Dow Jones futures rose early Thursday, along with S&P 500 and Nasdaq futures. Tesla rebounded solidly ahead of the open.
The stock market suffered further losses on Wednesday as rising Treasury yields, Apple’s iPhone woes and soaring Covid cases in China added selling pressure on major indexes.
The Nasdaq is near its lowest bear market, setting its worst close in more than two years. The Dow Jones broke through a key level.
Apple (AAPL) fell again, setting a new bearish low. AAPL stock is at risk of falling below a $2 trillion valuation. You’re here (TSLA), which also set another bear market low, edged higher. But that only pared a strong weekly loss.
Energy stocks fell as crude and natural gas prices slipped, with natural gas and coal producers hardest hit.
But several energy stocks are showing resilience. Exxon Mobil (XOM), Chevron (CLC), Schlumberger (SLB), Valaris (VAL) and, to some extent, First Solar (FSLR) hold up reasonably well.
But whether these stocks actually progress from here largely depends on whether volatile energy prices rise.
After the close, egg farmer Cal Maine (CALM) reported a surge in earnings that slightly missed fiscal second-quarter views. CALM stock fell 5% in extended trade, even with revenue up 110% and the egg farmer announcing a dividend of $1.35 per share. Shares fell 2.5% to 62.19 in Wednesday’s regular session. This brought CALM stock back into the 5% hunting zone from a buy point of 60.11. But Cal-Maine could open Thursday below that entry.
Dow Jones Futures Today
Dow Jones futures were up 0.2% relative to fair value. S&P 500 futures climbed 0.4% and Nasdaq 100 futures jumped 0.8%, helped by TSLA shares.
The 10-year Treasury yield fell 1 basis point to 3.88%.
Crude oil futures fell 1%.
Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.
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Stock market wednesday
The stock market continued to decline, with all major indexes falling more than 1%.
The Dow Jones Industrial Average fell 1.1% in Wednesday’s stock trading. The S&P 500 index fell 1.2%. The Nasdaq composite fell 1.35%. Small cap Russell 2000 fell 1.6%.
U.S. crude oil prices fell 0.4% to $79.23 a barrel on Wednesday. Natural gas futures fell 5.8%.
The 10-year Treasury yield rose 3 basis points to 3.89%. This represents an increase of 49 basis points from the low of 3.4% on December 7, with almost all of the gain since December 15.
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) lost 1.1%. ETF VanEck Vectors Semiconductor (SMH) fell 1.3%. Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) fell 0.5%, setting a new five-year low. ARK Genomics ETF (ARKG) fell 0.6%, just above its June bearish low. Tesla stock is still a significant holding in Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) fell 4% and the Global X US Infrastructure Development ETF (PAVE) fell 1.75%. The US Global Jets ETF (JETS) fell 2.4%. The SPDR S&P Homebuilders ETF (XHB) fell 2%. ETF Energy Select SPDR (XLE) fell 2.2%, with XOM and CVX stocks easily the top constituents and SLB stocks coming in third. The Financial Select SPDR ETF (XLF) edged down 0.35%. The Health Care Select Sector SPDR Fund (XLV) lost 0.65%.
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Apple stock fell 3.1% on Wednesday to 126.04, an 18-month low. TrendForce has cut its iPhone shipment forecast for 2022 due to recent lockdowns at Foxconn’s Zhengzhou base. And it also cut its forecast for early 2023 shipments, citing Foxconn labor shortages.
The Dow Jones tech titan is on course for its sixth straight weekly loss and its worst monthly loss in four years. The valuation of AAPL shares closed at $2 trillion, threatening to fall below $2 trillion.
AAPL stock rose 1% early Thursday.
Tesla rose 3.3% to 112.71 after plunging 11.4% on Tuesday, ending a seven-day losing streak. The electric vehicle giant is still down almost 15% for the month. Late Wednesday, Morgan Stanley analyst Adam Jonas cut his TSLA share price target to 250, but also cut his fourth-quarter delivery target to just 399,000 electric vehicles.
Tesla jumped 4% in premarket trading.
Energy stocks to watch
Exxon shares fell 1.6% to 108.38, back below the 50-day line a day after recently recovering from that key level. XOM stock has a buy point of 114.76 from a flat base above a previous consolidation. But a move above Tuesday’s high of 110.47 could offer early entry.
Chevron’s stock is very similar to Exxon Mobil’s. The shares fell 1.5% to 176.98, slipping below its 50-day mark. CVX stock has a flat base alongside earlier consolidation, with a buy point of 189.78, according to MarketSmith analysis. Investors could use 180.33, just above Tuesday’s high, as an early entry for CVX stock.
Schlumberger stock fell 1.7% to 52.60, finding support near the 10-week line. The SLB stock has a deep 16% consolidation above/next to a deep cup base. The official buy point is 56.14. But investors could use 54.28, just above the December 5 high at 54.18, as an early entry for SLB shares.
Valaris shares fell 2.6% to 64.74, up slightly from a test of the 10-day, 21-day and 50-day lines. The offshore contract drilling company has a buy point of 70.27 from a deep cup base of 17% above a deep cup model with handle. The buy point is 70.27. Investors could use 67.75, just above Tuesday’s high, as an early entry. It could become a good handle buying point in a few days.
First Solar fell 2.7% to 146.17, losing further ground from the 50-day line, but pulled out of an intraday low of 142.35. The stock FSLR needs some work and could easily break down from this point. Ideally, other solar stocks, which are even harder hit, will also improve. But watch to see if First Solar can regain its 50 and 21 day lines. There could then be a trend line, or perhaps a move above the December 21 high at 162.20, to offer early entry. FSLR stock could have a new base at the end of next week.
The stock market had another tough session on Wednesday.
The Dow Jones, which gained on Tuesday, could not resist Wednesday. The Dow Jones closed below its rising 50-day moving average for the first time since Oct. 21.
The S&P 500 continued to slide from its 50-day rising line. The benchmark held above last Thursday’s lows, but ended with its worst close since Nov. 9. The best performers of the S&P 500, Generac (GNRC) and Tesla stock, were the biggest losers in the S&P 500 in 2022. Not exactly inspiring.
The Russell 2000 broke through Thursday’s low, hitting its worst level in two months.
The Nasdaq composite fell just under 135 points from its intraday low on Oct. 13 in the bear market. The tech-heavy index ended with its weakest close since July 2020. Apple stock and a host of other growth names tumbled.
Until there is clarity on the Fed’s final rate game and the economic outlook — including the Covid push in China — the stock market is likely to be choppy at best. And the major indices are doing much worse than that right now.
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What to do now
The stock market is not doing well. While some sectors are holding up better than others, it is difficult for equities to make much headway. Sectors and individual stocks can also deteriorate rapidly.
Investors could hold small positions in some promising sectors, but should stay away from growth for now. There’s nothing wrong with being all cash. Keeping your financial and mental capital intact is essential.
But work on your watchlists. Many stocks in various sectors are close to buy points, or could be so quickly if the market rallies. Focus on stocks with strong relative strength and holding key levels. Don’t rule out resilient names that don’t yet have a clear buy point.
If you had a bad year, you’re not going to make up for it in the last two trading days of 2022 with the struggling market. Learn from your mistakes and prepare for the next sustained market rally in 2023.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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