Dow Jones Futures: Market Rally Retreats, BBBY Stock Falls on This; Time to bite on Apple stock?
Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures, with Cisco earnings and BBBY stock news in focus.
The share rally pulled back on Wednesday due to important resistance. The major indices initially took losses after the release of the Fed minutes from the meeting on 27-28. July, but faded again at the conclusion.
apple ( AAPL ) cleared a trendline entry, with the megacap stock technically actionable ahead of an official breakout.
The lithium giant Chemical and Mining Society of Chile (SQM), chip design company Synopsis (SNPS) and subsequent Dow Jones technology giant Cisco Systems (CSCO) reported late Wednesday. The SNPS share rose slightly, and the Cisco share went for a long time with strong earnings and guidance. SQM revenues are still at a loss.
BJ’s Wholesale (BJ), one more rival Costco Wholesale (COST), reports before Thursday’s opening. BJ’s stock is not far from a buy point while Costco is right at a buy point.
BBBY stocks fall late
Meanwhile, recently revived meme stock Bed Bath & Beyond ( BBBY ) fell more than 10 in late trading. BBBY stock rose 12% to 23.08 in Wednesday’s session, but closed near bottom in the session after hitting a five-month high of 30 intraday.
The shares jumped 29% in massive volume on Tuesday as GameStop (GME) Chairman Ryan Cohen revealed that he still owns BBBY shares along with significant out-of-the-money options.
But late Wednesday, Cohen revealed his intention to exit BBBY stock entirely.
GME stock, the original meme stock, retreated overnight after falling 4% on Wednesday. AMC Entertainment (AMC), another meme stock, fell 14% in the regular session.
Federal Reserve policymakers at their meeting in late July agreed that further rate hikes are necessary, according to the recently released Fed minutes.
Falling commodity prices, including energy, are not enough, according to the Fed minutes, with policymakers emphasizing that inflationary pressures are broad-based. But they were also worried about slowing down the economy too much.
They did not seem concerned that financial conditions had eased since the June meeting, including lower government interest rates and a stock market rally.
Overall, the Fed minutes contained no hawkish surprises, which eased expectations for rate hikes.
Still, markets now see a 63.5% chance of a 50 basis point Fed rate hike on September 21. Earlier Wednesday, before the Fed minutes were released, the odds were about evenly split between a half-point move or a third straight 75-basis-point move.
Costco stock is on the IBD Leaderboard and SwingTrader. SNPS shares are on the IBD Long-Term Leaders. Synopsys and SQM shares are on the IBD 50.
Dow Jones Futures today
Dow Jones futures were flat versus fair value. S&P 500 futures fell 0.1% and Nasdaq 100 futures fell 0.2%. The CSCO share is a member of the Dow Jones, S&P 500 and Nasdaq composite.
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 on Wednesday
The stock rally saw losses across the major indexes after a mixed outing on Tuesday.
Fed minutes ultimately didn’t change the major indexes much.
Retail sales in July were flat, the Commerce Department reported before Wednesday’s open. It was a little under the views. But sales excluding cars and gasoline rose 0.7%, bolstering expectations that the US economy will return to growth in the third quarter.
The Dow Jones Industrial Average fell 0.5% in Wednesday’s trading. The S&P 500 index lost 0.7 percent. The Nasdaq composite fell 1.25 percent. The small-cap Russell 2000 fell 1.7%.
U.S. crude oil prices rose 1.8% to $88.11 a barrel, ending a three-day losing streak. US crude oil and gasoline inventories fell sharply in the past week, far more than expected. Gasoline demand in the past four weeks peaked in 2022.
The 10-year government yield jumped 10 basis points to 2.89%. That’s a four-week high, but still below the 50-day mark.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell just over 1%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.5%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 1.7%. VanEck Vectors Semiconductor ETF ( SMH ) retreated 2.15%. The SNPS share is in the IGV and SMH ETFs.
