Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures. The attempted stock market rally got off to a strong start on Thursday, but fizzled out, hitting key resistance as Treasury yields continued to rise on fresh economic data.
Snapchat parent Snap ( SNAP ) plunged once again with mixed results and no guidance, weighing on other social media firms Meta platforms (META) and Pinterest (PINS).
In Thursday’s session, Tesla ( TSLA ) fell to a 16-month low, following mixed earnings and mixed signals late Wednesday.
Technical titans apple (AAPL), Microsoft (MSFT), Google parent Alphabet (GOOGL), meta-platforms, Amazon.com (AMZN) and Nvidia ( NVDA ) is all hitting resistance at its 21-day moving averages, just like the S&P 500 and Nasdaq. All are badly damaged, with most not far from recent lows.
While the rally attempt continues, this remains a bear market until proven otherwise. Investors should be cautious about making new purchases in the current environment.
Snap stock crashes again
Snap (SNAP) topped the third-quarter earnings reports. But earnings rose less than 6%, a record low and just below consensus. But the Snapchat parent won’t provide guidance. Despite announcing a $500 million buyback, SNAP stock plunged 27% in after-hours trading. That’s after crashing 43% and 39%, respectively, after the previous two earnings reports.
The Meta stock, which reports next Wednesday, fell modestly in extended trading. PINS stock sold off after reversing lower on the 50-day and 200-day lines on Thursday. Both report next week. Twitter (TWTR) was little changed as investors see Tesla CEO Elon Musk close his $44 billion takeover soon.
Early Friday, oilfield service giant Schlumberger (SLB) reports earnings. SLB stock is moving up quickly on the right side of a 38% deep cup base, but is not yet actionable. Dow Jones components American Express (AXP) and Verizon Communications (VZ) is also in print. AXP stock and Verizon are near 52-week lows.
Dow Jones Futures today
Dow Jones futures fell 0.25% vs. fair value. S&P 500 futures fell 0.5 percent. Nasdaq 100 futures fell 0.8%, while the META stock was negative.
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
Shares rose higher in the first hour of trading, but faded as government yields marched higher again.
The Dow Jones Industrial Average fell 0.3% in Thursday’s trading. The S&P 500 index fell 0.8 percent. The Nasdaq composite fell 0.6 percent. The small-cap Russell 2000 fell 1.3%.
The 10-year Treasury yield jumped 10 basis points to 4.23%, another 14-year high after jumping 13 basis points on Wednesday. The benchmark interest rate on the Treasury is heading for a 12th consecutive weekly rise.
Before the opening, the Labor Department reported that the first number of unemployed people fell last week, defying views for a third straight gain. The Philly Fed manufacturing index remained negative in October, slightly worse than the outlook, but the employment index signaled strong demand for labor. That’s not what the Federal Reserve wants to see.
The two-year Treasury yield is around 4.6%, with the Fed recently signaling that fed funds rates may peak. However, markets are currently predicting 4.75%-5% after the February meeting.
Crude oil futures that expire in November rose 0.5% to $85.98 a barrel, but retreated from morning highs. December crude fell 1 cent to $84.51. Natural gas prices fell 1.9%, extending sharp losses to the industry’s worst since late March.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.9%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 0.8%. VanEck Vectors Semiconductor ETF ( SMH ) rose 0.8%.
ARK Innovation ETF ( ARKK ) and ARK Genomics ETF ( ARKG ) reflect more speculative stock stocks, both down 0.4%. TSLA stock remains the top holding across Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF ( XME ) climbed 0.5%, with STLD stock a notable holding. The US Global Jets ETF (JETS) gave up 0.8%. The SPDR S&P Homebuilders ETF ( XHB ) fell 2.5%. The Energy Select SPDR ETF (XLE) rose 0.1% and the Financial Select SPDR ETF (XLF) slipped 1.6%. The Health Care Select Sector SPDR Fund ( XLV ) was down 0.8%.
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Tesla shares traded down 6.65% to 207.28 on Thursday, breaking a new 16-month low. Late Wednesday, Tesla earnings were barely on top of third-quarter projections, while earnings fell short. While Elon Musk promised an “epic” fourth quarter and said demand remains strong, he admitted that China and Europe are showing some weakness.
Tesla plans to produce significantly more vehicles than it delivers in Q4, after production topped sales by 22,000 in Q3. The EV giant says it is doing this to smooth out deliveries compared to the typical end of the quarter. But the move comes as production capacity increases and the backlog in China is gone.
New EV credits should support Tesla’s sales in the US in 2023.
Meanwhile, Tesla CEO Elon Musk is reportedly seeking new equity partners to fund his Twitter takeover to avoid any further TSLA stock sales. It comes after Musk said he is “thrilled” to run Twitter but admitted he is “paying too much”.
Musk has reportedly told potential investors that he will cut nearly 75% of Twitter’s 7,500 employees shortly after he takes over.
TWTR shares rose 1.2% to 52.44 on Thursday, just below the takeover price of $54.20. That’s the industry’s highest since Musk first announced interest in Twitter.
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Market rally analysis
The attempted stock market rally got off to a strong start on Thursday, with the Nasdaq up almost 1.5% in the first hour. But the Nasdaq, S&P 500 and Russell 2000 hit resistance at the 21-day moving average again. Dow Jones continues to hold above its 21 days.
The technical resistance coincided with government interest rates again rising higher.
The major indexes are still up solid this week, despite trading near weekly lows. If returns had a sustained decline or pause, the market rally may take off. However, if yields continue to climb, it is easy to see the indices falling back towards market lows.
The market rally attempt still needs a follow-up day to confirm the uptrend.
Many of Thursday’s winners were stocks with terrible charts, including earnings-driven ones Lamb Research (LRCX) and AT&T (T).
Energy shares are still the clear leader. But many are extended from their 50-day lines. Energy shares are exposed to large fluctuations with underlying oil and natural gas prices.
Some steel stocks are showing their strength. Medical names such as Humana (HUMMING), Cardinal health (CAH) and Vertex Pharmaceuticals (VRTX) was mixed. Despite rising relative strength lines, many medical doctors are not making much progress.
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What to do now
Market volatility increases investor risk. Stocks can look promising but see strong gains disappear in a matter of minutes or hours. And that’s with the indices solidly higher for the week. If they were flat or down, the downside reversals could be far more painful.
Put aside the volatility, and there are still no good reasons to be significantly invested now. The market rally has not had a follow-up day. The S&P 500 and Nasdaq are struggling at the 21-day line.
Next week Dow Jones makes Apple, Microsoft, Google, Meta Platforms, Amazon, Boeing (BA), Intel (INTC) and hundreds of other companies will report. This income can be a catalyst for big market gains, heavy losses or more whipsaw.
The market can take a bull turn at any time. A number of stocks can be quickly set in motion if a confirmed rally starts. So stay engaged and keep your watchlists fresh.
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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