Dow Jones futures rose early Thursday, with S&P 500 and Nasdaq futures focused on Nvidia and Cisco gains.
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Stock market rally pulls back amid weakness Aim (TGT) earnings and vacation guidance, as well as Micron Technology (HE) interrupt memory chip production plans. The bond market risks brighter recession as the 10-year Treasury yield continues to fall and short-term interest rates remain high.
EV giant tesla (TSLA) pulled back and showed the weakest recent performance among mega-capital stocks.
Earning
Nvidia (NVDA), the lithium giant Sociedad Quimica and Minera de Chile (Square meters) and Cisco Systems (CSCO) headlined Wednesday night earnings.
NVDA stock rose moderately in overnight trading after mixed earnings and guidance.
CSCO stock rises 4% in extended action Cisco tops its fiscal Q1 outlook and directed on income. Cisco stock fell 1.1% on Wednesday, trading between the 50-day and 200-day lines. IBD Stocks Scoreboard Arista Networks (A NETWORK) Cisco rose slightly in earnings.
SQM earnings and revenue surpassed third-quarter views, but the report came too late for after-hours trading. SQM stock fell 2.6% on Wednesday and is down more than 10% this week amid lithium price concerns. Chilean lithium and fertilizer giant in trouble cup base with 115.82 point of purchase. It may be working on an arm.
Chinese e-commerce giant Ali Dad (FATHER) and department store chains in the USA Macy’s (M) and kohl’s (CSR) will be delivered early on Thursday. BABA stock tumbled modestly on Wednesday, only after rising 11% on Tuesday. Shares of Macy’s and KSS fell on Target’s holiday warning on Wednesday.
Dow Jones Futures Today
Dow Jones futures rose 0.15%. reasonable value. S&P 500 futures were up 0.2%. Nasdaq 100 futures gained 0.3%. CSCO stock is a Dow Jones, S&P 500 and Nasdaq component, but Nvidia has a larger weight in the S&P 500 and Nasdaq.
The 10-year Treasury yield rose 2 basis points to 3.71%.
Crude oil futures fell more than 1%.
Republicans have regained control of the House, according to multiple media outlets. But before election day there will be a much smaller majority than expected.
Remember, overnight action Dow futures and elsewhere it doesn’t necessarily turn into real trade on the next regular trade Exchange session.
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Stock Rally
The stock market rally lost ground on Thursday, with small stocks and techs spearheading the decline.
The Dow Jones Industrial Average fell 0.1% on Wednesday. stock market trading. The S&P 500 index gave up 0.8 percent. The Nasdaq composite fell 1.5%. The minor Russell 2000 fell 1.8%.
U.S. crude oil prices fell 1.5 percent to $85.59 a barrel. Natural gas futures rose 2.8 percent.
Treasury Yield Curve Sheds Recession Risk
The 10-year Treasury yield fell 11 basis points to 3.69%, the lowest since early October, down from 4.15% just a week ago. Benchmark Treasury yield is currently below the current federal funds rate range of 3.75%-4%, and the Fed is expected to raise rates by 50 basis points to 4.25%-4.5% next month.
The two-year Treasury yield, which is more closely tied to Fed policy, remained steady at 4.36%, while the quarterly rate was at 4.23%. The steepening yield curve inversion between quarterly and 10-year Treasuries is the highest since a short period in late 2019. This points to increased recession risks or, at best, negligible economic growth in 2023.
Fed chairman Jerome Powell and some of his colleagues have signaled that a recession may be necessary to contain inflation, although other policymakers see a reasonable chance of a soft landing.
The ever-inverting yield curve comes amid still robust labor markets and a strong retail sales report for October.
ETFs
Between best ETFsInnovative IBD 50 ETF (fifty) fell 1.7%, while the Innovator IBD Breakout Opportunities ETF (STRUGGLE) lost just over 1%. iShares Extended Technology-Software Industry ETF (IGV), lost 2.1% as many cloud software names had a bad session. VanEck Vectors Semiconductor ETF (SMH) Nvidia stock and Micron core components fell 3.6%.
