Dow Jones futures rose steadily Friday morning along with S&P 500 futures and Nasdaq futures, with Adobe reporting gains after the close. Stocks tumbled to fresh lows on Thursday, erasing an initial Fed-led rally on Wednesday, as well as several rallies as recession fears intensified.
A new report on Thursday pointed to a rapidly cooling economy, but the Federal Reserve focused on unmanageably high inflation.
Investors should avoid danger, but stay involved and continue to look for promising stocks. The relative strength lines of ExxonMobil (XOM), Northrop Grumman (NOC), Dollar General (DG), World Wrestling Entertainment (WWE), and Chinese EV giant and Tesla rival BYD (BYDDF) are at or near high levels.
Northrop Grumman and WWE stocks are on the IBD charts. XOM stock is in the IBD Big Cap 20. Exxon Mobil was also an IBD stock on Thursday.
Tesla (TSLA) CEO Elon Musk held a town hall meeting with Twitter (TWTR) employees on Thursday, after weeks of disparaging the social media company and stating that He wants to back out of the $44 billion deal or renegotiate for a lower price. Musk did not specifically say he was committed to a deal with Twitter. But he said he wanted to significantly increase the number of users to 1 billion, but also wanted to charge fees, in part to deter fake accounts. He also hinted at layoffs on Twitter.
Twitter shares fell 1.55% to 37.40. That’s well below Musk’s purchase price of $54.20 per share of TWTR.
Tesla shares tumbled 8.5% to 639.30. Unlike the major indexes and most large-cap stocks, TSLA stock hasn’t broken below recent lows. But shares were slightly above the May 24 low of 620.57.
The electric car giant was slightly up ahead of the open.
Earlier on Friday, Tesla raised the price of its Model Y Long Range in China by about $2,840. On Thursday, the company raised U.S. prices on nearly all of its vehicles, except for the base Model 3 price, due to higher material costs.
Adobe revenue
After the bell, Adobe (ADBE) reported second-quarter earnings and sales that barely beat expectations. But the software giant is forecasting lower performance and sales for the full year.
ADBE shares were down 4% in premarket trading. Adobe shares fell 3.1 percent on Thursday to close at 89.59, a two-year low.
Also overnight, Roku (ROKU) signed an e-commerce streaming deal with Walmart (WMT). Retail giant Dow Jones is set to strike an exclusive deal that will allow streamers to buy products directly on Roku.
Dow Jones Futures Today
Dow Jones futures rose 0.8% to fair value. S&P 500 futures rose 1%. Nasdaq 100 futures rose 1.2%. ADBE stock is a component of the S&P 500 and the Nasdaq 100.
China-listed stocks rose strongly ahead of the open.
The 10-year Treasury yield fell 9 basis points to 3.22%. The two-year Treasury yield fell 6 basis points to 3.1%.
U.S. crude oil prices edged lower.
Bitcoin was trading near $21,000, just above an 18-month low of $20,087.90 set earlier this week.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular trading session.
Stock market thursday
Stocks sold off sharply in early trade and extended losses, with all major indexes hitting 52-week lows. The Dow Jones Industrial Average fell 2.4% in trade on Thursday. The S&P 500 fell 3.25%. The Nasdaq Composite fell 4.1%. The small-cap Russell 2000 index fell 4.6%.
U.S. crude rose 2 percent to $117.58 a barrel on the back of new U.S. sanctions on Iran’s petrochemical industry.
The 10-year government bond yield slipped 8 basis points to 3.31%. The two-year Treasury yield fell 12 basis points to 3.16%. Government bond yields have been volatile in recent days as investors’ focus has shifted between inflation risk and recession risk.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 5.8%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 3.55%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 4.4%. The VanEck Vectors Semiconductor ETF (SMH) fell 5.9%.
The SPDR S&P Metals & Mining ETF (XME) fell 4.3% and the Global X U.S. Infrastructure Development ETF (PAVE) 4.9%. The U.S. Global Jets ETF (JETS) fell 5.9%. The SPDR S&P Homebuilders ETF (XHB) fell 6.6%. The Energy Select SPDR ETF (XLE) fell 5.6% and the Financial Select SPDR ETF (XLF) fell 2.5%. The Healthcare Select Sector SPDR Fund (XLV) fell 1.5%.
