Dow Jones Falls On Recession Fears; AI Stock Crashes, Many Groups Sell Off

After hours, Dow Jones futures climbed higher along with S&P 500 and Nasdaq options. Dow component Johnson & Johnson (JNJ), rose late after it announced it would pay $8.9 Billion to settle claims that talc products cause cancer.

As recession fears mounted, the stock market lost ground Tuesday. The number of job openings fell to a 21 month low, which was much lower than anticipated. The data do not support a Fed rate hike, but they raise concern that the U.S. is headed for recession.

Major indexes suffered modest losses but did not suffer much damage. This is largely due to megacaps. Meta Platforms (META), Apple (AAPL) and Microsoft (MSFT), barely budged, while Meta Platformss (META), edged higher. TSLA maintained its key support though.

Overall, growth was fairly steady with some software companies like ServiceNow (NOW), making strong moves. AI stock fell on the negative side due to a short-seller's recent move vs.. C3.ai. Market breadth was poor overall. Many industries, including steelmakers and base metal miners, as well as heavy construction companies, suffered severe losses. Economic fears.

Not only did banks fall, but so did regional banks and giants like JPMorgan Chase (JPM). The recent bank troubles will probably mean that there will be less lending, especially for commercial real property, which will impact the economy.

Jamie Dimon, CEO of JPMorgan, warned Tuesday in his annual shareholder letter that the bank crisis "not yet over" and would have "repercussions" for many years.

As investors fleeing from recession fears and a weaker dollar, gold and gold stocks enjoyed a strong day.

SwingTrader is available for ServiceNow stock and META stock. Microsoft stock and Google stock are IBD Long-Term leaders.

This video discusses Tuesday's market action. It also analyzes NOW stock, Atkore, and C3.ai.

J&J Talc Settlement

Johnson & Johnson announced that it would pay $8.9 Billion to settle long-standing claims about baby power and other talc products causing cancer. LTL Management, a J&J subsidiary, filed for bankruptcy.

JNJ stock gained 3% in the final trading session. The 50-day line was reclaimed by shares, which rose just over 1% Tuesday. JNJ stock remains at a 2-year low.

Dow Jones Futures Today

Dow Jones futures increased 0.1% vs. fair values, with JNJ stock providing a slight lift. S&P 500 and Nasdaq 100 futures edged up.

Do not forget that Dow futures stock exchange session is subject to overnight action.

Stock Market Rally

Stock market rallies began Tuesday with little change, but then retreated. Major indexes fell modestly, but this masks deeper weakness.

At 10:10 a.m. ET: The JOLTS survey revealed that job openings dropped to 9.9 million in February, down from 10.6 million in January. This is the lowest number of job openings in 21 months, and it's also far below view counts. This is something markets and Fed chief Jerome Powell have longed for for many months. However, the focus shifted to fears of recession and the indexes fell quickly.

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

U.S. crude oil prices rose 0.4% to $80.71 per barrel, slightly below their morning highs, but nearly 11% higher than the previous four sessions.

The 10-year Treasury yield dropped more than 9 basis points, to 3.335%. The yield on the two-year Treasury fell 15 basis points to 3.833%.

From 57% Monday, the odds of a May rate increase fell to 40% on Tuesday. Expectations for a rate increase will be influenced by the March jobs report due Friday, U.S. markets close.

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

ETFs

The Innovator IBD50 ETF (FFTY), which is a growth ETF, fell 1.5%. Just in time, the iShares Expanded Tech Software Sector ETF (IGV), edged up with big components from MSFT and NOW. VanEck Vectors Semiconductor ETF(SMH) fell 1.5%.

Reflecting more-speculative stories stocks, ARK Innovation ETF(ARKK) dropped 0.5% while ARK Genomics ETF(ARKG) fell 0.4%. The No. 1 holding is TSLA stock. Ark Invest's ETFs are the No. 1 holding.

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

Financial Select SPDR ETF (XLF KRE), which was not far from its multiyear lows, slumped by 2.2%.

AI Stock

AI stock fell 26% to 24.95 in huge volume, wiping out much of the recent big advance for this highly volatile name.

Kerrisdale Capital Management had previously stated that it was short selling AI stock. Deloitte received a letter from Kerrisdale Capital Management accusing C3.ai of using accounting methods that have the inflation effect on its income statement.

C3.ai responded that the "Kerrisdale Letter" was a highly creative, transparent attempt by a self-acclaimed short sell to shorten the stock.

Late trading saw AI stock rise modestly

Megacap Stocks

Apple stock fell 0.3%, while Microsoft was just below break-even. META stock climbed 0.8%. All rights are extended.

Tesla stock dropped 1.1% to 192.58 but remained above its 21-day line and 50-day lines. On Monday, shares fell 6.1% to 192.58. This was below the 200.76 buy level as analysts worry that further price cuts are needed to fuel demand. Tesla cut prices in Australia on Tuesday.

Market Rally Analysis

Although the stock market rallies retreated Tuesday it is not clear if this was the beginning of anything serious or a big deal.

Investors were more afraid of a recession Tuesday than the Fed after months of waiting for weaker economic data.

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

For the second consecutive session, Friday's trading range was maintained by the Nasdaq. After four consecutive wins, the Dow Jones and S&P 500 pulled back.

The megacaps and Apple stock didn't move. The chip market declined, but they don't appear to be damaged.

Tuesday's leaders were software stocks, with ServiceNow rising 2.5% to 476.05 after an analyst upgrade. This move will lead to a 494.72 consolidation point. NOW stock was actionable Friday after a strong move beyond its 50-day mark and breaking a downtrend.

Losers trumped winners Tuesday by more than 2-to-1 in the Nasdaq/NYSE. Many of the losers were in the mining, construction, or manufacturing industries. Stocks in their respective groups fell as well as Nucor (NUE), Rio Tinto, Atkore (ATKR), Caterpillar (CAT), and Nucor (NUE).

Bank stocks, particularly regional ones, are still in trouble.

What to do now?

Market rally was due for a pullback, and it got one. The majority of the major losers were not leaders, but growth names did well.

However, the actions in many stocks and groups of stocks demonstrate the importance to be nimble as well as controlled.

Investors should not expect a wild bull market. Instead, they should take small steps to get into the uptrend and avoid investing in extended stocks. Investors should consider taking partial profits and not rushing to cash out, especially if they are dealing with volatile names such as AI stock. Do not let winners become losers.

It is a great time to stay engaged. Pay close attention to the major stocks and your portfolio. Keep up with your watchlists.

To stay on top of market direction, leading stocks, and other sectors, read The Big Picture each day.