Dow Jones Futures: Market Rally Back While The Fed Hawks Say This; Tesla rival hovers

Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rise bounced back from heavy morning losses to close mixed on Thursday when two hawkish Fed officials eased fears of interest rate hikes somewhat.

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Dow Jones component UnitedHealth Group (UNH) reports before Friday’s market opens, starting quarterly revenues for health insurance companies and medical services. The UNH stock turned higher from the 50-day line on Thursday to close 0.2% to 502.43, not far from a buying point of 518.90.

Bank giants Wells Fargo (WFC) and Citigroup (C) also reported before opening. The WFC stock and Citigroup are in long downward trends. In fact, Citi shares fell to their worst level since the end of 2020 on Thursday, after weaker-than-expected earnings from JPMorgan Chase (JPM) and Morgan Stanley (MS).

Meanwhile, Dollar tree (DLTR), BJ’s Wholesale (BJ) and Lantheus Holdings (LNTH) flashed with buy signals, while McKesson (MCK) had a bullish shakeout.

China EV and battery giant BYD (BYDDF) rose on bullish earnings guidance, but is still down sharply for the week following rumors that Warren Buffett’s Berkshire Hathaway may sell some of its large BYD stock. China EV startup Li Auto (LI) remains actionable, while Tesla (TSLA) takes between two important moving averages.

The Lantheus stock is on the IBD Leaderboard. DLTR shares and Li Auto are on SwingTrader. Dollar Tree, Lantheus, BJ’s Wholesale, McKesson, UnitedHealth and the LI stock are all on IBD 50. The MCK stock and Dollar Tree are also on IBD Big Cap 20.

The video built into the article discussed Thursday’s marketing action and analyzed apple (AAPL), Costco Wholesale (COST) and BJ’s inventory.

Fed Hawks Vis A Little Dove

Fed Board of Governors Christopher Waller and St. Louis Fed President James Bullard, two of the Fed’s most vocal on front-loading rate hikes, on Thursday lowered expectations of a 100 basis point rate hike later this month. The prospect of a full-point rate hike rose Wednesday after the hot CPI report in June and Atlanta Fed President Raphael Bostic’s statement that “everything is at stake.”

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Waller said on Thursday that 75 basis points is still his “basis” for an interest rate increase at the meeting 26-27. July, saying “markets may have come a little ahead of themselves” at 100 basis points, although he did not rule out a “major” move.

Bullard told the Nikkei that he prefers a move of 75 basis points, which he said would bring the Fed Funds rate to a “neutral” level. He said further tightening would be necessary, but “we can consider” as the year continues.

Before the opening, the producer price index unexpectedly accelerated in June to a scorching increase of 11.3% compared with a year earlier. But core inflation declined more than expected. In particular, core PPI rose 0.4% compared to the previous month, cooled by corn 0.7% increase. This was in contrast to the core CPI, which shows accelerating increases from month to month.

The markets are now pricing a 57% chance that the Fed will raise interest rates by 75 basis points. On Wednesday, the odds of a summit trip exploded to 80% from about 8% the day before.

Dow Jones Futures today

Dow Jones futures rose 0.3% relative to fair value. S&P 500 futures rose 0.35%. Nasdaq 100 futures rose 0.5 percent.

China’s economic data were mixed overnight. GDP in the second quarter rose 0.4% compared to a year earlier, and managed to grow despite Covid shutdowns during the second quarter, but lacked impressions of 1%. Industrial production in June increased by 3.9% compared with the previous year, just below the consensus of 4.1%. Retail sales, however, rose by 3.1%, defying the prospect of flat results.

China achieved 0.4% GDP growth in the second quarter from a year ago, and lacked expectations as the economy struggled to shake off the impact of Covid controls.

On Friday morning, investors will receive US retail sales and industrial production data for June, along with the Empire manufacturing index for July.

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 rally

Shares rose on Thursday morning due to new fears of inflation and weak JPMorgan earnings. Key indices closed mostly lower, but ended close to today’s best levels.

The Dow Jones Industrial Average closed down 0.5% in Thursday’s trading session. The S&P 500 index fell 0.3 percent. The Nasdaq composite achieved a fraction of the gain. Small-cap Russell 2000 fell 1%.

The US crude oil price fell 0.5% to $ 95.78 a barrel, far from the lowest levels during the day, but still the lowest industry since April. Gasoline futures fell more than 1%, prolonging a rapid decline.

The 10-year government interest rate rose by 6 basis points to 2.96%, but closed almost at the end of the session. The two-year return erased large gains and fell 1 basis point to 3.13%. The one-year government interest rate fell by 3 basis points to 3.18%. The yield curve remains inverted from one-year to 10-year, but smaller.

