Dow Jones futures fell overnight along with S&P 500 futures and Nasdaq futures FedEx (FDX) crashes overnight on weak earnings and forecast. The equity market rally weakened further, with major indices erasing Wednesday’s weak-to-moderate rebound, while US Treasury yields are near long-term highs.
The market is still grappling with Tuesday’s hot CPI inflation report, which turned on its head the bull case of the Federal Reserve slowing rate hikes soon.
Adobe (ADBE) crashed due to mixed results and a $20 billion acquisition. Oil and natural gas stocks fell with energy prices, but solar and lithium stocks also suffered sharp losses.
Neurocrine Life Sciences (NBIX) and Apex Pharma (VRTX) continue to perform well, although they have not been easy to trade either.
Meanwhile, megacap techs continue to falter. Apple (AAPL), which signaled an early buy signal on Monday, undercut short-term lows on Thursday. Microsoft (MSFT) is nearing its June lows while Google is its parent alphabet (GOOGL) hit a 19-month closing low.
NBIX shares are on the IBD leaderboard. Microsoft and Google stocks are IBD long-term leaders. VRTX shares are in the IBD Big Cap 20.
After the close, FedEx’s reported first-quarter earnings fell 21% year-on-year, while expectations were for an 18% rise. Sales rose slightly, but slightly missed forecasts. The shipping giant also withdrew guidance for fiscal 2023 and announced sweeping cost-cutting measures as it faces declining shipping volumes. FedEx was scheduled to release first-quarter results on September 22.
FDX stock plunged 16% in overnight trading. archrival UPS (UPS) declined nearly 6%. Amazon.com (AMZN) fell 2%. Amazon has trimmed its ties with FedEx, but the warning could be bad news for e-commerce overall.
Separately, General Electric (GE) said ongoing supply chain issues are weighing on cash flow. GE stock fell 4% overnight.
Dow Jones futures today
Dow Jones futures fell 0.45% from fair value. S&P 500 futures fell 0.65%. Nasdaq 100 futures fell 0.75%.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
stock market rally
The stock market rally opened higher on Thursday, but that didn’t last as selling soon took hold.
Jobless claims fell to another three-month low but other data, including August retail sales, generally pointed to a weaker-than-expected economy but with easing price pressures. The Atlanta Fed’s GDPNow tool estimates Q3 GDP growth at just 0.5% versus 2.5% in August.
The Dow Jones Industrial Average fell 0.6% in trading on Thursday. The S&P 500 Index lost 1.1%. The Nasdaq Composite fell 1.4%. Small cap Russell 2000 lost 0.7%.
Apple stock fell 1.9% to 152.37, undercutting the low of its already strong price. After breaching their 50-day and 200-day moving averages on Monday, stocks plunged back below those key levels in Tuesday’s market meltdown.
Microsoft shares were down 2.7% on Thursday to 245.38, the lowest since their mid-June bottom. Google stock fell 2% to 102.91, beating not its intraday low of May 24 but its worst close since April 2022.
US crude prices fell 3.8% to $85.10 a barrel. Natural gas prices plunged 8.7% as an averted rail strike will keep coal shipments running. Natgas had peaked on Wednesday.
The 10-year government bond yield rose 5 basis points to 3.46% despite weak economic data. That’s just below the 11-year high of 3.48% set on June 14. The one-year return has exceeded 4%.
Among the best ETFs, Innovator IBD 50 ETF (FFTY) slumped 2.1%, while Innovator IBD Breakout Opportunities ETF (BOUT) lost 1%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 3.2%, with Adobe and MSFT shares being the key constituents. The VanEck Vectors Semiconductor ETF (SMH) is down 1.8%.
The SPDR S&P Metals & Mining ETF (XME) is down 2.75%. The Energy Select SPDR ETF (XLE) fell 2.6% and the Financial Select SPDR ETF (XLF) rose 0.3%. The Health Care Select Sector SPDR Fund (XLV) rose 0.6%.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) was up 2.2% and ARK Genomics ETF (ARKG) was up 1.8%.
The five best Chinese stocks to watch right now
NBIX shares rose 2.5% on Thursday to 106.93. According to MarketSmith analysis, Neurocrine Biosciences now has a flat base with a buy point of 109.36. Stocks have flashed some early entries over the past few weeks but quickly pulled back. Shortly after Wednesday’s open, NBIX stock slipped to 100.46, testing its 50-day moving average and the top of a previous base. In theory, a trader could have bought Neurocrine as it rebounded from its 50-day moving average, but given the market conditions, it would have taken a brave soul to place that bet.
The relative strength line is at a new high, reflecting the strong outperformance of NBIX stock in a weak market.
VRTX shares rose 1% to 287.67, just below the 50-day moving average. Vertex Pharmaceuticals flashed some early buy signals late last week but fell 4.4% on Tuesday, falling below its 50-day mark.
In a few days, Vertex stock could have its own flat base.
Analysis of the market rally
The stock market rally shows no appetite for a recovery. Major indexes easily erased those gains after Tuesday’s timid, lackluster recovery from Wednesday’s sell-off.
The Nasdaq 100, which includes the key weights of stocks Apple, Microsoft and Google, undercut its Sept. 6 intraday low. The Nasdaq and S&P 500 are yet to break the September 6 lows. but both posted their worst finishes since July.
The Nasdaq close below the September 6 low would likely mark the end of the long-running market rally.
From a technical perspective, the major indices need to get back above their 50-day moving averages. Your 21-day moving average is now below the 50-day moving average.
The forthcoming Fed meeting increases risks in the coming days. More broadly, the market will likely struggle to make any lasting progress until there is a strong sense that the Fed will slow and soon pause rate hikes. That was the hope that entered Tuesday’s CPI inflation report. But not anymore.
Meanwhile, not only is inflation higher than assumed just a few days ago, but economic activity is also weaker. So the Federal Reserve will impose more “pain” in the midst of a struggling economy.
A recession – or a zero-growth economy with tight labor markets – will be difficult for companies to weather.
Time the market with IBD’s ETF market strategy
The market rally is once again barely lasting. Far too many intriguing stocks giving a buy signal and reversing down the next day. It’s just an extremely difficult environment to invest in.
Until the major indices return above their 50-day moving averages, investors should have modest exposure at most and be extremely cautious about new purchases. Clarity on the endgame of a Fed rate hike would be nice, but that may not come for a few weeks or more.
Market conditions could improve or deteriorate rapidly. If it’s the former, you should have an up-to-date watch list. If the latter is the case, you’ll be glad you worked on watch lists instead of buying new stocks.
Read The Big Picture every day to keep up to date with 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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