SPDR S&P Metals & Mining ETF (XME) registered just over 2% and the Global X US Infrastructure Development ETF (FLOOR) fell 0.5%. US Global Jets ETF (JETS) gave up 2.4%. SPDR S&P Homebuilders ETF (XHB) retracted 1.4%. Energy Select SPDR ETF (XLE) fell 2% and the Financial Select SPDR ETF (XLF) fell 0.5%. Health Sector Selected SPDR Fund (XLV) ended just below the breakeven point.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) fell 5.15% and the ARK Genomics ETF (ARKG) 3.7%. Tesla stock remains a major holding in Ark Invest’s ETFs.
Top Five China Stocks to Watch Now
Nvidia Earnings
Nvidia earnings miss third-quarter views, but revenue fell less than feared. Data center chip demand remained strong. Gaming revenue has dropped, but not as badly as feared. The chip giant led slightly lower in Q4 sales.
Nvidia stock rose 2% in active overnight trading. Shares fell 4.5% to 159.10 on Wednesday. But NVDA stock has soared since hitting 108.13, a bear market low, on Oct. At 13, she hopes things will improve in the future. The chip giant has climbed well above the 50-day line but is still below the 200-day line.
Nvidia stock has no apparent point of purchase. Ideally, stocks break above the 200-day line and form a new bottom.
Tesla Stock
Tesla stock fell 3.9% to 186.92 on Wednesday. It was set on November 2, when it was above 177.12, a 2-year low. 9, TSLA stock hits resistance at the 10-day moving average. The EV giant has not closed above its 21-day line since Sept. 21.
Other mega-large companies have struggled, but Apple (AAPL), Microsoft (MSFT) and Google top Alphabet (GOOGLE) above their 50-day moving average, even the Facebook parent Meta Platforms (META) above the 21-day line.
Meanwhile, other EV stocks look as bad or worse as Tesla. Also, CEO Elon Musk’s reign of Twitter may be putting pressure on TSLA stock in various ways.
Musk testified on Wednesday in a lawsuit regarding 2018 Tesla stock options, which accounts for nearly $50 billion of his fortune. He implied that he would not stay as Twitter’s chief permanently.
Tesla vs. BYD: Which EV Giant Would Buy Better?
Market Rally Analysis
The stock market rally was probably caused by a pause or a pullback, and that’s what happened on Wednesday.
The Dow Jones paused just below its short-term August highs, holding comfortably above the 200-day mark. The S&P 500 looks pretty normal with a modest drop not far from the 200-day line.
The Nasdaq is still above the 50-day line but below its October short-term highs. Russell 2000 broke below the 200-day line, underlining Monday’s intraday low.
Meanwhile, some stocks, which had given glowing buy signals over the past few sessions, fell again on Wednesday. While many retailers have slumped due to Target’s missed earnings, their growth game has been largely stymied as defensive names rallied and defensive growth stocks soared.
If the market rises in the near future, Wednesday’s move will soon be forgotten. But if the Nasdaq drops below the 50-day level and leading stocks come under further pressure, that will be alarming.
While markets are rightly focused on Fed policy, there are other concerns. Still, the cumulative effect of the Fed’s rate hikes this year is weighing on the economy. And the effect will continue for several months after rate increases have finally come to an end.
The inverted yield curve reflects increased recession risks.
Even now, the combination of high inflation and weakening demand takes a significant toll. Target earnings showed that even though competitors Walmart (WMT) had strong conclusions and guidance. Inflation may drop slowly over the next year, but that doesn’t mean the outlook for corporate profits and share prices is bright.
Time the Market with IBD’s ETF Market Strategy
what to do now
Wednesday’s move offers a reason for investors to be wary of the rapidly increasing exposure. If the market pulls back as it did on Wednesday, taking a lot of new positions in one day could backfire. It is better to add exposure gradually, assuming that the market rally and your positions are making progress.
The stock market rally is still good, but prone to big swings, industry rotations and earnings surprises. It is not yet clear which stocks and sectors will lead. Therefore, do not concentrate too much on a particular industry or theme.
However, you want to regularly update your watchlists by creating a large network.
Early entries are still important. Traditional buy points have not done well, especially if they are significantly above the 50-day line.
Investors may still want to take a partial profit when they make a quick gain in a stock. This can give you the confidence to hold the remaining stock longer and are stock round-trips that will protect your portfolio.
To read big picture every day to stay in sync with market direction and leading stocks and industries.
Please follow Ed Carson on Twitter: @IBD_ECarson for stock market updates and more.
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