Dow Jones futures edged lower overnight, while S&P 500 futures and Nasdaq futures fell on an AMD earnings warning. The attempted stock market rally lost ground on Thursday, hitting resistance at short-term levels ahead of Friday’s key jobs report.
Tesla CEO Elon Musk and his lawyers made several demands related to Twitter (TWTR) takeover agreement. Meanwhile, the judge overseeing the Twitter case gave Musk until October 28 to end the deal. But that move means the Musk-Twitter trial, if it happens, won’t start until November. TWTR stock fell.
Separately, S&P Global raised Tesla (TSLA) credit rating to investment grade, a long-awaited move that will lower borrowing costs. But Tesla shares fell slightly, extending a sharp downward trend.
Shockwave Medical (SWAV), Arista Networks (A WEB), Eli Lilly (LLY), At Semiconductor (ON) and Neurocrine Life Sciences (NBIX) cleared or flirted with buy points during Thursday’s session.
NBIX stock is on the IBD Leaderboard, while Shockwave is on the Leaderboard Watchlist. Microsoft (MSFT) and Google stock are on IBD Long-Term Leaders. SWAV shares and Onsemi are on the IBD 50 list. ANET shares and On Semiconductor are on the IBD Big Cap 20. SWAV was Wednesday’s IBD Stock Of The Day.
After the conclusion, Advanced Micro Devices ( AMD ) said third-quarter sales will be about $5.6 billion, well below analysts’ consensus of about $6.7 billion. AMD blamed a weak PC market and ongoing inventory changes.
AMD stock fell more than 4% overnight. Shares had fallen 0.1% to 67.85 in Thursday’s regular session. AMD stock is still up for the week after hitting two-year lows last week.
Intel (INTC), which competes with AMD in PC chips, retreated modestly. So did Nvidia (NVDA), which competes with AMD in graphics chips.
Separately, Aehr test systems ( AEHR ), a small chip maker with exposure to electric vehicles, reported better-than-expected financial profit in the first quarter. The AEHR share jumped in extended action. Shares are signaling a move to around the 50-day line, not far from a trendline entry. AEHR stock fell 3.1% to 13.88 in Thursday’s session.
The Labor Department will release the September jobs report at 8:30 a.m. ET. Wall Street expects nonfarm payrolls to rise by 250,000, a solid gain, but down from August’s 315,000. Unemployment is kept at 3.7 percent. Labor force participation and wage growth will also be key.
The Federal Reserve wants to see the labor markets ease significantly before pulling back interest rate hikes. This week, the JOLTS survey showed that job vacancies fell by 1 million in August, while weekly jobless claims rose more than expected. The ADP employment index showed solid private jobs higher, while the ISM’s manufacturing and services gauges gave mixed readings on employment.
A weak employment report in September could spur markets to downgrade expectations of Fed rate hikes in the coming months. But the consumer price index for September threatens 13 October.
Dow Jones Futures today
Dow Jones futures fell 0.15% relative to fair value. S&P 500 futures fell 0.3 percent. Nasdaq 100 futures fell 0.35 percent. Intel stock is on the Dow Jones, S&P 500 and Nasdaq, while AMD and Nvidia stock are notable S&P 500 and Nasdaq components.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
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Stock market rally
The attempt at a stock market rally started with the major indices moving modestly to just below short-term resistance, then falling back, and closing at session lows as government interest rates rose.
The Dow Jones Industrial Average retreated 1.15% in Thursday trading. The S&P 500 index gave up 1%. The Nasdaq composite fell 0.7 percent. The small-cap Russell 2000 lost 0.6%.
The 10-year Treasury yield rose 7 basis points to 3.83%, as more Fed officials stuck to the central bank’s hawkish line. It jumped 14 basis points on Wednesday. The 10-year yield is now up for the week and not far from the 12-year highs of around 4%. The 10-year government interest rate that fell from Monday to Tuesday was an important tailwind for the new attempt at a stock market rally.
US crude oil prices rose 0.8% to $88.45 a barrel, their fourth straight gain. OPEC+ agreed on Wednesday to cut production quotas by 2 million barrels per day.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.5%. The iShares Expanded Tech-Software Sector ETF ( IGV ) was down 0.3%, with MSFT stock a huge component. VanEck Vectors Semiconductor ETF ( SMH ) fell 0.7%. SMH dropped overnight, with AMD, Intel and Nvidia stocking all the major components.
