S&P 500 Falls Below Key Level On Elections, Tesla, Bitcoin; CPI Inflation Report Looms

After a tough day for the S&P 500 and the stock market rally, the Dow Jones Futures rose slightly on Thursday along with the S&P 500 Futures and Nasdaq Futures. All eyes will be on the October CPI inflation report.




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On Wednesday, the stock market rally fell, with the S&P 500 pulling back below its 50-day moving average. Mixed election results, bitcoin’s continuing crisis, renewed lockdowns in China – and the rising consumer price index – were likely contributors.

Bitcoin fell to a two-year low as the world’s largest cryptocurrency exchange, Binance, said on Wednesday afternoon that it would not buy rival FTX.

Megacaps didn’t help. Tesla (TSLA) fell below key levels to a two-year low. Amazon.Com (AMZN) also made new bear market lows. Apple (AAPL) had its worst run since June, while Microsoft (MSFT) and Google Parent Alphabet (GOOGL) Fell a bit.

facebook parent meta platform The (meta) exception was, rebounding after the announcement of job and spending cuts. But major suppliers fell.

major earnings

Catalyst Pharmaceuticals (CPRX), Accelerate Energy (EE), Celsius Holdings (CELH), rivian (RIVN) and Wynn Resorts (WYNN) reported late Wednesday.

Catalyst Pharma outperformed EPS and Revenue Views to strengthen CPRX stock in after-hours action. The biotech also implied Q4 sales in line with the consensus. Catalyst stock fell 5.35% on Wednesday, near the opening entry.

CELH stock jumped overnight on strong Celsius revenue growth after the energy drink maker fell to its lowest level since July on Wednesday. Rivian stock rebounds on mixed Q3 results after falling to four-month low lucid (LCID) result. EE stock fell marginally in limited trading after topping Accelerate’s earnings. Testing the 50-day line, Accelerate stock skidded on Wednesday.

Meanwhile, networking firms Digi International (DGII) and Tesla China EV Rivals NIO (NIO) are on tap early Thursday. DGII stock pulled back towards its 50-day line on Wednesday as it acts as an ascending base buy point. Nio’s stock fell to a two-year low as southern manufacturing hub Guangzhou announced a Covid lockdown, shutting down many Chinese stocks.

CPI Inflation Report

The October Consumer Price Index will be released Thursday at 8:30 a.m. ET. Economists expect the CPI inflation report to show 0.7% in prices versus Sept. Core CPI, which excludes food and energy, should climb 0.5%.

The annual CPI inflation rate should come down to 8% from 8.2% in September. Core inflation looks stable at 6.6 per cent.

The Federal Reserve wants to see clear and convincing evidence of slowing inflation before ending rate hikes. Markets are leaning slightly toward a 50-basis-point Fed rate hike in December, but there is still a strong possibility of a fifth straight 75-basis point move. The November employment data and CPI report will be released ahead of the December Fed meeting and announcement.

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dow jones futures today

Dow Jones futures were up 0.2% versus fair value. S&P 500 futures rose 0.2% and Nasdaq 100 futures rose 0.5%.

The 10-year Treasury yield fell 8 basis points to 4.07%.

Bitcoin traded above $16,500 from a two-year low on Wednesday afternoon.

Remember that overnight action in Dow futures and elsewhere does not necessarily entail actual trading in the next regular stock market session.


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stock market rally

The stock market’s rally opened mixed on Wednesday, but then lost ground, closing at session lows, especially in the afternoon.

The Dow Jones Industrial Average lost nearly 2% in Wednesday’s stock market trading. The S&P 500 index fell 2.1%. The Nasdaq Composite slipped 2.5%. The small-cap Russell 2000 dropped 2.7%.

The 10-year Treasury yield rose 2 basis points to 4.15%.

The dollar had a strong session after a major decline in three days.

The price of US crude fell 3.5% to $85.83 a barrel. Weekly US crude inventories rose by most in a month. Meanwhile, China’s lockdown raised concerns about the demand for crude there. US natural gas futures retreated 4.5%.

Bitcoin

Bitcoin fell again as Binance’s tentative deal to buy FTX declined, with Binance moving after looking at its rival’s books. “We expected to be able to provide FTX clients with liquidity, but the issues are beyond our control or ability to assist,” Binance said in a statement on Wednesday afternoon.

FTX, which earlier this year seemed to be a potential savior for ailing crypto firms, is now in danger of collapse.

Bitcoin fell to $15,554.48, its worst in two years. The leading cryptocurrency broke below $20,000 on Monday itself. Other major cryptos such as Ethereum also continue to sell alongside crypto-related stocks.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dropped 4.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) dropped 1.8%. The iShares Extended Tech-Software Sector ETF (IGV) sank 2.2%, with Microsoft stock being a major component. The VanEck Vector Semiconductor ETF (SMH) retreated 2.7%.

Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) fell 6.5% and the ARK Genomics ETF (ARKG) fell 4.3%. Tesla stock is a major holding in Arch Invest’s ETF.

The SPDR S&P Metals & Mining ETF (XME) was down 5.4% and the Global X US Infrastructure Development ETF (PAVE) lost 2.1%. The US Global Jets ETF (JETS) dropped nearly 1%. The SPDR S&P Homebuilders ETF (XHB) fell 1.75%. The Energy Select SPDR ETF (XLE) fell 4.9% and the Financial Select SPDR ETF (XLF) fell 1.7%. Health Care Select Sector SPDR Fund (XLV) declined 1.1%.

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Tesla Stock

Tesla stock fell 7.2% to 177.59, hitting its 2021 low. Late Tuesday, Elon Musk revealed that he sold nearly $4 billion worth of TSLA stock on November 4, 7, and 8, possibly to help fund his Twitter acquisition. The disclosure could lift an overhang on TSLA stock, though Musk hasn’t said yet whether he’s finished with his latest batch of share sales.

The Twitter acquisition of Elon Musk has a massive impact. It’s taking a lot of his time and there are concerns that his Twitter moves and tweets will harm the Elon Musk brand, and maybe even Tesla. At a Twitter Spaces event on Wednesday, Musk talked adding subscriptions and savings-and-pay features, but didn’t do much to win back wary advertisers.

In addition, Tesla could fall along with other China-exposed stocks in the wake of the stepped-up lockdown there. In addition, several US and Chinese EV stocks lost double digits on Wednesday, including Nio, Lucid and RIVN stocks.

In the end, Tesla still has some bitcoins.

TSLA stock remained active overnight. Late on Wednesday, President Biden, responding to a question about whether Musk is a national security risk, said “it’s worth looking into,” adding that there are “a lot of ways” to do this.


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Other Megacap Stocks

The meta platform will cut 11,000 jobs or 13% of its workforce. Facebook Parent will also curb infrastructure spending as investors largely defray metaverse costs. META stock up 5.2%, but spending curbs Arista Network (A trap), NVIDIA (NVDA) and other suppliers are benefiting from the Metaverse splurge.

Apple stock fell 3.3% to 134.87. While the iPhone maker hasn’t lowered its October intraday lows or its June 16 bear-market low, AAPL stock closed at its worst level since June 17. Earlier this week, Apple warned that China’s COVID restrictions would hurt iPhone 14 Pro production.

Amazon stock plunged 4.3%, falling to its lowest level since March 2020. MSFT stock fell 1.9%. Google stock retreated 1.8%. But both are still a bit up for the week.

market rally analysis

On Wednesday, when the rally of the stock market was again seen gaining momentum, the selling returned on Wednesday. The Dow Jones retreated just below its 200-day line. The S&P 500 fell below its 50-day moving average. The Russell 2000 also broke below the 50-day line.

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The trailing Nasdaq retreated after finding resistance at the 21-day line on Tuesday.

Treasury yields rose, but not by much. The dollar rebounded, but has been in a recent decline. Still uncertain election results, suggesting a less-than-expected GOP wave, may play a role. Bitcoin’s decline, China’s lockdown and often negative earnings reactions contributed.

After all, the market rally has been under pressure since last one week. A break above the 50-day line of the S&P 500 is the minimum level for the market to consolidate. A move above that key level would be an even stronger signal for the Nasdaq.

The October CPI report could set the tone on Fed rate hike expectations and perhaps market direction for at least a few weeks.


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What should we do now

The market rally is range-bound, although the Dow is near recent highs and Nasdaq is near bear-market lows. A volatile, sideways market is extremely dangerous for investors.

A strong bull market usually lifts all boats. A bear market drowns them, leaving everyone on dry land. But the market volatility is enough to entice investors with mini-runs for the index and strong gains for individual stocks. But after buying near the short-term top, investors get caught in the undertow as the stock falls back. It can go further with investors incurring small losses or some very large losses.

If they are working out, it’s ok to buy a few tests and hold positions, although you might consider taking at least a partial profit early in this environment. But investors should wait for the market to rally before making substantial investments so that they show continued strength.

But it is important to persist. Investors should have a game plan and implement it if the market or individual holdings are low or high. Update your watchlist so that you are ready to take advantage of the next true bull rally.

Read The Big Picture every day to keep up with the market direction and key stocks and sectors.

Please follow Ed Carson on Twitter @ibd_ecarson For stock market updates and much more.

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