Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, after a tough day for the S&P 500 and stock market rally. All eyes will be on the October CPI inflation report.
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The stock market rally lost ground on Wednesday and the S&P 500 fell below its 50-day moving average. Mixed election results, Bitcoin’s ongoing woesrenewed Chinese quarantines – and the upcoming consumer price index – were possible contributions.
Bitcoin slumped to two-year lows as the world’s largest cryptocurrency exchange Binance said Wednesday afternoon that it would not buy rival FTX.
Megacaps didn’t help. tesla (TSLA) fell below key levels, hitting a two-year low. amazon.com (AMZN) also determined the new lows of the bear market. Apple (AAPL) had its worst closure since June. Microsoft (MSFT) and Google parent Alphabet (GOOGLE) fell slightly.
Facebook parent Meta Platforms (META) was the exception, then rebound job posting and spending cuts. But key suppliers fell.
Significant Earnings
Catalyst Drugs (CPRX), Perfect Energy (EE), Celsius Holdings (FULLY FULL), Rivian (RIVN) and Wynn Resorts (WYNN) reported late Wednesday.
CPRX stock rose solidly in after-hours trading Catalyst Pharma beat EPS and revenue outlooks. Biotech also hinted at Q4 sales in line with the consensus. Catalyst stock fell 5.35% on Wednesday, reverting to early entry.
CELH stock rose overnight on strong Celsius revenue growth after the energy drink maker slumped to its lowest level since July on Wednesday. Rivian shares rebound mixed Q3 results after falling to a four-month low clear (LCID) Results. EE stock fell modestly in limited trading after Excelerate earnings beat outlook. Excelerate stock broke on Wednesday and tested the 50-day line.
Meanwhile, networking companies Digi International (DGII) and Tesla Chinese EV rival No (NIO) on tap early Thursday. DGII stock pulled back towards the 50-day line on Wednesday. rising base point of purchase. Nio stock fell to a two-year low as southern manufacturing hub Guangzhou announced Covid quarantines and negatively impacted many Chinese stocks.
CPI Inflation Report
The October consumer price index will be released on Thursday at 8:30am ET. Economists expect the CPI inflation report to show prices rising 0.7%. September. Core CPI, which excludes food and energy, needs to rise to 0.5%.
Annual CPI inflation rate should decrease from 8.2% in September to 8%. Core inflation remained stable at 6.6%.
The Federal Reserve wants to see clear and convincing evidence that inflation is slowing before it ends interest rate hikes. Markets are leaning slightly towards the Fed’s 50bps rate hike in December, but there is still a strong chance for a fifth 75bps move in a row. November employment data and CPI report will be announced before the Fed meeting and announcement in December.
Dow Jones Futures Today
Dow Jones futures rose 0.1%. reasonable value. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.25%.
The 10-year Treasury yield fell 6 basis points to 4.09%.
Bitcoin traded just over $16,000, still near two-year lows on Wednesday afternoon.
Remember that 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 started on Wednesday mixed but later lost ground especially in the afternoon and closed at session lows.
The Dow Jones Industrial Average fell nearly 2% on Wednesday stock market trading. The S&P 500 index fell 2.1 percent. The Nasdaq composite slipped 2.5%. The small-cap Russell 2000 fell 2.7%.
The 10-year Treasury yield rose 2 basis points to 4.15%.
The dollar had a strong session after a massive drop in three days.
U.S. crude oil prices fell 3.5 percent to $85.83 a barrel. Weekly US crude inventories posted their highest increase in a month. Meanwhile, quarantines in China have raised concerns about raw demand there. US natural gas futures fell 4.5%.
bitcoin
Bitcoin slumped again as Tuesday’s tentative deal by Binance to buy FTX, Binance walked out after looking at its rival’s books. “Our hope was to support FTX customers in providing liquidity, but the issues are beyond our control or ability to assist,” Binance said in a statement Wednesday afternoon.
FTX, which earlier this year seemed like a potential savior for ailing crypto firms, is now in danger of collapsing.
Bitcoin fell as low as $15,554.48, the worst in two years. The leading cryptocurrency dropped below $20,000 on Monday alone. Other major cryptos like Ethereum continue to sell alongside crypto-related stocks.
ETFs
Between best ETFsInnovative IBD 50 ETF (FFTY) fell 4.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gave 1.8%. iShares Extended Technology-Software Industry ETF (IGV) fell 2.2%, with Microsoft stock a key component. VanEck Vectors Semiconductor ETF (SMH) retracted 2.7%.
Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKK) fell 6.5% and the ARK Genomics ETF (ARKG) 4.3%. Tesla stock is a major holding in Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) 5.4% and the Global X US Infrastructure Development ETF (OPEN) lost 2.1%. US Global Jets ETF (JETS) fell by about 1%. SPDR S&P Homebuilders ETF (XHB) fell by 1.75%. Energy Select SPDR ETF (XLE) sold 4.9% and the Financial Select SPDR ETF (XLF) fell by 1.7%. Healthcare Select Sector SPDR Fund (XLV) fell by 1.1%.
Top Five China Stocks to Watch Now
Tesla Stock
Tesla stock fell 7.2% to 177.59, below its 2021 lows. Late on Tuesday, Elon Musk announced that he sold approximately $4 billion worth of TSLA shares in November. 4, 7 and 8, possibly to help fund the Twitter takeover. The statement may remove a bulge on TSLA stock, but Musk has yet to say the final batch of share sales is over.
Elon Musk’s takeover of Twitter has broader impact. It takes a lot of his time, and there are concerns that his actions and tweets on Twitter will harm the Elon Musk brand and perhaps Tesla. At a Twitter Spaces event on Wednesday, Musk talked about adding subscriptions and savings and payment features, but it didn’t do much to win back watchful advertisers.
Also, Tesla could drop along with other stocks exposed to China following the accelerated lockdowns there. Also, several US and Chinese EV stocks, including Nio, Lucid and RIVN shares, suffered double-digit losses on Wednesday.
Finally, Tesla still has some Bitcoin.
TSLA stock remained active overnight. Late Wednesday, President Biden, when asked if Musk was a national security risk, said it was “worth looking at” and added that there were “many ways” to do it.
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Other Megacap Shares
Meta Platforms will lay off 11,000 jobs, or 13% of its workforce. The Facebook parent company will also cut back on infrastructure spending as investors forgo large metaverse costs. META stock gains 5.2%, but spending restrictions hit Arista Networks (A NETWORK), Nvidia (NVDA) and other suppliers taking advantage of metaverse waste.
Apple stock fell 3.3% to 134.87. While the iPhone maker didn’t cut October intraday lows or June 16 market lows, AAPL stock closed at its worst since June 17. Earlier this week, Apple warned that Chinese Covid restrictions would hurt iPhone 14 Pro production.
Amazon stock fell 4.3% to its lowest point since March 2020. MSFT stock fell 1.9%. Google shares fell 1.8%. But both still rose slightly for the week.
Market Rally Analysis
Selling was back on Wednesday as the stock market rally seemed to be gaining momentum again. The Dow Jones fell just below the 200-day line. The S&P 500 fell below its 50-day moving average. Russell 2000 also fell below the 50-day mark.
The lagging Nasdaq pulled back after meeting resistance at the 21-day line on Tuesday.
Treasury yields rose, but not by much. The dollar has rebounded but has been in a downtrend recently. The still uncertain election results, which signaled a less-than-expected GOP wave, may have played a role. Bitcoin’s decline, lockdowns in China, and the often negative earnings response have all contributed.
As a result, the market rally was under pressure last week. S&P 500 above the 50-day line is the minimum level for market strength. Nasdaq moving above this key level will be an even stronger signal.
The October CPI report could set the direction of the Fed’s rate hike expectations and perhaps the market for at least a few weeks.
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what to do now
The market rally is ranged, although the Dow is close to recent highs and the Nasdaq is close to bear market lows. A volatile, flat market is extremely dangerous for investors.
A strong bull market usually lifts all boats. A bear market sinks them and drives everyone to dry ground. But the choppy market waters will be enough to lure investors with mini trades for indices and strong gains for individual stocks. But after buying near the short-term top, investors are caught in the undercurrent as stocks fall back. This could continue as traders take lots of small or very large losses.
In this environment, you can consider making at least a partial profit quickly, but it’s okay to make some test buys and hold positions if they’re working. However, investors should wait for the market rally to show continued strength before taking on significant risk.
But staying connected is important. Investors should have a game plan and implement it if the market or individual holdings break up or down. Keep your watchlists updated to be ready to take advantage of the next true bull market rally.
To read big picture every day to stay in sync with market direction and leading stocks and industries.
Please follow Ed Carson on Twitter at: @IBD_ECarson for stock market updates and more.
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