Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures, with FedEx (FDX) plunges overnight on weak earnings and guidance. Equity gains continued to weaken, with the major indexes erasing Wednesday’s slim to modest gains, while government yields are near long-term highs.
The market is still coming to grips with Tuesday’s hot CPI inflation report, which debunked the case of the Federal Reserve cutting interest rate hikes soon.
Adobe (ADBE) crashed with mixed results and a $20 billion acquisition. Oil and natural gas stocks fell with energy prices, but solar and lithium stocks also took big losses.
Neurocrine Life Sciences (NBIX) and Vertex Pharmaceuticals (VRTX) continues to perform well, although they haven’t been easy to trade either.
Meanwhile, megacap tech continues to weaken. apple ( AAPL ), which on Monday gave an early buy signal, undermined near-term lows on Thursday. Microsoft (MSFT) nears June lows while Google parent Alphabet (GOOGL) hit a 19-month low.
The NBIX stock is on the IBD Leaderboard. Microsoft and Google shares are on IBD Long-Term Leaders. VRTX stock is on the IBD Big Cap 20.
After the close, FedEx reported that first-quarter earnings fell 21% year-over-year vs. views for a profit of 18%. Revenue increased modestly, but slightly missed forecasts. The shipping giant also withdrew guidance for the 2023 financial year and announced sweeping cost-cutting measures as it faces declining shipping volumes. FedEx was scheduled to announce first-quarter results on September 22.
FDX stock plunged 17% in overnight trading. Arch-rival UPS (UPS) fell 6%. Amazon.com (AMZN) fell 2%. Amazon has reduced its ties with FedEx, but the warning could be bad news for e-commerce in general.
Separately, General Electric ( GE ) said continued supply chain issues are squeezing cash flow. GE stock fell 4% overnight.
Dow Jones Futures today
Dow Jones futures fell 0.4% relative to fair value. S&P 500 futures fell 0.6 percent. Nasdaq 100 futures fell 0.7 percent.
The 10-year government yield fell 2 basis points to 3.44%.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally opened higher on Thursday, but it did not last as the sell-off soon took hold.
Jobless claims fell once again to a three-month low, but other data, including retail sales in August, pointed to a generally weaker-than-expected economy, but with easing price pressures. The Atlanta Fed’s GDPNow tool projects third-quarter GDP growth of just 0.5% versus the outlook for 2.5% back in August.
The Dow Jones Industrial Average fell 0.6 percent in Thursday’s trading. The S&P 500 index lost 1.1 percent. The Nasdaq composite gave up 1.4 percent. The small-cap Russell 2000 lost 0.7%.
Apple shares fell 1.9% to 152.37, undercutting the low of the already hefty handle. After rising above its 50-day and 200-day lines on Monday, stocks plunged back below those key levels in Tuesday’s market meltdown.
Microsoft shares fell 2.7% to 245.38 on Thursday, the lowest point since a mid-June low. Google shares fell 2% to 102.91, falling short of their intraday low on May 24 but their worst close since April 2022.
The US crude oil price fell 3.8 percent to 85.10 dollars a barrel. Natural gas prices fell 8.7% as an averted rail strike will keep coal transportation going. Natgas had increased on Wednesday.
The 10-year Treasury yield rose 5 basis points to 3.46%, despite weak economic data. That is just below the 11-year high of 3.48% set on 14 June. The one-year interest rate has topped 4%.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 2.1%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) lost 1%. The iShares Expanded Tech-Software Sector ETF ( IGV ) gave up 3.2%, with Adobe and MSFT making major components. The VanEck Vectors Semiconductor ETF ( SMH ) retreated 1.8%.
The SPDR S&P Metals & Mining ETF ( XME ) fell 2.75%. The Energy Select SPDR ETF (XLE) fell 2.6% and the Financial Select SPDR ETF (XLF) rose 0.3%. The Health Care Select Sector SPDR Fund ( XLV ) rose 0.6%.
As a result of more speculative stock stocks, the ARK Innovation ETF (ARKK) rose 2.2% and the ARK Genomics ETF (ARKG) rose 1.8%.
Top five Chinese stocks to watch now
NBIX shares rose 2.5% to 106.93 on Thursday. Neurocrine Biosciences now has a flat base with a buy point of 109.36, according to MarketSmith analysis. Shares flashed some early entries in the past couple of weeks, but quickly pulled back. Shortly after Wednesday’s open, NBIX stock eased to 100.46, testing its 50-day line and the top of a previous base. In theory, a trader could have bought Neurocrine when it rebounded from its 50-day line, but it would have taken a brave soul to place that bet given the market conditions.
The relative strength line is at a new high, reflecting the NBIX share’s strong excess return in a weak market.
VRTX shares climbed 1% to 287.67, just below the 50-day line. Vertex Pharmaceuticals showed some early buy signals late last week, but fell 4.4% on Tuesday, falling below its 50-day.
In a few days, Vertex stock may have its own flat base.
Market rally analysis
The share rise shows no appetite to come back. After Wednesday’s preliminary, lackluster pullback from Tuesday’s selloff, the major indexes easily erased those gains.
The Nasdaq 100, with Apple, Microsoft and Google stock key weights, fell below its intraday low on September 6. The Nasdaq and S&P 500 have so far not undermined the September 6 lows. but both set their worst bars since July.
The Nasdaq closing below the September 6 low is likely to spell the end of the prolonged market rally.
On a technical basis, the major indices need to return above their 50-day moving averages. Their 21-day lines are now below the 50-day.
The looming Fed meeting increases the risk in the next few days. More broadly, the market will likely struggle to make lasting progress until there is a strong sense that the Fed will slow and soon stop rate hikes. That had been the hope heading into the CPI inflation report on Tuesday. But not anymore.
Meanwhile, not only is inflation higher than expected just a few days ago, economic activity is weaker. So the Federal Reserve will impose more “pain” in the midst of a struggling economy.
A recession – or a zero-growth economy with tight labor markets – will be difficult for businesses to navigate.
Time the market with IBD’s ETF market strategy
What to do now
The market rally is barely keeping up. Too many exciting stocks will flash a buy signal and then reverse lower the next day. It’s just an extremely difficult environment to invest in.
Until the major indexes are back above their 50-day moving averages, investors should have modest exposure, at most, and be extremely cautious about any new purchases. Clarity on an endgame of Fed rate hikes would be nice, but that may not come for several weeks or more.
Market conditions can quickly improve or deteriorate. If it’s the former, you’ll want an up-to-date watchlist. If it’s the latter, you’ll be glad you worked on watchlists versus buying new stocks.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
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