Dow Jones futures rose modestly early Thursday, along with futures for the S&P 500 and Nasdaq. The stock market rally had a flat down session on Wednesday.
The Nasdaq led falls as Apple (AAPL), Google’s main Alphabet (Google) and Tesla shares extended large weekly losses. Apple and Google shares broke below some support levels as tesla (TSLA) is nearing its bear market lows.
Tesla continued to slide Thursday on various news stories.
The sideways action in recent weeks has been a challenge to buy hard. Choppy markets slice investors. This is not a good time to add exposure.
On Wednesday night, the Pentagon said that amazon.com (AMZN), Google, Microsoft (MSFT) Y Oracle (ORCL) won cloud computing contracts that could reach a combined $9 billion through 2028. In 2019, the Department of Defense awarded a $10 billion cloud computing contract, but canceled that deal in 2021 in the midst of Amazon’s objections.
The four tech giants were little changed in after-hours trading.
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Dow Jones futures were up 0.3% against fair value. S&P 500 futures were up 0.35% and Nasdaq 100 futures were up 0.4%.
The 10-year Treasury yield rose 6 basis points to 3.47%.
Crude oil futures rose more than 3% after falling to 2022 lows on Wednesday. The Keystone pipeline has been shut down due to a spill.
Copper rose 1%.
The Hang Seng Index rallied 3.4%, resuming its recent bull run as local media reported that Hong Kong is considering ending its outdoor mask rule. US-listed Chinese stocks pointed solidly higher.
Remember that overnight action in dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock Exchange session.
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The stock market rally traded modestly lower for most of the session on Wednesday, closing generally in the red.
The Dow Jones Industrial Average rose less than two points on Wednesday stock trading. The S&P 500 index fell 0.2%. The Nasdaq Composite fell 0.5%. The small-cap Russell 2000 declined 0.3%.
US crude oil prices fell 3% to $72.01 a barrel, and continued to slide on global demand fears. Gasoline futures sank 3.4% to a one-year low. Natural gas prices rose 4.6% after a sharp five-session drop.
The 10-year Treasury yield plunged 10 basis points to 3.41%, hitting its lowest level in almost three months.
The inverse relationship between stock and bond yields is declining because Treasury yields are now falling more on recession fears than easing inflationary pressures. A bland November 20th CPI report. 13 would still be acclaimed. While a half point rate hike looks very likely on December 1st. On January 14, progress in inflation would raise hopes for smaller increases in early 2023 and an earlier end to the tightening. That would reduce the risks of a fall, or at least a crash landing.
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) fell 0.5%. The VanEck Vector Semiconductor ETF (HMS) closed just below breakeven. Mirroring more speculative historical stocks, the ARK Innovation ETF (ARKK) fell 0.8% and ARK Genomics ETF (ARKG) rose 0.3%. TSLA stocks are a major holding in Ark Invest ETFs.
SPDR S&P Metals and Mining ETF (XME) fell 0.3% and the Global X US Infrastructure Development ETF (TO PAVE) lost a fraction. US Global Jets ETF (JETS) fell 3.3%. SPDR S&P Home Builders ETF (XHB) rose 1.8%. The Energy Select SPDR ETFXLE) fell 0.2% and the SPDR Financial Select ETF (XLF) decreased by 0.4%. The SPDR Select Healthcare Sector Fund (XLV) rose 0.8%.
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Apple shares and Google shares
Apple shares fell 1.4% on Wednesday to 140.94, hitting the lowest level since November 1. 10. So far this week, AAPL shares have fallen 4.65%, chipping away at its 50-day line. The Dow Jones technology titan is nearing its October. 13 low of 134.37 but still has some distance from its bear market low of 129.04 set on June 16.
Google shares fell 2.1% to 94.94, below its 50-day line. GOOGL shares are down 5.4% so far this week, wiping out the gains of the previous three weeks. Stocks are still comfortably above their November level. 3 bear market low of 83.34.
Tesla shares fell 3.2% to 174.04 on Wednesday, nearing the bear market low of 166.19 set on November 1. 22. Stocks are down 10.7% so far this week. TSLA shares are down more than 50% in 2022.
On Wednesday, Tesla cut prices from China by 6,000 yuan for cars in inventory. Along with insurance subsidies, free charging and other perks, Tesla is offering more than 21,000 yuan in incentives for cars on the lot. That follows a widespread price cut in late October in China. And it comes before government subsidies for electric vehicles end on December 1. 31, which should boost demand. This also comes amid widespread reports, denied by Tesla, of impending production cuts in Shanghai.
Tesla’s Shanghai plant will shorten production shifts and delay the addition of some new hires due to weak demand from China, sources told Bloomberg. That follows recent widespread reports, denied by Tesla, that the EV giant would cut Shanghai production by 20%.
Meanwhile, Tesla China boss Tom Zhu has been tapped to manage the Austin plant and ramp up production there, Bloomberg reported Thursday.
Elon Musk’s bankers may offer him new Tesla stock-backed margin loans to replace some of Twitter’s high-interest debt, Bloomberg reported late Wednesday. Banks have had trouble paying off Twitter’s debt. Musk has already put up many of his Tesla stock holdings as collateral.
TSLA shares fell modestly early Thursday.
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Market recovery analysis
The stock market rally continued its pullback, although the technical picture did not change significantly.
The Nasdaq tested its 50-day line, one day after dipping below its 21-day moving average. Shares of Apple, Google and Tesla weighed on large-cap indices, but the underlying trend was also slightly lower.
The major indices have generally been on an upward trend since October 1. 13 lows, especially the Dow Jones and S&P 500. The market rally appeared to be gaining momentum late last week, with the S&P 500 above its 200-day line and the Dow Jones hitting a seven-month high.
But with the recent pullback, the major indices and the Russell 2000 are essentially where they were in early November or late October.
Sideways markets are among the most dangerous for investors, especially when there is up and down volatility. There is enough upward force to attract buyers, but then the market swings lower for a while. That forces investors to cut losses when they are small, with a good chance that stocks will rally, or risk a much bigger drop.
The current choppy rally in the market has an additional hurdle. Most of the advance came in a handful of one-day sessions, so it is difficult to have even mini-uptrends to generate profit on new positions.
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What to do now
The stock market rally has hit resistance and is testing some key levels, but not seriously damaged yet. If you have modest exposure with positions that are working, you don’t need to get out. Taking partial profits is never a bad idea in this market, of course.
But there’s a good chance that anyone who bought stocks in recent weeks when they broke out or gave early buy signals is short of those positions. In a choppy, sideways market, when stocks start to look interesting, they may be about to peak.
Investors should be wary of adding exposure until the market can clear the recent trading range, with the S&P 500 decisively above its 200-day line. That may not happen until after next week’s CPI inflation report and the Fed meeting.
Even then, investors should add to positions slowly, in case the major indices pull back again after reaching near-term highs.
But keep working on those watch lists. Industrial and infrastructure works look good, along with a variety of doctors. Some brokerage houses hang around the points of purchase. Chipset names are showing relative strength, with a number of semiconductor kits holding up well.
read The panorama daily to stay in sync with market direction and major stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson for stock market updates and more.
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