ETFs

Among the best ETFs, Innovator IBD 50 ETF (FFTY) climbed 0.45%, while Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.5%. iShares Expanded Tech-Software Sector ETF (IGV) fell 0.9%. VanEck Vectors Semiconductor ETF (SMH) rose 2.1%, with Taiwan semiconductor (TSM) earnings and guidance lifts the chip sector.

The SPDR S&P Metals & Mining ETF (XME) fell almost 3% and the Global X US Infrastructure Development ETF (PAVE) fell 0.6%. US Global Jets ETF (JETS) fell 0.7%. SPDR S&P Homebuilders ETF (XHB) retreated 1.1%. Energy Select SPDR ETF (XLE) and Financial Select SPDR ETF (XLF) both lost 1.9%. Health Care Select Sector SPDR Fund (XLV) decreased 0.3%. The UNH stock is an important XLV component.

As a result of more speculative history shares, the ARK Innovation ETF (ARKK) fell 2.1% and the ARK Genomics ETF (ARKG) 1.8%. The Tesla share is still a top stock of Ark Invest’s ETFs. Cathie Wood’s Ark also owns some BYD shares.

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Shares close to buy points

Dollar Tree shares rose 1.7% to 168.76. It pushed the DLTR stock back above a buy point of 166.45 cups with handles. The shares of the dollar store giant are 7.8% above the 50-day limit. The relative strength line, the blue line in the charts, has reached new heights in several weeks, according to MarketSmith analysis.

BJ’s share rose 2.95% to 70.16, just below a 71.10 double-bottom buying point. The shares crossed a downward trend line, which provided an early entry. The volume was quite low while BJ’s share is 14% above the 50-day limit, which should give investors a break. Ideally, the member department store chain would consolidate around current levels, perhaps forging a handle. The RS line for BJ’s shares reaches new heights.

The LNTH share rose 0.7% to 67.91, and recovered from its 50-day line. Although it did not manage Friday’s high intraday of 69.08, the Lantheus share is capable of action. The LNTH share will have a proper base after this week with a buy point of 73.88.

The McKesson stock had a bad start on Thursday, falling below the 50-day line to 315.78 intraday. But the stock retreated to close 0.4% to 362.55. The MCK stock has a buy point of 340.04 flat-base, but investors can use 335.47, just above Monday’s high intraday, as an early entry.

BYD Stock Spikes

The EV giant said on Thursday that it expects net profit for the first half of the year up 139% -207% compared to a year earlier in local currency, 2.8 billion-3.6 billion yuan ($ 533 million). Excluding one-time gains and losses, profits should skyrocket by 578% -795%.

The BYD stock jumped 8.4% to 37.71, rebounding back over the 50-day line after finding support in the 200-day Wednesday. But stocks are still down sharply for the week. The BYD share plunged 11.3% on Tuesday due to rumors that Buffett may move to sell part or all of its stake in the electric car manufacturer. That rumor is still unconfirmed. But the BYD share must be put up again, and forge a new base next to the deep consolidation from November to June.

The smaller rival Li Auto went up 0.4% to 38.18. The LI share is still active after jumping from its 21-day line on Wednesday. Li Auto shares are working on a new consolidation after more than doubling from the beginning of May to the end of June.

Tesla shares rose 0.5% to 714.94. The stocks are just above their 21-day line and below their falling 50-day line. The TSLA stock is again slightly above the 10-week line. Tesla’s revenue for the second quarter comes on July 20th.

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Market Rally Analysis

For a second session in a row, the major indices fell sharply in the morning, but soon picked up again, with the Nasdaq turning positive in the afternoon. On Thursday, the Nasdaq managed to scrape out a small gain, while the S&P 500, Dow Jones and Russell 2000 all fell for a fifth session in a row.

All key indices are down sharply for the week, which started with the Nasdaq again meeting resistance at its 10-week moving average. The indices are all below their 21-day moving average.

After trending lower in several sessions, the “trend under pressure” may be due to a bounce. But it does not have to happen right away, and maybe Thursday’s rally was from the lowest “bounce”.

Without a doubt, the most important indices are distance-bound, with the peaks at the beginning or end of June marking the peak and the bottom in mid-June marking a bottom. There is a lot of volatility in this area.

As the earnings season warms up, adding to a whirlwind of inflation-recession-Fed uncertainty, it looks like the volatility of the market rally and individual stocks will continue.

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What to do now

Medical stocks like UnitedHealth and McKesson that did not look good in the morning returned, but investors can not rely on intraday rally to save the day.

The market is looking for direction on a short-term basis within a long, painful downtrend. It’s just not a good environment to have a lot of exposure. Be quick to make some profit to lock in gains in such a choppy market.

Build your watch lists and pay attention to key revenue in the coming days and weeks.

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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