In stocks reflecting more speculative stories, the ARK Innovation ETF (ARKK) fell 6.2% and the ARK Genomics ETF (ARKG) fell 3.55%. Tesla stock remains a key position in the Ark Invest ETF, with fund manager Cathie Wood buying shares again in recent weeks. ROKU stock is also a big Ark Holdings. Ark also owns some shares in BYD.
Stocks to watch
XOM shares fell 3.7% to 91.39 on Thursday, but found support at the 50-day/10-week moving average. Technically, ExxonMobil’s stock price starts at the 89.90 buy point for the mug with the handle. But investors who decide to buy the stock in the current environment should probably wait for a strong bounce from the 50-day moving average.
Northrop shares fell 2.1% to 449.02 and encountered resistance at the 50-day moving average but held up relatively well. Earlier this month, an unusual cup with a handle exploded and quickly disappeared. Technically, the 477.36 handle buy point is still valid. A strong bounce above the 50-day moving average could lead to an early entry. One concern: other defense stocks have fared worse than Northrop.
Dollar General shares were down 2 cents at 232.23, just around the 50-day moving average. At Thursday’s close, DG stock was trading in line with its cup bottom, with a new buy point of 240.07. Additionally, dollar store Dollar Tree (DLTR) is doing well, while clearance retailer Ollie’s Bargain Outlet (OLLI) is in buy territory.
WWE shares fell 3.4% to 64.87, according to MarketSmith analysis, but still not far below the 68.82 buy point in the Henkel Long Term Cup. World Wrestling Entertainment previously cleared a flat base and is technically in the area of 63.81 entries.
Longtime chief executive Vince McMahon is stepping down from the role as the board investigates claims that a “hush fee” was paid to a former employee. His daughter Stephanie McMahon will serve as interim CEO. The committee’s report was released later on Wednesday.
BYD shares fell 4.9% to 36 points on Thursday, just above its 21-day moving average, following a 4.4% drop on Wednesday. Shares of the Chinese electric vehicle and battery giant may be struggling to control its 48%-deep bottom after surging sharply over the past five weeks. On the weekly chart, a handle should emerge after Friday, providing a buy point at 39.81. Ideally, BYD would form a bullish hold, perhaps long enough to be its own flat bottom, and then allow the big averages to catch up. Other Chinese EV stocks have rallied over the past few weeks, with Li Auto (LI) trading higher on the right side of a deep consolidation.
BYD is over-the-counter in the United States, so BYD’s trading volume itself is small. But BYD is listed in Hong Kong and Shenzhen, so the actual volume is very large.
Market analysis
Stocks rallied on Wednesday after a big Fed meeting before selling off sharply on Thursday, erasing the day’s gains. Major stock indexes tumbled to fresh lows, snapping an early rally.
It is common for the market to reverse the initial reaction to the Fed meeting the next day. This week’s rally and sell-off is similar to the market move after the Fed’s March 3-4 meeting. possible. The major indexes rebounded strongly on May 4, but then tumbled the next session.
There is growing concern that the Fed needs to push the economy into recession to control inflation. After an unexpected drop in retail sales earlier in the week, housing starts plummeted and the Philly Fed’s manufacturing index was negative on Thursday, suggesting the economy is already cooling rapidly.
But because gasoline, especially diesel, is so scarce, slower growth may not do much to keep energy prices in check. Crude oil and gasoline futures rose on such a bad market day on Thursday, underscoring the momentum.
Controlling headline inflation — and inflation expectations — will therefore be a challenge. A mild recession is cooling, but inflation remains uncomfortably high and now may be the best-case scenario for the economy and the stock market.
Of course, in the end it’s the market reaction that matters, not the news. At some point, the stock market will consider the negative news and look to a brighter future.
One possible area of support is the pre-pandemic peak. The Nasdaq was at 9,838.37, just below 10,000. The Dow and S&P 500 are also heading towards their pre-Covid highs.
Of course, a bear market doesn’t need to bottom at these levels. The Russell 2000 has weakened from its pre-pandemic peak.
Few stocks have survived the current frenzied sell-off. Even energy stocks are pulling back. Some, like XOM stock, are trying to find support at the 50-day moving average or other key levels.
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