The Nasdaq composite made an impressive rebound as the software sector became an unlikely source of strength in Tuesday’s stock market.
The Nasdaq plunged as much as 2.2% but reduced its loss to just 0.1% at the close. While the rebound brought some relief, the index remained below the 50-day moving average, which has been flattening since mid-March.
Software stocks gave the composite much of their strength. Enterprise, gaming, cybersecurity and design software — industry groups that have fallen to the bottom half of IBD’s industry ranking — all rose more than 2%. They were among the top 20 of 197 groups Tuesday.
In the enterprise software group, there were some hopeful signs. Digital Turbine (APPS), Workday (WDAY), Dynatrace (DT) and Zendesk (ZEN) found support around the 200-day moving average after suffering weeks of declines. The group climbed more than 2% despite that Rackspace Technology (RXT) sold off more than 20% after earnings.
U.S. Stock Market Today Overview
Last Update: 4:10 PM ET 5/11/2021
The iShares Expanded Tech-Software ETF (IGV), a benchmark for the industry, reversed higher after falling below its 200-day line. It closed 1.1% higher, in another sign that software stocks may be bottoming.
Some major stocks also appear to be finding support at the 200-day average. Apple (AAPL) bounced from that level, offering hopes that it’s making a bottom. Amazon.com (AMZN) reversed higher after sliding below its 200-day line. Facebook (FB) remains well above its 200-day, but the stock bounced at the 299.81 buy point of its April 1 breakout.
Solar stocks also helped the Nasdaq. The group rose about 1.5% after falling nearly to the bottom of IBD’s industry rankings.
Building, Oil Groups Lag
By comparison, some of the market’s top-ranked industry groups lagged Tuesday. Wood products, homebuilders, oil exploration & production and furniture retailers fell 2% to 4%.
The S&P 500 pared its loss to 0.9% at the close. The Dow Jones Industrial Average fell 1.4%, though it held above its 21-day exponential moving average. The Russell 2000 was off 0.4% at the closing bell.
Volume rose from Monday’s totals, according to early data. Declining stocks led advancers by 5-to-3 on the Nasdaq and by more than 3-to-1 on the NYSE.
Innovator IBD 50 ETF (FFTY) lost 1.2% even after bouncing from an early plunge of 3.8%. Heavy exposure to building stocks hurt the IBD 50.
Homebuilder Green Brick Partners (GRBK) gapped down and closed below its 50-day moving average. It also fell more than 7% below the 25.15 handle entry, which is a sell signal. Meritage Homes (MTH) sank below its 117.16 buy point just one day after rising above it.
Floor & Decor (FND) fell to its 10-week moving average and is trading below the 108.14 buy point.
Worries about inflation resurfaced, which raised fears that interest rates may rise sooner than planned. Those worries hit growth stocks harder, sending the Nasdaq down nearly 8% from its April 29 peak. Before Wednesday’s market open, a key inflation data point comes out when the consumer price index is announced at 8:30 a.m. ET.
Juan Carlos Arancibia is the Markets Editor of IBD and oversees our market coverage. Follow him at @IBD_jarancibia
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