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Dow Jones Futures Await Fed’s Favorite Inflation Report; Tesla rises late on Elon Musk promise




Dow Jones futures edged lower after hours, along with S&P 500 futures and Nasdaq futures. The Federal Reserve’s favorite inflation gauge is on tap Friday morning, while Tesla shares rose late on Elon Musk’s comments.




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The stock market suffered heavy losses on Thursday, wiping out Wednesday’s gains and more amid negative corporate news and economic data as well as bearish comments from billionaire investor David Tepper. The major indexes broke key levels with many leading stocks peeling back. Shares pared losses, but the closing declines were still significant.

Nvidia (NVDA), Lamb Research (LRCX) and other chip stocks were big losers, like the memory chip maker Micron technology (MU) missed views, guided low, and announced staff and further cuts in capital spending.

The Tesla (TSLA) meltdown continued. In addition to company-specific factors, Tesla stock fell Thursday with other automakers that CarMax (KMX) cited problems with affordable vehicles for its big quarterly miss. TSLA shares rose late after Elon Musk signaled no new share sales through 2023.

Other megacaps showed weakness, with Apple sliding into the bear market again Amazon.com (AMZN) already there. Microsoft (MSFT) broke through key support.

Investors should mostly stay in cash, reduce already modest exposure and largely avoid new purchases.

GDP growth in the third quarter was revised higher than forecast, along with the report’s inflation gauge. Initial unemployment claims increased, but less than expected. The November index of leading economic indicators fell 1%, strengthening the case for a recession next year.

PCE inflation data

On Friday, the Commerce Department will release the price index for personal consumption expenditures for November. The inflation data is part of the monthly income and expenditure report.

The PCE price index should rise 0.2% compared to October, with core prices also up 0.2%. The PCE inflation rate should cool to 5.5% from October’s 6%. Core PCE inflation is expected to ease to 4.6% from 5%.

The PCE inflation rate has been the Fed’s favorite price gauge for some time. Fed Chairman Jerome Powell has recently said that he is closely watching the prices of non-residential PCE services.

Personal income should rise 0.3% in November, with consumer spending up 0.2%. Americans have dipped into savings and increased credit costs in recent months.

Dow Jones Futures today

Dow Jones futures declined relative to fair value. S&P 500 futures and Nasdaq 100 futures edged lower, with TSLA shares giving a modest boost.

The PCE inflation rate will be released at 8:30 a.m. ET. November durable goods data will also be released at that time, with November new home sales at 10 A.M.

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 stock rally started weakly and continued to fall by mid-afternoon. The major indexes pared losses after that, but still suffered damaging losses.

The Dow Jones Industrial Average fell just over 1% in Thursday’s trading. The S&P 500 index fell 1.45%, with Tesla shares and LRCX the worst performers. The Nasdaq composite retreated 2.2%. The small-cap Russell 2000 gave up 1.3%.

Apple shares retreated 2.4% to 132.23, not far from the June bear market of 129.04. Fellow Dow Jones titan Microsoft gave up 2.55%, below its 50-day line after holding that key level since early November. Amazon shares fell 3.4%, nearing March 2020 Covid crash lows.

Nvidia fell 7% but found support at its 50-day line.

US crude fell 1% to $77.49.

The 10-year government yield fell 1 basis point to 3.67%. The two-year Treasury yield, more closely linked to Fed policy, rose modestly. The markets still expect interest rate increases of four points in February and March.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF ( IGV ) fell 1.9%, with MSFT stock a key component. VanEck Vectors Semiconductor ETF ( SMH ) plunged 4.15%. Nvidia shares, LRCX and Micron are notable SMH holdings, but chip weakness was widespread.

Mirroring more speculative stock stocks, the ARK Innovation ETF ( ARKK ) gave up 3.4%, falling to a new five-year low. ARK Genomics ETF (ARKG) fell back 1.1%. The TSLA share is a large holding across Ark Invest, but especially ARKK.

The SPDR S&P Metals & Mining ETF ( XME ) lost 1.75%. The US Global Jets ETF (JETS) retreated 2.1%. The SPDR S&P Homebuilders ETF ( XHB ) fell 0.9%. The Energy Select SPDR ETF (XLE) cooled 2.3% and the Financial Select SPDR ETF (XLF) was down 0.9%. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.1%.


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Tesla shares

Tesla shares plunged 8.8% to 125.35 on Thursday, hitting their lowest point since September 2020 as heavy-volume selling continued. Tesla doubled its year-end delivery discount in the US to $7,500 late Wednesday. It came as CarMax’s affordability problems hit automakers and dealers widely. TSLA stock has lost nearly 36% in December alone.

However, Tesla Elon Musk said in a Twitter Spaces call Thursday night: “I will not sell stock next year under any circumstances … not sell stock until 2024-2025.”

Musk has sold nearly $39 billion worth of Tesla stock since the stock peaked in November 2021, including another batch in mid-December. Several times he has stated that he was done selling for the time being, but he has never been so definitive.

However, Musk made it clear that he will not tone down his politically charged tweets. “I’m not going to suppress my views just to increase the share price.”

TSLA stock rose more than 2% in overnight trading.

Market Rally Analysis

Stocks were in a bearish mood on Thursday, with the major indexes plunging on economic data and corporate news.

The S&P 500, which just regained its 50-day line on Wednesday, sold off to undermine Tuesday’s intraday low. So did the Nasdaq, but both rallied to finish above Tuesday’s lows.

The Dow Jones just broke Monday’s intraday lows, but rebounded to close above the 50-day line.

While Apple, Amazon, Microsoft, and especially Tesla shares look dire, this isn’t just a megacap selloff. The Invesco S&P 500 Equal Weight ETF ( RSP ) fell 1.1% on Thursday, back below its 50-day line.

The SMH chip ETF dipped below its 50-day line, just days after jumping to a multi-month high on Dec. 13, above its 200-day moving average. Unlike the S&P 500, the SMH closed well below Tuesday’s low.

Leading stocks were hit hard again on Thursday, except for some defensive or defensive growth names. Some metals and mining stocks still look OK on a weekly chart.

The stock market rise is under severe pressure, just hanging on.


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What to do now

Market action continues to deteriorate, with trends turning decidedly negative since shortly after the December 13 open.

Market exposure should be slim, limited to positions that work. Even then, investors may want to take partial profits or simply exit some trades with a profit.

At some point the market will bounce like it did on Wednesday. Don’t get carried away by a strong open, or even a strong session.

Investors should work on their watch lists. Focus on stocks with strong relative strength or holding key levels like the 50-day line, and that get fussy if the charts don’t look good right now.

Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.

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