The SPDR S&P Metals & Mining ETF (XME) fell 2.7% and the Global X US Infrastructure Development ETF (PAVE) shed 1.1%. The US Global Jets ETF (JETS) fell 2.5%. The SPDR S&P Homebuilders ETF ( XHB ) fell 1.7%. The Energy Select SPDR ETF (XLE) rose 0.8% and the Financial Select SPDR ETF (XLF) fell 0.5%. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.6%.
ARK Innovation ETF ( ARKK ) reflected more speculative stock stocks, falling 5.3% and ARK Genomics ETF ( ARKG ) 5.1%.
Top five Chinese stocks to watch
Apple shares, a member of the Dow Jones, S&P 500 and Nasdaq composite, rose 0.9% to 174.55 on Wednesday. AAPL stock moved above a downtrend line dating back to early January. It provides a buying opportunity.
The official buy point is 183.04, according to MarketSmith analysis. Investors can view Apple’s stock chart as a difficult double bottom base with an entry at 179.71.
AAPL stock rose in volume that was slightly above normal. But most of the strong uptrend over the past two months has been trading below average. The tech titan could use a break. A handle will create a lower buy point and allow the moving averages to catch up.
Apple stock is outperforming other megacaps and the broader market: Its relative strength line, the blue line on the charts, has hit record highs for a few weeks.
SQM earnings were not yet out Wednesday night. Shares fell 1.2% to 104.42 in Wednesday’s regular session after falling 5.1% on Tuesday in a downside reversal. SQM stock is working on a buy point at 115.86 cups after topping a 99.84 early entry last week from a too-low handle. A proper handle would be ideal for the SQM stock.
Lithium rivals Albemarle (ALB) and Alive (LTHM) both reported strong earnings earlier this month, with industry giant Albemarle sharply raising guidance again.
Synopsys earnings topped views, while guidance was also strong. SNPS shares rose in late trading. Shares fell 1.2% to 381, holding above an official buy point of 377.70. Synopsys stock already cleared some early entries in late July and remains well above the 50-day line. If stocks stop near the top of the base, it can create a buying opportunity.
Rival Cadence design systems (CDNS), also above an official buy point, rose higher late.
Cisco topped fiscal Q4 views and guided up for Q1. CSCO shares rose solidly in extended trading. The stock fell 0.2% to 46.66 on Wednesday. Cisco shares rallied modestly from early July lows, but are well below their declining 200-day line.
Ahead of earnings Thursday morning, BJ’s stock fell 0.2% to 69.13 on Wednesday, not far from a buy point of 71.10. COST shares rose 0.6% to 556.32 on Wednesday, holding above a 552.81 cup handle buy point.
Market Rally Analysis
A day after the S&P 500 stopped just below its 200-day moving average, the major indexes pulled back on Wednesday. The Fed minutes moved stocks, but they ultimately closed about where they were at 2pm ET.
Small caps and highly valued growth stocks were the biggest losers, but declines were broadly based outside of energy.
The Dow Jones held support at its 200-day line. The Russell 2000 undermined that key level. The S&P 500 and Nasdaq have not reached it.
The market rally has come a long way from its June lows with the 200-day line as a clear area of resistance. So this is an obvious time and place for the major indexes to pause or pull back.
For now, the market recovery seems reluctant to give up much ground. No doubt a little more withdrawal would be constructive. That would allow Apple and other stocks that have been running up the right side of bases to pause and form handles.
But the market is going to do what it’s going to do. The indices can quickly run past the 200-day line or pull back sharply to the 50-day line, or worse.
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What to do now
Stocks tend to follow market and industry trends. That’s why it’s so important to pay attention to the overall market, add exposure to confirmed uptrends, and mostly or completely move to cash corrections.
With the market hitting resistance at the 200-day line, investors should wait before increasing their net exposure. They could consider taking some partial profits.
But keep working on watchlists. A market break that refreshes can create great opportunities.
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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