Dow Jones futures fell Thursday morning, along with S&P 500 futures and Nasdaq futures. The stock market sold hotter than expected CPI inflation data on Wednesday, with the S&P 500 and Nasdaq breaking below the recent lows.
The market correction and the Nasdaq bear market show no signs of declining. Rebound attempts are half-hearted and quickly knocked down. And despite the market meltdown, the fear meters, a contrarian indicator, are still not high.
Meanwhile, a meltdown of so-called stack coins, digital currencies that are meant to be pegged to the dollar, continues to plummet, putting further pressure on Bitcoin and other cryptocurrencies.
After the end, Walt Disney (DIS) and Tesla (TSLA) rival Rivian (RIVN) reported weaker quarterly results than expected. But investors focused on Disney’s Disney + subscription numbers after the fantastic Netflix (NFLX) decline. Rivian shareholders wrote in the EV startup’s statement that it increases van shipments to larger customers Amazon.com (AMZN).
Tesla shares are approaching recent lows in their broad and loose consolidation. Tesla faces a number of challenges in the short and medium term.
Meanwhile, Merck (MRK) broke out briefly, while Eli Lilly (LLY), Anthem (ANTM), Chevron (CVX) and Dollar tree (DLTR) trades around its 50-day lines. All show relative strength.
Tesla, Anthem and LLY shares are on the IBD Leaderboard, while DLTR shares have joined the Leaderboard watch list. The MRK stock and Dollar Tree are on SwingTrader. Merck and CVX shares are on IBD Big Cap 20. Eli Lilly was Wednesday’s IBD share.
Dow Jones Futures today
Dow Jones futures fell 0.45% vs. fair value, reversed from modest gains Wednesday night. S&P 500 futures fell 0.6% and Nasdaq 100 futures retreated 1%. The DIS stock is a Dow Jones and S&P 500 component.
The 10-year government interest rate fell 8 basis points to 2.84%.
The US crude oil price fell more than 1 percent. Copper futures slipped 3%. There is growing concern that rising Fed interest rates to fight inflation will trigger a recession amid a series of economic growth challenges.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
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Stock market Wednesday
The stock market was volatile at Wednesday’s opening after the consumer price index in April. Inflation cooled to 8.3% from March’s 40-year high of 8.5%, but it was warmer than expected. Core consumer prices rose 0.6% compared with March.
Up-and-down trading was decisively negative, especially on the Nasdaq. The major indices fell to fresh 52-week lows, closing close to the worst levels of the day.
The Dow Jones Industrial Average fell 1% in Wednesday’s trading session. The S&P 500 index rose 1.6 percent. Nasdaq composites fell 3.2%. Small-cap Russell 2000 cut 2.5%.
The 10-year government bond yield fell 7 basis points to 2.92%, the third consecutive decline. This is after first increasing to 3.04% – and even higher before the opening of the KPI data. Meanwhile, the two-year interest rate increased by 1 basis point to 2.63%. The 2-year return is more closely linked to interest rate movements in the Fed, while the 10-year Treasury notices the effect of forecasts to slow growth.
The US crude oil price rose 6% to 105.71 barrels. With Shanghai and China Covid cases falling sharply in recent weeks, expectations are growing that the Chinese government will ease economic-crushing shutdowns, increase demand for crude oil and other commodities. But it has not happened yet.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.4%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.15%. iShares Expanded Tech-Software Sector ETF (IGV) fell 3.3%. VanEck Vectors Semiconductor ETF (SMH) retreated 3.1%.
The SPDR S&P Metals & Mining ETF (XME) fell 0.7% and the Global X US Infrastructure Development ETF (PAVE) gave up 1.4%. US Global Jets ETF (JETS) fell 2.4%. SPDR S&P Homebuilders ETF (XHB) retreated 3.6%. Energy Select SPDR ETF (XLE) rose 1.3%, with the CVX stock an important component. Financial Select SPDR ETF (XLF) fell 0.9%. Health Care Select Sector SPDR Fund (XLV) declined 0.7%, with Merck, Eli Lilly and ANTM shares all notable holdings.
ARK Innovation ETF (ARKK) reflected more speculative history shares, plunging 10.1%, with key holdings Unity software (U) and Coin base (COIN) tumbles on weak results and guidance. ARK Genomics ETF (ARKG) was down 7.8%. Both ETFs are at a two-year low. The TSLA share is still number 1 across Ark Invest’s ETFs.
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Merck shares rose 1.6% to 89.20, closing below a buyout point of 89.58 cups with handles after breaking out earlier. The shares had traded close over the previous several sessions. The relative strength line for the MRK share had risen to new heights well before Wednesday’s move.
The LLY stock rose 0.35% to 286.69, reducing the rise after trying to move from the 50-day moving average. Technically, the Eli Lilly share is still in the buying area from a buying point of 284 cups that was originally cleared almost two months ago. But investors may want to wait for the LLY stock to break a short downtrend, perhaps using the May 6 high of 298.25 as a trigger. After this week, Eli Lilly should have a flat base – part of a base-on-base formation – with a buy point of 314.10. The RS line for the LLY stock is already at a new high.
