Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally attempt started Thursday strong but shed gains, hitting key resistance as Treasury yields kept running higher on fresh economic data.
Tech titans Apple (AAPL), Microsoft (MSFT), Google parent Alphabet (GOOGL), Meta Platforms, Amazon.com (AMZN) and Nvidia (NVDA) all hit resistance at their 21-day moving averages, just like the S&P 500 and Nasdaq. All are heavily damaged, with most not far from recent lows.
While the rally attempt continues, this is still a bear market until proven otherwise. Investors should be wary of making any new buys in the current environment.
Snap Stock Crashes Again
Snap (SNAP) topped third-quarter earnings views. But revenue rose less than 6%, a record low and just below consensus. But the Snapchat parent won’t provide guidance. Despite a $500 million buyback announcement, SNAP stock plunged 27% in after-hours trading. That’s after crashing 43% and 39%, respectively, after the prior two earnings reports.
Meta stock, which reports next Wednesday, fell modestly in extended trade. PINS stock sold off after reversing lower at the 50-day and 200-day lines Thursday. Both report next week. Twitter (TWTR) was little changed as investors see Tesla CEO Elon Musk closing the $44 billion takeover soon.
Early Friday, oilfield services giant Schlumberger (SLB) reports earnings. SLB stock is moving quickly up the right side of a 38%-deep cup base, but isn’t actionable yet. Dow Jones components American Express (AXP) and Verizon Communications (VZ) also are on tap. AXP stock and Verizon are near 52-week lows.
Dow Jones Futures Today
Dow Jones futures dipped 0.1% vs. fair value. S&P 500 futures fell 0.3%. Nasdaq 100 futures sank 0.65%, with META stock a key negative.
The 10-year Treasury yield rose 1 basis point to 3.24%.
Stock Market Rally
The stock market rally ran higher in the first hour of trading, but wilted as Treasury yields marched higher again.
The Dow Jones Industrial Average fell 0.3% in Thursday’s stock market trading. The S&P 500 index sank 0.8%. The Nasdaq composite dropped 0.6%. The small-cap Russell 2000 slumped 1.3%.
The 10-year Treasury yield leapt 10 basis points to 4.23%, yet another fresh 14-year high after jumping 13 basis points on Wednesday. The benchmark Treasury yield is on track for a 12th straight weekly gain.
Before the open, the Labor Department reported initial jobless claims fell last week, defying views for a third straight gain. The Philly Fed manufacturing index remained negative in October, slightly worse than views, but the employment subindex signaled strong labor demand. That’s not what the Federal Reserve wants to see.
The two-year Treasury yield is around 4.6%, where the Fed recently signaled its fed funds rate might peak. However, markets are currently predicting 4.75%-5% after the February meeting.
The expiring November crude oil futures contract rose 0.5% to $85.98 a barrel, but backed off from morning highs. December crude dipped 1 cent to $84.51. Natural gas prices fell 1.9%, extending sharp losses to its worst close since late March.
SPDR S&P Metals & Mining ETF (XME) climbed 0.5%, with STLD stock a notable holding. U.S. Global Jets ETF (JETS) gave up 0.8%. SPDR S&P Homebuilders ETF (XHB) slumped 2.5%. The Energy Select SPDR ETF (XLE) edged up 0.1% and the Financial Select SPDR ETF (XLF) skidded 1.6%. The Health Care Select Sector SPDR Fund (XLV) descended 0.8%.
Tesla stock sold off 6.65% to 207.28 on Thursday, breaking to a fresh 16-month low. Late Wednesday, Tesla earnings narrowly topped Q3 views while revenue came up short. While Elon Musk promised an “epic” fourth quarter and said demand remains strong, he did concede that China and Europe are showing some weakness.
Tesla plans to produce significantly more vehicles than it delivers in Q4, after output topped sales by 22,000 in Q3. The EV giant says it’s doing this to smooth out deliveries vs. its typical end-of-quarter frenzy. But, the move comes as production capacity surges and China backlogs are gone.
New EV credits should support Tesla’s U.S. sales in 2023.
Meanwhile, Tesla CEO Elon Musk reportedly is seeking new equity partners to finance his Twitter takeover to avoid fresh TSLA stock sales. That comes after Musk said he’s “excited” to run Twitter, but admitted he’s “overpaying.”
TWTR stock rose 1.2% to 52.44 on Thursday, just below the $54.20 takeover price. It’s the highest close since Musk first announced interest in Twitter.
U.S. government officials are mulling subjecting Musk’s Twitter deal and Starlink satellite network to national security reviews, Bloomberg reported late Thursday. That follows Musk’s threats to cut off Starlink access to Ukraine and his Russia-friendly peace proposals.
Market Rally Analysis
The stock market rally attempt got off to a strong start Thursday, with the Nasdaq up nearly 1.5% in the first hour. But the Nasdaq, S&P 500 and Russell 2000 hit resistance at the 21-day moving average once again. The Dow Jones continues to hold above its 21-day.
The technical resistance coincided with Treasury yields moving higher yet again.
The major indexes are still up solidly this week, despite trading near weekly lows. If yields had a sustained decline or pause, the market rally might take off. But if yields keep climbing, it’s easy to envision the indexes tumbling back toward bear market lows.
The market rally attempt still needs a follow-through day to confirm the uptrend.
Energy stocks remain the clear leader. But many are extended from their 50-day lines. Energy stocks are prone to big swings with underlying oil and natural gas prices.
Some steel stocks are showing their mettle. Medical names such as Humana (HUM), Cardinal Health (CAH) and Vertex Pharmaceuticals (VRTX) were mixed. Despite rising relative strength lines, many medicals aren’t making a lot of headway.
What To Do Now
The market volatility adds to investor risk. Stocks can look promising, but see strong gains vanish in a few minutes or hours. And that’s with the indexes solidly higher for the week. If they were flat or down, the negative reversals could be far more painful.
Set aside the volatility and there still aren’t good reasons to be significantly invested now. The market rally hasn’t had a follow-through day. The S&P 500 and Nasdaq are struggling 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. Those earnings could be a catalyst for big market gains, sharp losses or more whipsaw action.
The market could take a bull turn at any moment. A number of stocks could be actionable quickly if a confirmed rally gets underway. So stay engaged and keep your watchlists fresh.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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