Dow Jones futures fell overnight, along with S&P 500 and Nasdaq futures, with fedex (FDX) plunging overnight on weak earnings and guidance. The stock market rally continued to weaken, with major indexes reversing Wednesday’s thin to modest rebound, while Treasury yields are near long-term highs.
The market is still grappling with Tuesday’s CPI inflation report, which upset the bullish scenario of the Federal Reserve’s slowing rate hikes.
Adobe (ADBE) crashed on mixed results and a $20 billion acquisition. Oil and natural gas stocks fell along with energy prices, but solar and lithium stocks also suffered heavy losses.
Meanwhile, megacap technologies continue to weaken. Apple (AAPL), which sent an early buy signal on Monday, undercut short-term lows on Thursday. Microsoft (MSFT) approaches its June lows as Google’s parent company Alphabet (GOOGL) set a 19-month closing low.
After the close, FedEx reported that fiscal first-quarter earnings fell 21% from a year earlier, compared to views for an 18% gain. Revenues increased modestly but slightly exceeded forecasts. The shipping giant also withdrew its guidance for fiscal year 2023 and announced sweeping cost-cutting measures as it faces falling shipping volumes. FedEx was scheduled to release first quarter results on Sept. 22.
FDX stock plunged 16% in overnight trading. Archival UPS (UPS) fell nearly 6%.
Dow Jones Futures Today
Dow Jones futures fell 0.5% from fair value. S&P 500 futures fell 0.6%. Nasdaq 100 futures were down 0.75%.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Stock market rally
The stock market rally opened higher on Thursday, but it didn’t last as selling quickly set in.
Unemployment insurance claims fell again to a three-month low, but other data, including August retail sales, generally pointed to a weaker-than-expected economy, albeit with loosening price pressures. The Atlanta Fed’s GDPNow tool estimates third-quarter GDP growth at just 0.5% compared to its outlook of 2.5% in August.
The Dow Jones Industrial Average fell 0.6% in stock trading Thursday. The S&P 500 index lost 1.1%. The Nasdaq composite fell 1.4%. Small cap Russell 2000 lost 0.7%.
Apple stock fell 1.9% to 152.37, undercutting the low of its already heavy handful. After breaking above its 50- and 200-day lines on Monday, stocks plunged back below those key levels in Tuesday’s market crash.
Microsoft stock fell 2.7% to 245.38 on Thursday, the lowest point since its mid-June low. Google stock fell 2% to 102.91, not undercutting its May 24 intraday low but the worst close since April 2022.
U.S. crude oil prices fell 3.8% to $85.10 a barrel. Natural gas prices fell 8.7% as an averted rail strike will keep coal shipments going. The Natgas had climbed on Wednesday.
The 10-year Treasury yield rose 5 basis points to 3.46%, despite lackluster economic data. That’s just below the 11-year high of 3.48% set on June 14. The one-year return exceeded 4%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 2.1%, while the Innovator IBD Breakout Opportunities ETF (FIGHT) lost 1%. The iShares Expanded Tech-Software Sector ETF (VIG) fell 3.2%, with major components from Adobe and MSFT. The VanEck Vectors Semiconductor ETF (SMH) fell 1.8%.
SPDR S&P Metals & Mining ETF (XME) fell by 2.75%. The SPDR Energy Select ETF (XLE) fell 2.6% and the Financial Select SPDR ETF (XLF) increased slightly by 0.3%. SPDR Healthcare Sector Fund (XLV) climbed 0.6%.
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NBIX stock rose 2.5% to 106.93 on Thursday. Neurocrine Biosciences now has a flat bottom with a buy point of 109.36, according to MarketSmith analysis. Stocks posted some early entries over the past two weeks, but quickly retreated. Shortly after Wednesday’s open, NBIX stock slipped to 100.46, testing its 50-day line and the top of a previous base. In theory, a trader could have bought Neurocrine as it bounced off its 50-day line, but it would have taken a brave soul to place that bet given the market conditions.
The relative strength line is at a new high, reflecting NBIX stock’s strong outperformance in a weak market.
VRTX stock climbed 1% to 287.67, just below the 50-day line. Vertex Pharmaceuticals issued early buy signals late last week, but fell 4.4% on Tuesday to below its 50-day mark.
In a few days, Vertex stock may have its own flat bottom.
Market rally analysis
The stock market rally shows no appetite to rebound. After Wednesday’s hesitant and lackluster rebound from Tuesday’s selloff, the major indices easily wiped out those gains.
The Nasdaq 100, with key weightings in Apple, Microsoft and Google stocks, undercut its September 6 intraday low. The Nasdaq and S&P 500 are yet to break through the Sept. 6 lows. but both set their worst closes since July.
The Nasdaq’s close below the Sept. 6 low would likely signal the end of the long-running market rally.
On a technical level, the major indices must go back above their 50-day moving averages. Their 21 day lines are now lower than their 50 day lines.
The looming Fed meeting adds to the risks over the next few days. More broadly, the market will likely struggle to make sustainable advances until there is strong sentiment that the Fed will slow down and halt rate hikes soon. That was the hope that featured in Tuesday’s CPI inflation report. But not anymore.
Meanwhile, not only is inflation higher than believed a few days ago, but economic activity is weaker. Thus, the Federal Reserve will impose more “pain” in the midst of a struggling economy.
A recession – or a zero-growth economy with tight labor markets – will be difficult for businesses to manage.
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What to do now
The market rally is again barely holding. Far too many intriguing stocks will give a buy signal and then reverse lower the next day. It’s just an extremely difficult environment in which to invest.
Until the major indices are back above their 50-day moving averages, investors should have modest exposure, at most, and be extremely cautious of any new buying. Clarity on an end game of the Fed rate hike would be nice, but that might not happen for several weeks or more.
Market conditions could quickly improve or deteriorate. If it’s the first, you’ll want to have an up-to-date watch list. If it’s the latter, you’ll be glad you worked on watchlists rather than buying new stocks.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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