ARK Innovation ETF ( ARKK ), reflecting more speculative stock stocks, rose 0.3% and ARK Genomics ETF ( ARKG ) lost a fraction. TSLA stock is a large holding across Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) retreated 0.45%. The US Global Jets ETF (JETS) fell 0.9 percent. The Energy Select SPDR ETF (XLE) rose 1.8%. The Health Care Select Sector SPDR Fund ( XLV ) fell 1.3%.
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Tesla shares fell 1.1% to 238.13, even with the investment-grade credit rating news. Shares have fallen 10% this week, first on disappointing third-quarter earnings and then on Twitter news.
Late Thursday, Musk tweeted that Tesla Semi production has started with deliveries to PepsiCo (PEP) which starts on 1 December. The Semi, delayed for years, will have a range of 500 miles, he said. Other specifications are not clear.
The Musk-Twitter Deal Saga
Tesla CEO Elon Musk appeared to reverse course on Tuesday, saying he wanted to move forward with the $44 billion Twitter deal.
But the two sides have not agreed on new terms. Musk reportedly wants the deal to be contingent on debt financing — an escape clause that wasn’t in the April takeover deal. He also wishes to reserve the right to renew his fraud claims.
Meanwhile, Musk’s lawyers filed a motion with Delaware’s Court of Chancery to delay the upcoming Twitter trial, saying the deal should now close before October 28.
Twitter immediately protested, saying it was an “invitation to mischief and delay.” The lawyers also asked Musk to pay $44 billion, plus interest.
However, the Chancery Court judge, in a temporary victory for Musk, late Thursday pushed back the Twitter trial, which was set to start on October 17. If the Twitter deal is not finalized by October 28, she sets the trial in November dates.
TWTR stock fell 3.7% Thursday to 49.39, then fell slightly overnight after the judge delayed the Twitter trial. Shares fell 1.35% on Wednesday after rising 22% on Tuesday. In April, Musk agreed to pay $54.20 per share for the Twitter stock.
Assuming Musk ends up buying Twitter, it’s possible he’ll have to sell additional TSLA stock to finance the takeover. So there is an overhang on Tesla stock.
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Shares close to buy points
NBIX shares rose modestly to close above a 109.36 flat-base buy point for the first time, according to MarketSmith analysis. While breakouts have struggled in 2022, Neurocrine is 7% above its 50-day mark.
LLY stock climbed slightly on fresh positive drug news, but failed to close above a traditional buy point.
ANET stock and Onsi closed just above downtrend lines, which are slightly above their 50-day lines. Both are technically early buy points within new consolidations, but have risen on low volume while Friday’s jobs report threatens the market recovery.
SWAV stock touched a trendline on Thursday, then turned slightly lower. Shares are still above the 21-day and 50-day lines. Shockwave stock will have a proper base after Friday.
Market rally analysis
The stock market rally attempt lost ground again on Thursday. The major indexes hit resistance at the 21-day line shortly after the open. They remained volatile but generally down for the remainder of the session, nearly closing out session lows.
On Wednesday, shares pared losses even as government yields rose. But they struggled on Thursday with the 10-year government yield, and the dollar, up solidly for a second session in a row.
The major indices remain sharply higher this week.
Investors were not ready to make big bets heading into Friday’s jobs report. The employment report may be central to the attempted market rally. A strong move could trigger a follow-up day to confirm the new uptrend, with the likes of Arista Networks, On Semiconductor and Shockwave all tradeable. But a negative reaction to the jobs report could send the indexes back towards their low market levels.
Energy stocks continued to lead on Thursday, but many look extended after rallying for several sessions. Medical plays remain exciting while chip, network, restaurant, insurance, fertilizer and several other groups have at least some names around purchase points.
On the downside, garbage hauling companies such as Waste connections (WCN) sold off hard. Solar energy stocks struggled again.
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What to do now
While a few stocks flashed buy signals on Thursday, at least intraday, there weren’t many reasons to make new purchases with the new market rally heading into the jobs report.
Even if the market carries out a follow-up over the next few days, it does not mean that investors should increase their exposure quickly. The market will continue to face a number of technical challenges and financial headwinds, while the AMD warning is just the latest gloomy news heading into earnings seasons.
But get those watch lists ready. As a market rally builds momentum, you’ll be ready to take advantage of seeing the potential big winners in advance.
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