Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures, with the job report in print Friday morning. The stock market plunged on Thursday, wiping out Wednesday’s big gains as the 10-year government bond yield rose above 3% in a second-day reaction to the Fed meeting.
The Dow Jones fell more than 1,000 points while the Nasdaq dived to its lowest levels since 2020, ending the short-lived rally attempt. The market rally attempts are still alive, barely enough, on the S&P 500 and Dow.
Investors who had stepped into the new stock market rally attempt may want to step down.
Vertex Pharmaceuticals (VRTX) reported mixed earnings late Thursday. The VRTX stock closed on the edge of a buying zone after testing support on the 50-day line earlier this week. Boise Cascade (BCC) is worth seeing and trades near a point of sale with earnings maturing Friday morning.
Northrop Grumman (NO C), Pioneer natural resources (PXD), Merck (MRK) and Albemarle (ALB), all with earnings out of the way, are also close to buying points in relatively strong sectors.
The Tesla stock and Vertex are on the IBD Leaderboard and the IBD 50. The Merck stock is on the SwingTrader and IBD Big Cap 20.
Dow Jones Futures today
Dow Jones futures fell 0.2% to fair value. S&P 500 futures fell 0.2 percent. Nasdaq 100 futures fell 0.2 percent.
The 10-year government interest rate rose 1 basis point to 3.08%.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
The Ministry of Labor will release the job report for April at 8:30 ET. Economists expect wage lists outside agriculture to rise by 400,000 with an unemployment rate of 3.6%. Wages are expected to jump 5.5% compared to a year earlier, slightly below the pace of March and not keep pace with inflation.
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Stock market rally
The stock market rally sold out through the session, and ended with huge losses after Wednesday’s encouraging progress.
The Dow Jones Industrial Average fell 1063 points, or 3.1%, in Thursday’s trading session. The S&P 500 index fell 3.6 percent. Nasdaq composites plunged 5%. Small-cap Russell 2000 lost 4%.
Apple shares fell 5.6% to 156.77, back below the 50-day and 200-day lines. The AAPL stock gave an early buy signal on Wednesday when it took back its 50-day line and pushed past a short trend line.
Tesla shares plunged 8.3% to 873.28, also back below the 50-day and 200-day lines. CEO Elon Musk set up some funding to help with his Twitter takeover, but he will also be Twitter (TWTR) CEO temporarily when he takes over. These are mixed messages for Tesla, and for TSLA shares, market sales were a real driver on Thursday.
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Treasury Yields is rising
The 10-year government interest rate rose 15 basis points to 3.07%, the highest point since the end of 2018. The yield is approaching an 11-year high of 3.25%.
On Wednesday, the 10-year interest rate fell modestly as Fed chief Jerome Powell said politicians did not actively consider 75 basis point increases at the June and July meeting. But the Fed is still aggressive. The Fed raised interest rates by half a point on Wednesday and will probably do so in the next two meetings.
The US crude oil price increased by 0.4% to 108.26 dollars per barrel, cooled by an intraday movement above 110 dollars when the stock market was sold. OPEC + agreed to another small increase in production.
Among the best ETFs, Innovator IBD 50 ETF (FFTY) fell 3.2%, while Innovator IBD Breakout Opportunities ETF (BOUT) gave up 3%. iShares Expanded Tech-Software Sector ETF (IGV) sold 5.75%. VanEck Vectors Semiconductor ETF (SMH) fell 5.75%.
The SPDR S&P Metals & Mining ETF (XME) fell 5.3% and the Global X US Infrastructure Development ETF (PAVE) withdrew 4%. US Global Jets ETF (JETS) fell 3.5%. SPDR S&P Homebuilders ETF (XHB) fell 4.9%. Energy Select SPDR ETF (XLE) fell 1.5% and Financial Select SPDR ETF (XLF) fell 2.9%. The Health Care Select Sector SPDR Fund (XLV) lost 1.9%, with the MRK share as a key holding.
ARK Innovation ETF (ARKK) reflected more speculative history stocks, plunging 8.9% and ARK Genomics ETF (ARKG) 7.85%. The Tesla stock is the top holding across Ark Invest’s ETFs.
