Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures, due to weak earnings and guidance from Cisco Systems. The rise in the stock market sold hard on Wednesday, like a big one Goal (TGT) earnings shortfall created major concerns for traders, related sectors and the broader economy amid strong inflation and weakened demand.
Wednesday’s strong sales come right on the heels of the major indices that are arranging a follow-up day to confirm the new stock market rise, flashing bearish signals.
After the end, Cisco Systems (CSCO) and Chemical and Mining Society of Chile (SQM), or SQM, reported earnings. Cisco revenues bypassed Q3 accounting impressions, but revenues were missed and the network giant also led lower for the current Q4. CSCO shares plunged more than 10%. Arista Networks (ANET) and other related stocks also fell solidly.
SQM revenues are still pending after hours of fertilizer and lithium spillage. The SQM stock rose 0.4 %% to 90.21 in Wednesday’s ordinary session after hitting 93.14 intraday, topping a buying point of 90.97.
The video embedded in this article discussed Wednesday’s market sales and analyzed the TGT stock, Northrop Grumman (NOC) and Broadcom (AVGO).
Target earnings Bad news for retail
Target revenues fell 41%, far more than expected. The retailer blamed shipping costs, as well as consumers moving away from TVs and other discretionary items. Target sees margin pressure during the current financial year. It came the next day Walmart (WMT) missed EPS and guided low, citing higher costs for goods, freight and labor. At the time, investors might have believed or hoped that Walmart’s problems were company-specific, but Target’s results signaled a much broader problem.
The target share fell 25% to 161.61. Walmart fell 6.8% after falling 11.4% on Tuesday. Both are at their lowest since 2020.
If Walmart and Target are struggling in the current economic climate, it may not be good for other discount stores and retailers and in general.
Dollar tree (DLTR) plunged 14.4% after falling 3.2% on Tuesday. The DLTR stock had held up well, but fell below 50-day on Tuesday and crashed to the 200-day line. Costco Wholesale (COST) lost more than 12%, after already hitting a breakout round-trip and fell below important moving averages in recent weeks. Both Dollar Tree and the COST stock will report next week.
Best buy (BBY), which reports early Thursday, fell 10.5% to a two-year low.
Trucking Companys, Tesla, Apple Stock Hit
JB Hunt Transport Services (JBHT) sold 9%, falling from near 10-week line. As consumer demand weakens, truck companies may see weaker demand and struggle to continue sky-high diesel prices.
Apple shares fell 5.6% to 140.82, a six-month low, as the Target warning about consumer discretionary spending increased fears of Dow Jones technology. In recent weeks, iPhone contract maker Foxconn and Taiwan semiconductor (TSM), which makes chips for apple (AAPL) and many others, warned of weak demand for smartphones. The AAPL share is heading for an eighth weekly loss in a row.
Tesla shares fell 6.8% to 709.81, the lowest close since August. While weaker consumer judgment in theory could hurt demand for Tesla’s high-priced electric vehicles, overall car production is so low that supply is still the overriding factor. Tesla (TSLA) is being pushed together with other highly valued growth names, along with manufacturing problems in Shanghai and CEO Elon Musk’s ongoing Twitter (TWTR) takeover story. Twitter shares fell 3.8% to 36.85, a two-month low and even further below Musk’s takeover price of $ 54.20.
The S&P 500 ESG index also started Tesla, mainly on corporate culture issues, and triggered several angry tweets from Musk.
Meanwhile, the US National Highway Traffic Safety Administration is investigating a Tesla Model S accident earlier this month that killed, possibly involved in autopilot. NHTSA investigates dozens of autopilot-related accidents.
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Dow Jones Futures today
Dow Jones futures fell 0.4% to fair value. S&P 500 futures fell 0.55%. Nasdaq 100 futures fell 0.9 percent. The Cisco stock is a Dow Jones, S&P 500 and Nasdaq component. Several other network and hardware stocks also lost ground.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze powerful stocks in the stock market rally on IBD Live
Stock market rally
The stock market opened sharply lower and continued to fall on Wednesday.
The Dow Jones Industrial Average fell 3.6% in Wednesday’s trading session. The S&P 500 index fell 4 percent. The Nasdaq composite plunged 4.7 percent. Small-cap Russell 2000 gave up 3.5%.
The US crude oil price turned from modest gains to fall 2.5% to $ 109.59 a barrel. Gasoline futures fell more than 5%.
The 10-year government interest rate fell 8 basis points to 2.89%.
Among the best ETFs, Innovator IBD 50 ETF (FFTY) fell 3.8%, while Innovator IBD Breakout Opportunities ETF (BOUT) lost 3.9%. iShares Expanded Tech-Software Sector ETF (IGV) gave up 4%. VanEck Vectors Semiconductor ETF (SMH) fell 4.8%.
The SPDR S&P Metals & Mining ETF (XME) fell 4.15% and the Global X US Infrastructure Development ETF (PAVE) retreated 3.6%. US Global Jets ETF (JETS) fell 3.4%. SPDR S&P Homebuilders ETF (XHB) fell 5.5%. Energy Select SPDR ETF (XLE) and Financial Select SPDR ETF (XLF) lost 2.75%. Health Care Select Sector SPDR Fund (XLV) falls 2.6%
The SPDR S&P Retail ETF, which includes the Target stock and Walmart as key components, plunged 8.3% to its lowest level since December 2020.
As a result of more speculative history shares, the ARK Innovation ETF (ARKK) fell 4.4% and the ARK Genomics ETF (ARKG) 4.7%. The TSLA share is still number 1 across Ark Invest’s ETFs.
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Market Rally Analysis
When you get a brand new car, you do not expect problems when driving off the site. But if you do, you can have a lemon. On Tuesday, the major indices arranged a follow-up day, which confirmed the new stock market rise.
But on Wednesday, the major indices fell, giving up all of Tuesday’s strong gains and much more.
A weaker consumer and sky-high costs for companies are a gloomy combination for retailers and manufacturers of discretionary goods. With consumer spending exceeding two-thirds of the US economy, the risk of an economic hard landing increases as the Fed tries to bring down inflation. Aggressive Fed rate hikes will cause severe pain. But the alternative, to keep inflation high, clearly also affects demand.
Aside from the reasons for the sale, the technical action is clear. Not every follow-up day works, and Wednesday’s action was a bearish signal.
The major indices closed below their FTD bottoms. Eric Krull, co-author of “The Lifecycle Trade,” says his research shows that when the major indices do this, there is a 90% chance that the market upturn will eventually fail.
The odds can be even worse in this case. The Dow Jones and S&P 500 created new 52-week closed lows on Wednesday, while the Nasdaq did not far.
However, the market rally is still in effect until the major indices undermine the start of their rally, in this case the May 12 intraday laws. The Dow Jones in particular is close to breaking down. Another leg down for the S&P 500 would almost certainly push the benchmark into a bear market, and join the Nasdaq.
Look at a weekly chart of the most important indices, and it is difficult to see the rally. The Dow, S&P 500 and Nasdaq are all on track to extend long weekly losses.
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What to do now
Wednesday’s sale is the reason why it is a good idea to enter a recently confirmed stock market rise slowly. This was especially true of the current market upturn, with the large indices below the most important moving averages and few equities in position.
Investors who bought stocks or ETFs on Wednesday’s FTD should scale out or go out.
Keep working on your watchlists. Focus on stocks with strong relative strength. But a strong RS line is not a green light to buy a stock, especially in a weak market.
The sale of DLTR shares on Wednesday – and Apple in the next few weeks – shows how stocks can hold up well, until they do not. So wait until a stock flashes with a buy signal in a strong market, and be ready to get out.
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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