Dow Jones Futures Rise as Treasury Rates Fall as Inflation Data Due; Nike dive on inventory

Dow Jones futures rose modestly on Friday morning, along with S&P 500 futures and Nasdaq futures, as Treasury yields fell. Nike (OF) and Micron technology ( MU ) earnings are in focus with the Fed’s favorite inflation gauge on deck.

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The stock market sold off hard on Thursday, wiping out Wednesday’s rise. The S&P 500 hit new lows in the bear market. The Nasdaq composite hasn’t fully undermined its June lows, but the large-cap Nasdaq 100 did, led by Apple shares and Tesla (TSLA).

Treasury yields rebounded somewhat on Thursday, while jobless claims fell to a five-month low, something the Federal Reserve doesn’t want to see. apple (AAPL) and CarMax (KMX) spurred big losses on Thursday. After narrowing losses on Wednesday spurred by a report of scaled-back iPhone production due to weak demand, Apple shares sold off sharply on Thursday, partly due to an analyst downgrade, with iPhone chipmakers also struggling.

CarMax (KMX) missed earnings views Thursday morning, warning of “reasonable challenges.” For largely similar reasons, Moody’s downgraded the outlook for the global automotive industry to negative from stable. KMX stock crashed, dragging down other car dealers. But General Motors (GM), Ford Motor (F), Stellar (STLA) and Tesla shares were also sold.

Tesla has a lot of news coming. Tesla is hosting its annual AI Day on Friday night. During the weekend, Tesla will probably publish delivery figures for the third quarter. But TSLA stock investors won’t have a chance to respond to those events until Monday morning.

Tesla on Thursday evening denied a local media report that the electric car giant would significantly cut the prices of the Model 3 and Y in China. There has been increasing speculation that Tesla will cut some China prices in early October.

Key income

Nike revenue and sales barely topped financial consensus in the first quarter. But gross margins fell significantly compared to a year earlier, mainly due to liquidation of excess inventory in North America. North America’s inventory increased by 65% ​​compared to a year earlier. The Dow Jones sportswear giant said it will take “decisive action” to get rid of wanted items.

The NKE share sold almost 10% in premarket action. Nike shares fell 3.2% on Thursday to 95.52, hitting a new two-year low during the day.

Micron earnings topped out slightly, while earnings fell short. The memory chip giant guided significantly lower for the current fiscal first quarter. It also plans to cut spending on wafer fab equipment by up to 50% in the current fiscal year compared to fiscal 2022.

The MU share rose 3% early Friday. Micron shares fell 1.9% to 50.01 in Thursday’s session, after hitting a 23-month low last week.

Micron’s investment cuts are not good news for memory-exposed chip giants such as Materials used (AMAT), KLA Corp. (KLAC) and Lamb Research (LRCX). All three stocks were little changed early Friday after falling slightly Thursday night.

In other news, IBM (IBM), cut its quarterly dividend by 78% to 37 cents per share. IBM stock rose in overnight action.

Dow Jones Futures today

Dow Jones futures rose 0.5% vs. fair value. The NKE share and IBM are Dow Jones components. S&P 500 futures rose 075% and Nasdaq 100 futures rose 0.6%.

The 10-year yield fell 6 basis points to 3.69%, reversing modest gains on Thursday evening.

Surveys in China for September were mixed. The official manufacturing PMI rose to 50.1 from 49.4 in August, just topping the break-even 50 level and beating the 49.8 forecast. But the private Caixin factory gauge fell 1.4 points to 48.1.

China’s central bank allows cities to lower the floor on mortgage rates if those areas have seen recent housing price rises.

At 8:30 a.m. ET, the Commerce Department will release the August Personal Income and Consumption Report. Investors will focus on the PCE price index, the Fed’s favorite inflation gauge. The overall PCE index should show a slightly cooler 6.1% increase compared to a year earlier. But core PCE inflation is seen up to 4.8% from 4.6%.

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 Thursday

The stock market fell sharply at the open and remained deep in the red throughout the day, closing only modestly above session lows.