The ANTM stock fell 0.4% to 487.36, reversed from modest gains near its 50-day line, technically back in a previous buying zone. The shares in the health insurance giant had retreated sharply in recent weeks. The Anthem stock can be active from the 50-day line, especially if it breaks over a short trend line. The RS line for the ANTM stock is at a new high.
The DLTR share fell 1.15% to 156.07, just below the 50-day line, just within a previous buying zone like Anthem. A 50-day line bounce over the 21-day line will also break a short downward trend line, offering an aggressive entry. The RS line for the Dollar Tree stock is reaching new heights.
The CVX stock rose 1.5% to 163.16, just below the 50-day line after moving above this intraday level. The Chevron stock has a flat base with a buying point of 174.96, according to MarketSmith analysis. Investors can buy CVX shares if it returns from the 50-day high and clears the May 6 high of 170.97. The RS line for Chevron storage is at a new high.
Disney’s revenues and revenues missed accounting estimates for the second quarter. Disney + subscribers increased by 8 million during the quarter to 137.7 million, hitting views for 134.4 million.
But ESPN + and Hulu subscriber levels were a bit missed, while Disney sees higher content spending on its streaming services.
Last month, Netflix reported a decline in streaming subscribers for the first time in the first quarter. And it predicted an even bigger loss in the 2nd quarter
The DIS share fell 5% overnight after first rising solidly on Wednesday night. Shares fell 2.3% on Wednesday to 105.21, a two-year low.
Netflix shares fell 1% in pre-market trading, after closing down 6.35%.
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Rivian reported a larger-than-expected loss while revenue in the first quarter fell far from consensus. However, the EV startup said it is stepping up production and deliveries of the EDV 700 van to Amazon, a major customer and investor.
Rivian previously announced that they were producing 2,553 cars in Q1. It was mostly Rivian R1T pickup, but also some R1S SUVs and commercial vans for the main customer, Amazon.com (AMZN). Rivian delivered 1,227 vehicles in the quarter.
Rivian said on Tuesday that it is on track to reach the production target for 2022 of 25,000 electric cars, but that is half the original target of 50,000.
The RIVN share rose 3% overnight in active trading. Shares plunged 9.6% to 20.45 the following Wednesday Ford (F) confirmed that it sold 8 million shares in Rivian. Early reports that Ford sales sent RIVN shares down 21% on Monday. The shares are at a record low, well below the November listing price of 78 dollars.
Tesla shares fell 8.25% to 734 on Wednesday. It is still above the February 24 intraday low of 700, but the lowest closure since September last year. An increasingly ugly handle is now too deep to be valid. The RS line for TSLA shares, at or near consolidation highs in early April, is now close to recent lows. The Tesla stock chart, like so many other growth names, will need a lot of repair work.
The TSLA share is down 2% early Thursday
It is clear that the stock market correction including the Nasdaq bear market is the biggest negative for the TSLA stock. But Tesla’s business faces a number of challenges.
The Tesla plant in Shanghai is barely producing any vehicles right now after a key supplier stopped production earlier this week. The Shanghai factory was closed from March 28 to April 19, and has had limited production since.
Meanwhile, competition in China is on the rise BYD (BYDDF) and several Chinese carmakers will launch Tesla Model 3 rivals in the coming months. Later this year, chip shortages are expected to decrease. Although it should let Tesla make a few more electric cars itself, rivals will be able to increase electric car production and total car production significantly, and ultimately reduce the price power for Tesla and the industry.
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After slightly volatile actions on Tuesday and Wednesday morning, the major indices turned significantly lower after the warmer-than-expected CPI inflation report. The S&P 500 and Nasdaq underwent the last lows of 2022, killing their one-day “rally”. The Dow Jones, which fell on Tuesday, also reached a recent 52-week low on Wednesday.
The market correction continues to fall, with the Nasdaq bear market now 30% deep. The S&P 500 is 18.3% lower than the highest in January, close to the limit of 20% bear market.
Losers crush winners, with new downturns that wipe out new heights.
So far, there are no real indications that the market is close to a bottom. While market fears are around the latest highs, the CBOE Volatility Index, or VIX, fell 1.3% to 32.60 on Wednesday, although the S&P 500 reached new lows.
But another contrarian indicator is, well, contrarian, with the latest bulls-bears reading of investment newsletter writers becoming increasingly bearish.
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What to do now
Staying out continues to be the best move. Yes, these are pockets of market power. But leading sectors are also not immune to sales pressure. Better to wait for a follow-up day to confirm a new market rally. Even then, investors should be careful.
Right now it’s not even a market rally attempt.
Stay engaged in the market but not obsessed with every minute of actions during the day. Keep working on your watchlists.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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