continue to work on your watchlists.

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