Dow Jones futures changed little overnight, along with S&P 500 futures and Nasdaq futures. Extending Wednesday’s losses, the stock market rally collapsed Thursday morning on flamboyant Fed statements. But the major indices closed slightly above some key levels.
Treasury yields jumped while crude oil prices declined.
Apple (AAPL), Microsoft (MSFT) and Google Guardian Alphabet (GOOGL), the only three trillion-dollar stock on US exchanges, rallied after testing support at its 50-day moving average. During this, Tesla (TSLA) retreated toward its bear market lows.
Investors should exercise caution in the current market, add exposure gradually and be prepared to take profits and cut losses quickly.
Applied Materials (AMAT), Palo Alto Networks (PANW), clear field (CLFD) and Ross Stores (ROST) topped EPS and sales views late Thursday, even with guidance that was generally strong.
AMAT stock gained marginally overnight, which looks set to move above its 200-day line. PANW stock popped up, indicating a move to its 50-day high. CLFD stock rose in extended trade, looking for a bounce above the 50-day line as it tries to form on the right side of the double-bottom base. ROST stock moved higher towards 2022 highs after closing in a range from lower base.
JD.com (JD) and Atkor (ATKR) are on tap beginning Friday.
JD stock jumped 7.5% on Thursday, reaching its 200-day line alibaba (Baba) Thursday’s earnings. ATKR stock fell 3.5% on Thursday but was comfortably above its 200-day line as it traded to the right of a deep cup base.
dow jones futures today
Dow Jones futures fell 0.1% versus fair value. S&P 500 futures leaned higher. Nasdaq 100 futures rose 0.2% with AMAT and PANW stocks lifting tech.
Crude oil futures rose 1%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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stock market rally
The stock market rally fell solidly at the open due to aggressive statements from St. Louis Fed President James Bullard and Kansas City Fed President Esther George. Major indices closed flat with minor losses.
The Dow Jones Industrial Average was below break-even in Thursday’s stock market trading. The S&P 500 index fell 0.3%. The Nasdaq Composite fell 0.35%. The small-cap Russell 2000 gave up 0.9%.
Apple stock climbed 1.3%. Microsoft stock gave back two cents, Google stock dipped 0.5%. All intraday tested their 50-day lines. All are below their 200-day line with no clear buy points. Tesla stock sank 2%, reaching near its Nov. 9 bear market lows.
US crude oil prices fell 4.6% to $81.64 per barrel. In addition to aggressive Fed comments, blame Beijing’s renewed emphasis on “zero-Covid” policies. The high-level body endorsed easing rules just a week after China’s State Council reportedly warned cities to avoid “irresponsible loosening” of COVID-19 measures. On Wednesday, Peking University was locked down over a single case. There has been an increase in Covid infections in China in the last two weeks.
Hawkish Fed raises Treasury yields
The 10-year Treasury yield rose 8 basis points to 3.77%.
The St. Louis Fed’s Bullard said the fed funds rate, currently at 3.75%-4%, could rise to as high as 7%, far above the consensus of around 5%. George of the Kansas City Fed said a recession may be needed to bring down inflation.
One reason policy makers seem stubborn is raising market rates and stalling the stock market rally. If financial conditions ease substantially on the Fed pivot expectations, inflation could persist longer, forcing the Fed to tighten official rates even further.
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Among the best ETFs, the Innovator IBD 50 ETF (FFTY) shed 0.1%. The iShares Extended Tech-Software Sector ETF (IGV) slid 2.65%, even with MSFT stock a major component. PANW Stock is also an IGV holding. The VanEck Vectors Semiconductor ETF (SMH) dipped 0.5% with AMAT stock a notable SMH holding.
The SPDR S&P Metals & Mining ETF (XME) slid 2.1%. The SPDR S&P Homebuilders ETF (XHB) retreated 2%. The Energy Select SPDR ETF (XLE) declined 0.5% and the Health Care Select Sector SPDR Fund (XLV) declined 0.2%.
Reflecting more-speculative story stocks, the ARK Innovations ETF (ARKK) shed 2.8% and the ARK Genomics ETF (ARKG) shed 3.2%. TSLA stock is a major holding in Ark Invest’s ETF.
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stock market rally analysis
The stock market rally tested some key levels at Thursday’s open. The Nasdaq found support just above its 50-day moving average. The S&P 500 briefly hit its October short-term high. The Russell 2000 retraces from near its 21-day line. The S&P 400 Midcap held its 200-day line.
The market was arguably due for a pullback after a strong run and the S&P 500 neared its 200-day line. At the same time, on Thursday, the market’s momentum got support in important areas. So the past few days were normal and somewhat constructive for the major indices – assuming they can sustain Thursday’s lows and eventually move up.
However, the market retraced from Tuesday’s intraday high to Thursday morning’s low and many stocks gained momentum or made early entries in the last few days. Many tested or outright failed those entries. Some are rebounding while others can do so. In some cases, previous purchase points are still valid, while others may require new handles or other entries to be set. Still others may struggle for extended periods.
A variety of stocks and sectors are showing interesting action.
In all these cases, a healthy market rally will be crucial.
Apple stock, Microsoft and Google are not market leaders and may not be for some time. But if they can avoid falling behind, it will be a big help.
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What should we do now
The stock market rally showed encouraging action on Thursday. The overall trend has been higher over the past several weeks. But it has been a circuitous road for investors.
Anyone who bought the stock after the October 21 follow-through day was likely underwater by early November. While the index climbed on the November 10 household CPI report, the Nasdaq, S&P 500 and Russell 2000 have been flat to below since then.
The stock market rally remains volatile with sector rotation and large intraday swings. Buying opportunities are often the moments when the market pulls the rug out from investors.
So keep the exposure light. Add exposure gradually – and be prepared to cut exposure due to market conditions or individual stock selling rules.
Keep your watchlist updated so you can spot emerging leaders.
Read The Big Picture every day to keep up with market direction and the leading stocks and sectors.
Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and much more.
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