Editorial StaffDow Jones futures fell Thursday morning, along with S&P 500 futures and Nasdaq futures. The stock market sold off Wednesday on hotter-than-expected CPI inflation data, with the S&P 500 and Nasdaq breaking below recent lows.
The market correction and Nasdaq bear market show no signs of slowing down. Rebound attempts are halfhearted and quickly swatted down. And despite the market meltdown fear gauges, a contrarian indicator, still aren’t spiking.
Meanwhile, a meltdown in so-called stablecoins, digital currencies that are supposed to be pegged to the dollar, continue to plunge, putting further pressure on Bitcoin and other cryptocurrencies.
After the close, Walt Disney (DIS) and Tesla (TSLA) rival Rivian (RIVN) reported weaker-than-expected quarterly results. But investors focused on Disney’s Disney+ subscription figures after the stunning Netflix (NFLX) decline. Rivian shareholders keyed in on the EV startup’s statement that it’s revving up delivery van shipments to major customer Amazon.com (AMZN).
Tesla stock is nearing recent lows in its wide-and-loose consolidation. Tesla faces a number of near-term and midterm challenges.
Meanwhile, Merck (MRK) briefly broke out, while Eli Lilly (LLY), Anthem (ANTM), Chevron (CVX) and Dollar Tree (DLTR) are trading around their 50-day lines. All are showing relative strength.
Tesla, Anthem and LLY stock are on IBD Leaderboard, while DLTR stock has joined the Leaderboard watchlist. MRK stock and Dollar Tree are on SwingTrader. Merck and CVX stock are on the IBD Big Cap 20. Eli Lilly was Wednesday’s IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures fell 0.7% vs. fair value. S&P 500 futures declined 0.95% and Nasdaq 100 futures retreated 1.5%. DIS stock is a Dow Jones and S&P 500 component.
The 10-year Treasury yield tumbled 9 basis points to 2.83%.
U.S. crude oil prices fell nearly 2%. Copper futures skidded 3%. There are growing concerns that Fed rate hikes to fight inflation will trigger a recession amid a number of economic growth challenges.
At 8:30 a.m. ET, the Labor Department will release the April producer price index and the latest weekly jobless claims.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Stock Market Wednesday
The stock market was volatile at Wednesday’s open following the April consumer price index. Inflation cooled to 8.3% from March’s 40-year high of 8.5%, but that was hotter than expected. Core consumer prices rose 0.6% vs. March.
Up-and-down trading turned decisively negative, especially on the Nasdaq. The major indexes sank to fresh 52-week lows, closing near their worst levels of the day.
The Dow Jones Industrial Average fell 1% in Wednesday’s stock market trading. The S&P 500 index gave up 1.6%. The Nasdaq composite tumbled 3.2%. The small-cap Russell 2000 skidded 2.5%.
The 10-year Treasury yield fell 7 basis points to 2.92%, its third straight decline. That’s after initially popping to 3.04% — and even higher before the open on the CPI data. Meanwhile, the two-year yield edged up 1 basis point to 2.63%. The 2-year yield is more closely tied to Fed rate moves, while the 10-year Treasury is feeling the effects of forecasts for slowing growth.
U.S. crude oil prices jumped 6% to 105.71 a barrel. With Shanghai and China Covid cases falling sharply over the past few weeks, expectations are growing that the Chinese government will relax economy-crushing lockdowns, boosting demand for crude oil and other commodities. But that hasn’t happened yet.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.4%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.15%. The iShares Expanded Tech-Software Sector ETF (IGV) slumped 3.3%. The VanEck Vectors Semiconductor ETF (SMH) retreated 3.1%.
SPDR S&P Metals & Mining ETF (XME) dipped 0.7% and the Global X U.S. Infrastructure Development ETF (PAVE) gave up 1.4%. U.S. Global Jets ETF (JETS) descended 2.4%. SPDR S&P Homebuilders ETF (XHB) retreated 3.6%. The Energy Select SPDR ETF (XLE) advanced 1.3%, with CVX stock a major component. The Financial Select SPDR ETF (XLF) slumped 0.9%. The Health Care Select Sector SPDR Fund (XLV) inched down 0.7%, with Merck, Eli Lilly and ANTM stock all notable holdings.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dived 10.1%, with key holdings Unity Software (U) and Coinbase (COIN) tumbling on weak results and guidance. ARK Genomics ETF (ARKG) skidded 7.8%. Both ETFs are at two-year lows. TSLA stock remains the No. 1 holding across Ark Invest’s ETFs.
Stocks To Watch
Merck stock rose 1.6% to 89.20, closing below an 89.58 cup-with-handle buy point after breaking out earlier. Shares had traded tightly over the prior several sessions. The relative strength line for MRK stock had been surging to new highs well ahead of Wednesday’s move.
LLY stock edged up 0.35% to 286.69, paring gains after trying to move off its 50-day moving average. Technically, Eli Lilly stock is still in buy range from a 284 cup-base buy point initially cleared nearly two months ago. But investors might want to wait for LLY stock to break a short downtrend, perhaps using the May 6 high of 298.25 as a trigger. After this week, Eli Lilly should have a flat base — part of a base-on-base formation — with a 314.10 buy point. The RS line for LLY stock is already at a new high.
ANTM stock dipped 0.4% to 487.36, reversing from modest gains near its 50-day line, technically back in a prior buy zone. Shares of the health insurance giant had pulled back tightly over the prior few weeks. Anthem stock could be actionable from the 50-day line, especially if it breaks above a short trend line. The RS line for ANTM stock is at a new high.
DLTR stock fell 1.15% to 156.07, slightly below its 50-day line, just within a prior buy zone like Anthem. A 50-day line bounce above the 21-day line would also break a short down-sloping trendline, offering an aggressive entry. The RS line for Dollar Tree stock is hitting new highs.
CVX stock advanced 1.5% to 163.16, just below its 50-day line after moving above that level intraday. Chevron stock is in a flat base with a 174.96 buy point, according to MarketSmith analysis. Investors could buy CVX stock if it rebounds from its 50-day and clears the May 6 high of 170.97. The RS line for Chevron stock is at a new high.
Market Analysis
After some volatile action Tuesday and Wednesday morning, the major indexes turned decisively lower following the hotter-than-expected CPI inflation report. The S&P 500 and Nasdaq undercut recent 2022 lows, killing their one-day “rallies.” The Dow Jones, which declined Tuesday, also hit fresh 52-week lows Wednesday.
The market correction continues to head lower, with the Nasdaq bear market now 30% deep. The S&P 500 is 18.3% off its January high, near the 20% bear market threshold.
Losers are crushing winners, with new lows obliterating new highs.
So far there are no real indications that the market is near a bottom. While market fear gauges are around recent highs, the CBOE Volatility Index, or VIX, fell 1.3% to 32.60 on Wednesday even as the S&P 500 hit new lows.
But another contrarian indicator is, well, contrarian, with the latest bulls-bears reading of investment newsletter writers turning increasingly bearish.
What To Do Now
Staying out continues to be the best move. Yes, there are pockets of market strength. But leading sectors aren’t immune from selling pressure either. Better to wait for a follow-through day to confirm a new market rally. Even then, investors should be cautious.
Right now, there isn’t even a market rally attempt.
Stay engaged with the market, but don’t obsess over every minute of intraday action. Keep working on your watchlists.
Source: Investors.com
