Dow Jones futures fell overnight along with S&P 500 futures and Nasdaq futures. The stock market rally attempt started strong on Thursday but pared gains and met key resistance as Treasury yields continued to rise on fresh economic data.
Snapchat Parents snap (SNAP) crashed again due to mixed results and a lack of guidance, weighing on other social media companies meta platforms (META) and Pinterest (PEN).
At Thursday’s session Tesla (TSLA) fell to a 16-month low after posting mixed gains and mixed signals late Wednesday.
tech titans Apple (AAPL), Microsoft (MSFT), parent company of Google alphabet (GOOGL), metaplatforms, Amazon.com (AMZN) and NVIDIA (NVDA) all met resistance at their 21-day moving averages, as did the S&P 500 and Nasdaq. All are badly damaged, with most not far off recent lows.
As the rally attempt continues, this is still a bear market until proven otherwise. Investors should be careful with new purchases in the current environment.
Snap Stock crashes again
snap (SNAP) beat earnings estimates for the third quarter. But revenue rose less than 6%, a record low and just below consensus. But the Snapchat parent won’t provide any guidance. Despite a $500 million buyback announcement, SNAP stock plummeted 27% in after-hours trading. That’s after a 43% and 39% crash respectively according to the previous two earnings reports.
The Meta stock, which reports next Wednesday, fell slightly in extended trading. PINS stock sold off on Thursday after turning lower at the 50-day and 200-day moving averages. Both will report next week. Twitter (TWTR) was little changed as investors see Tesla CEO Elon Musk closing the $44 billion acquisition soon.
Early Friday, oilfield services giant Schlumberger (SLB) reports result. SLB stock is moving fast on the right side of a 38% deep cup basis but is not yet actionable. Components by Dow Jones American Express (AXP) and Verizon Communications (VZ) are also available. AXP stock and Verizon are near 52-week lows.
Dow Jones futures today
Dow Jones futures fell 0.1% from fair value. S&P 500 futures fell 0.3%. Nasdaq 100 futures were down 0.6%, with META stock a key negative.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.
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stock market rally
The stock market rally was higher for the first hour of trading but faded as government bond yields marched higher again.
The Dow Jones Industrial Average fell 0.3% in trading on Thursday. The S&P 500 index fell 0.8%. The Nasdaq Composite fell 0.6%. Small-cap Russell 2000 fell 1.3%.
The 10-year Treasury yield jumped 10 basis points to 4.23%, another fresh 14-year high after rising 13 basis points on Wednesday. Benchmark Treasury yield is on track for 12th straight weekly gain.
Ahead of the opening, the Labor Department reported that initial jobless claims had fallen over the past week, defying prospects of a third straight gain. The Philly Fed Manufacturing Index remained negative in October, slightly worse than expectations, but the employment sub-index signaled strong demand for labour. The Federal Reserve doesn’t want to see that.
The two-year Treasury yield is around 4.6%, where the Fed recently signaled that its fed funds rate could peak. However, markets are currently forecasting 4.75% to 5% after the February session.
The expiring November crude futures contract rose 0.5% to $85.98 a barrel but retreated from the morning highs. Crude oil in December fell 1 cent to $84.51. Natural gas prices fell 1.9%, extending sharp losses to their worst close since late March.
Among the best ETFs, the innovator IBD 50 ETF (FFTY) lost 0.9%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 0.8%. The VanEck Vectors Semiconductor ETF (SMH) gained 0.8%.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both fell 0.4%. TSLA stock remains the top position among Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) was up 0.5% with STLD stock taking a notable position. The US Global Jets ETF (JETS) fell 0.8%. The SPDR S&P Homebuilders ETF (XHB) fell 2.5%. The Energy Select SPDR ETF (XLE) was up 0.1% and the Financial Select SPDR ETF (XLF) was down 1.6%. The Health Care Select Sector SPDR Fund (XLV) fell 0.8%.
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Tesla shares fell 6.65% to 207.28 on Thursday, hitting a fresh 16-month low. Late Wednesday, Tesla earnings narrowly beat Q3 views while earnings came up short. While Elon Musk promised an “epic” fourth quarter and said demand remains strong, he acknowledged that China and Europe are showing some weakness.
Tesla plans to produce significantly more vehicles than it will ship in the fourth quarter after third-quarter production exceeded sales by 22,000. The EV giant says it’s doing this to smooth deliveries compared to its typical end-of-the-quarter frenzy. But the move comes as manufacturing capacity soars and backlogs in China have cleared.
New EV credits should support Tesla’s US sales in 2023.
Meanwhile, Tesla CEO Elon Musk is reportedly looking for new equity partners to fund his Twitter acquisition to avoid new TSLA stock sales. That comes after Musk said he was “excited” to run Twitter but admitted he was “overpaying.”
TWTR shares rose 1.2% on Thursday to 52.44, just below the takeover price of $54.20. That’s the highest close since Musk first expressed interest in Twitter.
US government officials are considering subjecting Musk’s Twitter deal and the Starlink satellite network to national security reviews, Bloomberg reported late Thursday. This follows Musk’s threats to cut off Starlink’s access to Ukraine and his pro-Russia peace proposals.
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Analysis of the market rally
The attempt at the stock market rally got off to a strong start on Thursday, with the Nasdaq gaining nearly 1.5% in the first hour. But the Nasdaq, S&P 500 and Russell 2000 again encountered resistance at the 21-day moving average. The Dow Jones continues to hold above its 21-day course.
Technical resistance coincided with a renewed rise in Treasury yields.
Major indices are still up solidly this week despite trading near weekly lows. If yields fall sustainably or pause, the market rally could begin. But if yields continue to rise, it’s easy to imagine indices falling back towards bear market lows.
The market rally attempt needs another day to confirm the uptrend.
Many of Thursday’s winners were stocks with terrible charts, including profit-driven stocks Lam Research (LRX) and AT&T (T).
Energy stocks remain the clear frontrunners. But many are rolling from their 50-day moving averages. Energy stocks are vulnerable to large swings in underlying oil and natural gas prices.
Some steel stocks show their skills. Medical terms such as person (BUZZ), cardinal health (CAH) and Apex Pharma (VRTX) were mixed. Despite rising relative strength lines, many medical professionals are not making much progress.
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Market volatility increases investor risk. Stocks can look promising, but strong gains vanish in minutes or hours. And that’s with solid higher indices for this week. If they were flat or down, the negative reversals could be far more painful.
Volatility aside, there’s still no good reason to invest significantly right now. The market rally did not have a follow-through tag. The S&P 500 and Nasdaq are battling at the 21-day moving average.
Next week, Dow Jones will buy Apple, Microsoft, Google, Meta Platforms, Amazon, Boeing (BA), intel (INTC) and hundreds of other companies will report. These gains could be a catalyst for big market gains, heavy losses, or more whiplash moves.
The market could turn bullish at any moment. A number of stocks could be quick action if a confirmed rally gets underway. So stay tuned and keep your watchlists up to date.
Read The Big Picture every day to keep up to date with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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