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Vertex revenues fell during the impressions, although sales peaked slightly. The VRTX share fell 2% in action overnight. The stock closed down 2.7% to 266.37, withdrawing only from a buy point of 255.03, according to MarketSmith analysis. The Vertex share had tested the buy point on the 50-day line on Monday.
Boise Cascade Stock
Boise Cascade shares fell 4% on Thursday to 81.67, back below a buy point of 82.20. The relative strength line, the blue line in the charts, is already at a new high. The timber company reports results on Friday morning. Louisiana-Pacific (LPX) rose Tuesday-Wednesday on strong earnings, and blew past a trend line entry. Weyerhaeuser (WY) has had huge daily fluctuations near a point of purchase, but the last weekly action has been tight.
The Albemarle share rose 9.8% on Thursday to 236.50, and regains its 200-day line on thriving earnings and sharply raised guidance. It came the day after it rose 9.3% on similar news from rival lithium games Livent (LTHM). Ideally, the ALB stock will consolidate for a few days above the 200-day line and form a handle, then break over resistance near 248. The RS line is on its way back, hitting a 2022 high.
The LTHM stock also shows somewhat similar chart action, while Piemonte lithium (PLL) is worth seeing.
Northop shares rose 0.9% to 466.66 on Thursday, continuing to rise from the 50-day moving average and testing a trend line. They offered early registration. The NOC share has an official buy point of 477.36 from a cup with a handle. The RS line is at a 23-month high on a weekly chart.
Pioneer Natural Resources reported rising earnings and sales growth on Wednesday night. PXD shares climbed 1.5% to 256.48 on Thursday, its fourth straight rise. The shares almost exceeded the March 30 high of 260. If it can stay within its current range, the PXD stock will have a proper base after Friday with a buy point of 260.10. Investors can buy PXD shares from the 50-day line now. The RS line is already at a new high.
On April 28, Merck shares jumped nearly 5% on earnings, indicating an early entry in the cup-with-handle base. The next day, the MRK share flirted with the official buy point of 89.58 before retiring. Drug giant Dow Jones has withdrawn, but only slightly.
Merck shares fell 0.6% to 88.01 on Thursday. The RS line for the MRK share is straight at 52-week highs.
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Market Rally Analysis
The attempt at a stock market rally suffered astonishing losses on Thursday. The major indices wiped out Wednesday’s big gains and some more, with Nasdaq back at its worst levels since 2020.
Treasury yields fell on Wednesday after the Fed rate hike and the guidance, then shot up on Thursday in a delayed reaction.
The bond market has hit Wall Street. Rising government interest rates are a major headwind for equities, especially growth. With the Fed moving aggressively and not preoccupied with supporting stock prices, the stock market may struggle until there are clear signs that inflation is declining. This may take some time.
Do not get too excited if government interest rates fall in a day or two. This has happened a number of times in recent months, but the 10-year return has still almost doubled in the last two months.
The market rally trial is over for Nasdaq, but it is still ongoing for the S&P 500 and Dow Jones for now. So it could be a follow-up day already on Friday.
Sectors to look at
Energy and other raw materials such as fertilizer hold up relatively well, although many fell modestly to strong Thursday. Lithium and wood product companies such as ALB stock and Boise Cascade also look interesting. Northrop and other defense stocks are holding up well. Vertex, Merck and Eli Lilly (LLY) is around buying zones, while health insurance companies continue to do well.
Growth stocks, which had such nice movements on Wednesday, gave up all this and much more on Thursday. Although this article highlighted Apple stocks and Tesla, they still look better than other megacaps and growth stocks in general.
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What to do now
If you bought stocks or ETFs on Wednesday’s big upswing, you should probably have left the new positions on Thursday.
Technically, the market can still conduct a follow-up day. But the Nasdaq bear market seems to be starting another step down.
Cash remains a leading position in 2022.
Continue working on these watchlists. Driving through screens and updating watch lists is not the most exciting part of investing, but it is one of the most important. You do not know when the market will be ready. But if you are ready to trade when a market rally picks up, you can jump aboard the best stocks at the start of big races.
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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