Dow Jones futures fell early Thursday, along with S&P 500 futures and Nasdaq futures, with some key jobs and inflation data before the market opens.
The stock market rise sought direction on Wednesday. The large indices closed narrowly mixed. But the details showed further weakness, with losers easily trumping winners.
With the upswing under pressure, it is not a good time to make new purchases or hold more than token exposure.
The medical sector continues to lead, returning from Tuesday’s losses. UnitedHealth (UNH) moved higher in a buying zone after just breaking out on Wednesday. Vertex Pharmaceuticals (VRTX) took back an early entry after Tuesday’s retreat. McKesson (MCK) holds key support in its shallow base, not far from an aggressive entrance. Lantheus (LNTH) is trading around its 50-day line, and is consolidating after a huge rise earlier this year. All have relative strengths close to record highs.
Exclusive furniture dealer RH (RH) trimmed year-round estimates, citing weaker demand and a deteriorating economic environment. The RH share fell solidly overnight, signaling a new low of two years. Shares were already down 11% so far this week.
Simply good food (SMPL), which makes low-carb snacks and shakes, reports earnings early Thursday. The SMPL share rose 2% to 41.20 on Wednesday, close to a 42.01 early entry in a consolidation.
Some other food and beverage stocks are doing well, reflecting the defensive thinking in the market. The grain giant General Mills (GIS) jumped 6.35% on Wednesday to 74.72, breaking out on earnings and a dividend increase. Mail order (POST) is right at a point of purchase while Kellogg (K) sets up.
Tesla shares fell 1.8% to 685.47, down 7% so far this week. The stock continues to retreat from its 10-week moving average and is on its way back to its final lows. The LI share rose 2.7% to 38.08, back above a buy point, but is still strongly extended from the most important moving averages. Tesla (TSLA) and China EV startup Li Auto (LI) will report Q2 sales later this week.
The UNH stock is on the IBD Leaderboard. The LNTH share is on the top list. Simply Good Foods, UnitedHealth and VRTX shares are at IBD 50. Vertex and MCK shares are at IBD Big Cap 20. Lantheus was Wednesday’s IBD Stock Of The Day.
The video embedded in this article analyzed Wednesday’s market action and discussed the GIS stock, McKesson and Neurocrine life sciences (NBIX).
Dow Jones Futures today
Dow Jones futures retreated 0.7% against fair value. S&P 500 futures fell 0.8% and Nasdaq 100 futures fell 0.9%.
The 10-year government interest rate rose 1 basis point to 3.1%.
China’s manufacturing index for China rose 0.6 points in June to 50.2, moving back above the break-even 50 level for the first time in four months as the country recovers from the Covid shutdowns. But it was a little below views for 50.5. The service index jumped to 54.7 against 47.8 in May.
The US ISM manufacturing index for June comes Friday morning, after several negative regional factory reports.
At 8:30 ET on Thursday, investors will receive important US jobs and inflation data. The Ministry of Labor will release weekly demands for unemployment. The Department of Commerce will release the May Revenue and Expenditure Report for May, which includes the Federal Reserve’s favorite inflation gauge.
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 actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market traded in a narrow area on Wednesday.
The Dow Jones Industrial Average fell less than 0.1% in Wednesday’s trading session. The S&P 500 index lost a fraction. The Nasdaq composite rose 0.3 percent. Small-cap Russell 2000 lost 1%.
The US crude oil price fell 1.8% to 109.78 dollars per barrel, reversed from solid morning gains. Gasoline futures fell 2.8 percent.
The 10-year government interest rate fell by 12 basis points to 3.09%. The two-year interest rate fell to 3.06%. The two-to-10-year interest rate spread is down to 3 basis points, which underlines recession concerns.
Fed chief Jerome Powell stressed once again on Wednesday that the central bank’s priority is to fight inflation, even at the risk of a recession.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.25%, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 0.75%. iShares Expanded Tech-Software Sector ETF (IGV) rose 0.2%. VanEck Vectors Semiconductor ETF (SMH) fell 1.8%.
The SPDR S&P Metals & Mining ETF (XME) fell 2.8% and the Global X US Infrastructure Development ETF (PAVE) retreated 1.3%. The US Global Jets ETF (JETS) gave up 1.5%. SPDR S&P Homebuilders ETF (XHB) fell 0.4%. Energy Select SPDR ETF (XLE) fell 3.5% and Financial Select SPDR ETF (XLF) fell 0.6%. The Health Care Select Sector SPDR Fund (XLV) rose 0.9%, with UNH shares, Vertex and McKesson all in the ETF.
ARK Innovation ETF (ARKK) reflected more speculative history stocks, retreated 1.6% and ARK Genomics ETF (ARKG) lost 0.6%. The TSLA share remains a top holding across Ark Invest’s ETFs.
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Market Rally Analysis
The stock rise did not show bullish action, but only managed a mixed session after Tuesday’s big loss.
The details were less impressive, with falling stocks surpassing almost 2-to-1 forward stocks on both the NYSE and Nasdaq.
The market moved to “trend under pressure” on Tuesday when the Nasdaq composite and S&P 500 closed below the lowest levels on Friday’s follow-up day.
Research from Eric Krull, co-author of The Lifecycle Trade, shows that there is a 90% chance that the rally will eventually fail when an index closes during the lowest day of the follow-up day.
The rally is not officially over until the indices undermine their recent lowest levels.
The Dow Jones has not closed during the lowest day of the follow-up day, but it is not far off.
Russell 2000, for its part, closed below Friday’s lowest level on Wednesday.
The drugs picked up again, while defensive food stocks did well. But energy stocks, which jumped earlier in the week, fell solidly on Wednesday.
Time market with IBD’s ETF market strategy
What to do now
The rise in shares is not complete, but the outlook is not high. The odds are simply not in your favor right now. Investors should focus on preserving their mental and physical capital and preparing for a sustained market upswing.
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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