Dow Jones futures fell overnight, along with S&P 500 and Nasdaq futures. The stock market rally attempt started strong on Thursday but lost gains, hitting key resistance as Treasury yields continued to rise on new economic data.
Parent Snapchat Instantaneous (SNAP) once again plunged on mixed results and no guidance, weighing on other social media companies Metaplatforms (META) and pinterest (PINS).
During Thursday’s session, You’re here (TSLA) fell to a 16-month low, after mixed earnings and mixed signals on Wednesday night.
Tech Titans Apple (AAPL), Microsoft (MSFT), parent company of Google Alphabet (GOOGL), meta-platforms, Amazon.co.uk (AMZN) and Nvidia (NVDA) all hit resistance at their 21-day moving averages, as did the S&P 500 and Nasdaq. All are heavily damaged, most not far from recent lows.
Although the attempted rally continues, it is still a bear market until proven otherwise. Investors should be wary of any new purchases in the current environment.
Snap Stock crashes again
Instantaneous (SNAP) topped views on third-quarter earnings. But revenue rose less than 6%, a record high and just below consensus. But the Snapchat parent won’t provide advice. Despite a $500 million buyout announcement, SNAP stock plunged 27% in after-hours trading. That’s after falling 43% and 39%, respectively, after the previous two earnings reports.
Meta stock, which reports next Wednesday, fell slightly in extended trade. Shares of PINS sold off after retreating to the 50- and 200-day lines on Thursday. Both report next week. Twitter (TWTR) was little changed as investors see Tesla CEO Elon Musk closing the $44 billion buyout soon.
Early Friday, the oil services giant Schlumberger (SLB) declares its income. The SLB stock moves quickly to the right side of a 38% deep cup base, but is not usable yet. Dow Jones Components American Express (AXP) and Verizon Communications (VZ) are also present. AXP and Verizon shares are near 52-week lows.
Dow Jones Futures Today
Dow Jones futures fell 0.1% from fair value. S&P 500 futures fell 0.3%. Nasdaq 100 futures fell 0.65%, with META stock a key negative.
The 10-year Treasury yield rose 1 basis point to 3.24%.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally rose during the first hour of trading, but faded as Treasury yields rose again.
The Dow Jones Industrial Average fell 0.3% in stock trading Thursday. The S&P 500 index fell 0.8%. The Nasdaq composite fell 0.6%. The small-cap Russell 2000 fell 1.3%.
The 10-year Treasury yield jumped 10 basis points to 4.23%, a new 14-year high after jumping 13 basis points on Wednesday. The benchmark Treasury yield is on track for a 12th straight weekly gain.
Ahead of the opening, the Labor Department reported that initial jobless claims fell last week, defying sight for a third straight gain. The Philadelphia Fed’s manufacturing index remained negative in October, slightly worse than opinion, but the employment sub-index signaled strong demand for labour. This is not what the Federal Reserve wants to see.
The two-year Treasury yield is around 4.6%, where the Fed recently signaled that its fed funds rate could peak. However, markets are currently expecting 4.75%-5% after the February meeting.
Crude oil futures expiring in November rose 0.5% to $85.98 a barrel, but pulled back from morning highs. December crude fell 1 cent to $84.51. Natural gas prices fell 1.9%, extending steep losses to their worst close since late March.
Among the top ETFs, the Innovator IBD 50 (FFTY) ETF fell 0.9%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 0.8%. ETF VanEck Vectors Semiconductor (SMH) gained 0.8%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both fell 0.4%. The TSLA share remains the main holding among Ark Invest’s ETFs.
The SPDR S&P Metals & Mining (XME) ETF rose 0.5%, with STLD stock a notable holding. The US Global Jets ETF (JETS) fell 0.8%. The SPDR S&P Homebuilders ETF (XHB) fell 2.5%. ETF Energy Select SPDR (XLE) edged up 0.1% and ETF Financial Select SPDR (XLF) slipped 1.6%. The SPDR healthcare sector fund (XLV) fell 0.8%.
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Tesla stock fell 6.65% to 207.28 on Thursday, hitting a fresh 16-month low. On Wednesday evening, Tesla’s revenue narrowly topped third-quarter views, while revenue fell short. While Elon Musk promised an “epic” fourth quarter and said demand remained strong, he conceded China and Europe were showing some weakness.
Tesla expects to produce many more vehicles than it ships in the fourth quarter, after production surpassed sales by 22,000 in the third quarter. The electric vehicle giant says it’s doing this to smooth out deliveries from its typical end-of-quarter frenzy. But the move comes as production capacity increases and backlogs in China have disappeared.
New EV credits are expected to support Tesla’s U.S. sales in 2023.
Meanwhile, Tesla CEO Elon Musk is reportedly looking for new partners to fund his takeover of Twitter to avoid further sales of TSLA stock. It comes after Musk said he was “excited” to run Twitter but admitted he was “paying too much”.
TWTR stock rose 1.2% to 52.44 on Thursday, just below the repurchase price of $54.20. It’s the highest close since Musk announced his interest in Twitter.
US government officials are considering subjecting Musk’s Twitter deal and the Starlink satellite network to national security reviews, Bloomberg reported late Thursday. This follows Musk’s threats to cut off Starlink’s access to Ukraine and his pro-Russian peace proposals.
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Market rally analysis
The stock market rally attempt got off to a strong start on Thursday, with the Nasdaq up nearly 1.5% in the first hour. But the Nasdaq, S&P 500 and Russell 2000 again hit resistance at the 21-day moving average. The Dow continues to hold above its 21-day mark.
Technical resistance coincided with a further rise in Treasury yields.
Major indexes are still solidly higher this week, despite trading close to weekly lows. If yields had a sustained decline or pause, the market rally could take off. But if yields continue to climb, it’s easy to imagine indices falling back to bear market lows.
The market’s attempted rally still needs a follow-up day to confirm the uptrend.
Many of Thursday’s winners were stocks with terrible charts, including fueled by earnings Search Lam (LRCX) and AT&T (T).
Energy stocks remain the undisputed leader. But many are extended their 50-day lines. Energy stocks are subject to large fluctuations with the underlying prices of oil and natural gas.
Certain steel values are proving their worth. Medical names such as humane (hum), Cardinal Health (ACH) and Vertex Pharmaceuticals (VRTX) were mixed. Despite the increase in the relative lines of force, many medical examinations do not progress much.
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What to do now
Market volatility adds to investor risk. Stocks can look promising, but see strong gains disappear within minutes or hours. And that’s with the indexes solidly higher for the week. If they were flat or falling, negative reversals could be much more painful.
Put volatility aside and there’s still no good reason to invest meaningfully now. The market rally did not have a follow-up day. The S&P 500 and the Nasdaq are in trouble at the 21-day line.
Next week, Dow Jones stock Apple, Microsoft, Google, Meta Platforms, Amazon, Boeing (BA), Intel (INTC) and hundreds of other companies will report. These profits could be a catalyst for big market gains, big losses, or new ups and downs.
The market could take a bullish turn at any time. A number of stocks could be actionable quickly if a confirmed rally gets under way. So stay engaged and keep your watchlists up to date.
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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