Markets are still catching up with Tuesday’s heated CPI inflation report, which soon slowed the Federal Reserve’s bull case.
adobe (ADBE) crashed on mixed results and a $20 billion acquisition. Oil and natural gas stocks fell along with energy prices, but solar and lithium stocks also took heavy losses.
Neurocrine Biosciences (NBIX) and Vertex Pharmaceuticals (VRTX) continues to do well, although trading has not been easy for them either.
Meanwhile, megacap technology continues to weaken. Apple (AAPL), which signaled early buying on Monday, eased to short-term lows on Thursday. Microsoft (MSFT) nears its June low, while Google parent Alphabet (GOOGL) set a closing low of 19 months.
NBIX stock is on the IBD leaderboard. Microsoft and Google stocks are on the IBD long-term leaders. VRTX stock IBD Big Cap is at 20.
After the close, FedEx reported that fiscal first-quarter earnings fell 21% versus a year ago for an 18% gain. Revenue grew marginally but missed forecasts slightly. The shipping giant also pulled down its fiscal 2023 guidance and announced cost-cutting measures as it faces a decline in shipping volumes. FedEx was scheduled to release Q1 results on September 22.
FDX stock fell 17% in overnight trading. arrival UPS (UPS) dipped 6%. Amazon.Com (AMZN) fell 2%. Amazon has downgraded its relationship with FedEx, but that warning could be bad news for e-commerce overall.
separately, general Electric (GE) said continuing supply-chain issues are putting pressure on cash flows. GE stock fell 4% overnight.
dow jones futures today
Dow Jones futures dropped 0.5% versus fair value. S&P 500 futures fell 0.6%. Nasdaq 100 futures were down 0.8%.
Remember that overnight action in Dow futures and elsewhere does not necessarily entail actual trading in the next regular stock market session.
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stock market rally
The stock market rally opened higher on Thursday but did not last as the sell-off soon took hold.
Jobless claims fell again to a three-month low, but other data, including August retail sales, pointed to a weaker economy than expected, but with easing price pressure. The Atlanta Fed’s GDPNow tool estimates Q3 GDP growth at just 0.5% compared to 2.5% in August.
The Dow Jones Industrial Average fell 0.6% in Thursday’s stock market trading. The S&P 500 index dropped 1.1%. The Nasdaq Composite lost 1.4%. The small-cap Russell 2000 declined 0.7%.
Apple stock fell 1.9% to 152.37, reducing the lows of its already heavy handle. After rising above their 50-day and 200-day lines on Monday, shares fell below those key levels in Tuesday’s market downturn.
Microsoft stock fell 2.7% to 245.38 on Thursday, its lowest point since mid-June. Google stock fell 2% to 102.91, not hitting its May 24 intraday low, but its worst since April 2022.
US crude oil prices fell 3.8% to $85.10 a barrel. Natural gas prices fell by 8.7%, as coal shipments to continue due to postponement of rail strike. There was a rise in natgas on Wednesday.
The 10-year Treasury yield rose 5 basis points to 3.46% despite weak economic data. This is just below the 11-year high of 3.48% set on June 14. The one-year yield is above 4%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dropped 2.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) dropped 1%. The iShares Extended Tech-Software Sector ETF (IGV) was up 3.2% with Adobe and MSFT stocks leading the way. The VanEck Vector Semiconductor ETF (SMH) retreated 1.8%.
The SPDR S&P Metals & Mining ETF (XME) lost 2.75%. The Energy Select SPDR ETF (XLE) fell 2.6% and the Financial Select SPDR ETF (XLF) was up 0.3%. Health Care Select Sector SPDR Fund (XLV) climbed 0.6%.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) rose 2.2% and the ARK Genomics ETF (ARKG) rose 1.8%.
The five best Chinese stocks to watch right now
NBIX shares rose 2.5% to 106.93 on Thursday. According to MarketSmith analysis, Neurocrine Biosciences now has a flat base with 109.36 buy points. The shares have shown some early entries over the past few weeks, but pulled back quickly. Shortly after Wednesday’s opening, NBIX stock slipped to 100.46, testing the top of its 50-day line and prior base. In theory, a trader could buy Neurocrine as it rebounded from its 50-day line, but it would require a brave soul to place that bet given the market conditions.
The relative strength line is at a new high, reflecting the strong outperformance of the NBIX stock in a weak market.
VRTX stock climbed 1% to 287.67 just below the 50-day line. Vertex Pharmaceuticals showed some early buy signals late last week, but fell 4.4% on Tuesday, falling below its 50-day low.
Vertex stock may have flat base of its own in few days.
market rally analysis
The stock market rally is showing no appetite to bounce back. After Wednesday’s temporary, weak rebound from Tuesday’s selloff, major indices easily erased those gains.
The Nasdaq 100 lowered its September 6 intraday low, with Apple, Microsoft and Google stocks leading the way. The Nasdaq and S&P 500 have yet to make their September lows. But both posted their worst performance since July.
A close below the Nasdaq Sept. 6 low could mark the end of a long ill-fated market rally.
On a technical basis, the major indices need to move back above their 50-day moving average. Their 21-day lines are now down from 50-days.
The impending Fed meeting over the next few days adds to the risks. Broadly speaking, the market may struggle to make sustainable progress unless there is a strong sentiment that the Fed will slow down and stop raising rates soon. That was expected in the CPI inflation report on Tuesday. But not now.
Meanwhile, not only is inflation higher than it was a few days ago, economic activity is weak. So the Federal Reserve will inflict more “pain” in the midst of a struggling economy.
A recession — or a zero-growth economy with tight labor markets — will be harder for businesses to navigate.
Time Markets with IBD’s ETF Market Strategy
What should we do now
The market rally is once again hanging hard. A lot of interesting stocks will flash a buy signal the next day and then reverse lower. This is an extremely difficult environment to invest in.
As long as the major indexes do not move above their 50-day moving averages, investors should invest sparingly, and be extremely cautious about any fresh purchases. Clarity on the Fed rate hike end game would be nice, but it may not come for several weeks or more.
Market conditions may improve or decline rapidly. 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 buying new stocks versus watchlists.
Read The Big Picture every day to keep up with the market direction and key stocks and sectors.
Please follow Ed Carson on Twitter @ibd_ecarson For stock market updates and much more.
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