The Dow Jones Industrial Average gave up 1.5% in Thursday’s trading. The S&P 500 index fell 2.1 percent. The Nasdaq composite slipped 2.8%. The small-cap Russell 2000 fell 2.2%.

Apple shares fell 4.9% to 142.48, hitting their worst levels since early July but still some way off June’s lows. Bank of America downgraded Apple shares to neutral with a price target of 160.

CarMax revenue fell 54% from a year earlier, well below consensus. The price of used cars has started to come under pressure, and the car dealer cited affordability issues. KMX stock plunged nearly 25%. Carvana (CNVA) plunged 20%.

The CarMax debacle and Moody’s industry downgrade slammed automakers. GM shares fell 5.65%, Ford 5.8% and Chrysler’s parent Stellantis 4.8%. Tesla shares fell 6.8%, falling from near the 50-day and 200-day lines but staying just above near-term lows.

The 10-year Treasury yield rose 4 basis points to 3.75%, after reaching 3.81% intraday. It follows Wednesday’s drop of 26 basis points. Nevertheless, the benchmark interest rate on the treasury is still on the way to a ninth consecutive weekly rise.

US crude oil prices fell 1.1% to $81.23 a barrel.

ETFs

Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 1.7%. VanEck Vectors Semiconductor ETF ( SMH ) lost 3.15%. MU stock is a notable SMH holding, along with AMAT, LRCX and KLAC.

The SPDR S&P Metals & Mining ETF ( XME ) retreated 1.8%. The Energy Select SPDR ETF (XLE) and the Financial Select SPDR ETF (XLF) fell 1.3%. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.8%.

Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) fell 5.5% and the ARK Genomics ETF ( ARKG ) 4%, after strong gains on Wednesday. Tesla stock is a large holding across Ark Invest’s ETFs.

Top five Chinese stocks to watch now

Stock market analysis

So much for Wednesday’s stock market bounce. It took only a few minutes on Thursday for the major indexes to erase all one-day rebounds.

The S&P 500 index undercut Tuesday’s levels, marking a new low in the bear market. The Nasdaq 100 just hit its lowest level in June, with Apple and Tesla among the big losers.

The Nasdaq composite itself has yet to undermine its June lows, but fell below the September 23rd intraday low.

The S&P 500 and Nasdaq rally days are back to zero. The Dow Jones didn’t quite break below Tuesday’s bear market intraday low, so Thursday was technically day two of the rally attempt.

Treasury yields rose on Thursday, but recouped only a fraction of Wednesday’s losses. The US dollar lost ground for a second session in a row. Nevertheless, the 10-year government yield and the dollar have risen sharply in recent weeks.

Apple, CarMax and Nike have raised new concerns about consumer spending. Apple stock and iPhone chip names, along with GM, Tesla and the auto sector, make up a fairly large share of the market. Nike alone is a $150 billion blue-chip component.

ONE Meta platforms (META) hiring freeze and likely layoffs, along with Micron’s weak outlook, added to broader corporate woes.

But you don’t need to look for reasons why stocks sold off on Thursday. It’s a bear market. The Federal Reserve is raising interest rates aggressively, even as the US economy risks falling into a clear recession.

Wednesday’s bounce was delayed, but also did not signal that the severe downtrend was over.

The CBOE Volatility Index, or VIX, rose on Thursday. But it was an inside day for the market fear gauge after Wednesday’s downside. That suggests the major indexes may need to break decisively below their June lows before the bear market falls.

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What to do now

Investors need patience. At some point the bear market will end and a new sustained uptrend will develop. But don’t jump at the first ascent. Follow-up days are a good way to get into a new market rally quickly, but with at least some indication that it may have staying power.

If you bought stocks during Wednesday’s bounce, you need to be ready to get out quickly. A few such as Vertex Pharmaceuticals (VRTX) and DoubleVerify (DV) held up well on Thursday. But many exciting names on Wednesday wiped out those gains.

For now, focus on updating your watchlists. Look for stocks with strong relative strength. If they hold important moving averages, great, but at this point there are many relative “winners”, such as World Wrestling Entertainment (WWE), is below its 50-day and 200-day lines.

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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