Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures, with FedEx (FDX) plunging overnight on weak earnings and guidance. The stock market rally continued to weaken, with the major indexes wiping out Wednesday’s slim-to-modest bounce, while Treasury yields are near long-term highs.
The market is still coming to grips with Tuesday’s hot CPI inflation report, which upended the bull case of the Federal Reserve slowing rate hikes soon.
Meanwhile, megacap techs continue to weaken. Apple (AAPL), which on Monday flashed an early buy signal, undercut short-term lows Thursday. Microsoft (MSFT) is nearing its June lows while Google parent Alphabet (GOOGL) set a 19-month closing low.
After the close, FedEx reported fiscal first-quarter earnings fell 21% vs. a year earlier vs. views for an 18% gain. Revenue rose modestly but slightly missed forecasts. The shipping giant also pulled fiscal 2023 guidance and announced sweeping cost-cutting measures as it faces declining shipping volumes. FedEx had been scheduled to release Q1 results on Sept. 22.
Separately, General Electric (GE) said continued supply-chain issues are pressuring cash flow. GE stock fell 4% overnight.
Dow Jones Futures Today
Dow Jones futures dropped 0.4% vs. fair value. S&P 500 futures fell 0.6%. Nasdaq 100 futures declined 0.8%.
The 10-year Treasury yield fell 2 basis points to 3.44%.
Stock Market Rally
The stock market rally opened higher Thursday but that didn’t last, as selling soon took hold.
Jobless claims fell yet again to a three-month low, but other data, including August retail sales, generally pointed to a weaker economy than expected, but with easing price pressures. The Atlanta Fed’s GDPNow tool estimates Q3 GDP growth of just 0.5% vs. its outlook for 2.5% back in August.
The Dow Jones Industrial Average fell 0.6% in Thursday’s stock market trading. The S&P 500 index lost 1.1%. The Nasdaq composite gave up 1.4%. The small-cap Russell 2000 lost 0.7%.
Apple stock sank 1.9% to 152.37, undercutting the low of its already hefty handle. After gapping up above its 50-day and 200-day lines Monday, shares plunged back below those key levels in Tuesday’s market meltdown.
Microsoft stock sank 2.7% to 245.38 Thursday, the lowest point since its mid-June bottom. 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 sank 3.8% to $85.10 a barrel. Natural gas prices plunged 8.7% as an averted rail strike will keep coal shipments going. Natgas had spiked on Wednesday.
The 10-year Treasury yield rose 5 basis points to 3.46%, despite the lackluster economic data. That’s just below the 11-year high of 3.48% set on June 14. The one-year yield has topped 4%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slumped 2.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 1%. The iShares Expanded Tech-Software Sector ETF (IGV) gave up 3.2%, with Adobe and MSFT stock major components. The VanEck Vectors Semiconductor ETF (SMH) retreated 1.8%.
SPDR S&P Metals & Mining ETF (XME) declined 2.75%. The Energy Select SPDR ETF (XLE) fell 2.6% and the Financial Select SPDR ETF (XLF) edged up 0.3%. The Health Care Select Sector SPDR Fund (XLV) climbed 0.6%.
NBIX stock rose 2.5% to 106.93 on Thursday. Neurocrine Biosciences now has a flat base with a 109.36 buy point, according to MarketSmith analysis. Shares have flashed some early entries in the last couple of weeks, but quickly pulled back. Soon after Wednesday’s open, NBIX stock skidded to 100.46, testing its 50-day line and the top of a prior base. In theory, a trader could have bought Neurocrine as it rebounded from 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 50-day line. Vertex Pharmaceuticals flashed some early buy signals late last week, but fell 4.4% on Tuesday, dropping below its 50-day.
In a few days, Vertex stock may have its own flat base.
Market Rally Analysis
The stock market rally is showing no appetite for bouncing back. After Wednesday’s tentative, lackluster rebound from Tuesday’s sell-off, the major indexes wiped out those gains easily.
The Nasdaq 100, with Apple, Microsoft and Google stock key weights, undercut its Sept. 6 intraday low. The Nasdaq and S&P 500 have not yet undercut the Sept. 6 lows. but both set their worst closes since July.
The Nasdaq closing below the Sept. 6 low would likely spell the end for the long-ailing market rally.
On a technical basis, the major indexes need to get back above their 50-day moving averages. Their 21-day lines are now below the 50-day.
The looming Fed meeting adds to the risks over the next few days. More broadly, the market will likely struggle to make lasting advances until there is a strong sense that the Fed will slow and soon pause rate hikes. That had been the hope heading into the CPI inflation report on Tuesday. But no longer.
Meanwhile, not only is inflation higher than believed just a few days ago, economic activity is weaker. So the Federal Reserve will be imposing more “pain” amid a struggling economy.
A recession — or a zero-growth economy with tight labor markets — will be tough for businesses to navigate.
What To Do Now
The market rally is once again barely hanging on. Far too many intriguing stocks will flash a buy signal then reverse lower the next day. It’s just an extremely difficult environment to be investing in.
Until the major indexes are back above their 50-day moving averages, investors should have modest exposure, at most, and be extremely cautious about any new buys. Clarity on a Fed rate hike end game would be nice, but that may not come for several weeks or more.
Market conditions could quickly improve or deteriorate. If it’s the former, you’ll want to have an up-to-date watchlist. If it’s the latter, you’ll be glad you worked on watchlists vs. buying new stocks.
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