Dow Jones futures were little changed Friday morning, along with S&P 500 and Nasdaq futures, with Nike (DE) i Micron technology (MU) gains in focus and the Fed’s favorite inflation gauge on deck.
The stock market sold off sharply on Thursday, erasing Wednesday’s gains. The S&P 500 hit new bear market lows. The Nasdaq composite hasn’t fully broken off its June lows, but the large-cap Nasdaq 100 has, led by shares of Apple and Tesla (TSLA).
Treasury yields rebounded a bit on Thursday, while jobless claims fell to a five-month low, something the Federal Reserve doesn’t want to see. apple (AAPL) and CarMax (KMX) led to heavy losses on Thursday. After paring losses on Wednesday on a report of iPhone production cuts due to weak demand, Apple shares were off sharply on Thursday, partly on an analyst downgrade, with manufacturers of iPhone chips also struggling.
CarMax (KMX) took a big miss on earnings Thursday morning, warning of “affordability challenges.” For largely similar reasons, Moody’s downgraded its outlook for the global auto industry to negative from stable. KMX’s stock crashed, sinking other car dealerships. But General Motors (GM), Ford Motor (F), stellar ( STLA ) and Tesla shares also sold off.
Tesla has a lot of news to come. Tesla will hold its annual AI Day on Friday night. Over the weekend, Tesla will likely release third quarter delivery numbers. But investors in TSLA stock won’t have a chance to respond to those events until Monday morning.
Tesla on Thursday night denied a local media report that the electric vehicle giant would significantly reduce the prices of the Model 3 and Y in China. There has been growing speculation that Tesla would cut some China prices in early October.
Nike’s earnings and sales narrowly beat fiscal first-quarter consensus. But gross margins fell significantly from a year earlier, largely due to the liquidation of excess inventory in North America. North American inventory was up 65% from a year earlier. Sportswear giant Dow Jones said it will take “decisive action” to dispose of the sought-after merchandise.
Shares of NKE sold off 9% in extended action. Nike shares fell 3.2% in Thursday’s session to 95.52, hitting a new two-year intraday low.
Micron earnings beat slightly, while revenue came up short. The memory chip giant guided significantly lower in the current fiscal first quarter. It also plans to reduce spending on wafer manufacturing equipment by up to 50% in the current fiscal year compared to fiscal 2022.
MU shares were little changed in overnight trading. Shares of Micron fell 1.9% to 50.01 in Thursday’s session, after hitting a 23-month low last week.
Micron’s cut in capital spending is bad news for memory-exposed chip-equipment giants such as Applied materials (LOVED), KLA Corp. (KLAC) and Lam Research (LRCX). All three stocks retreated modestly in extended action.
In other news, IBM (IBM), cut its quarterly dividend by 78% to 37 cents per share. IBM shares rose in overnight action.
Dow Jones futures today
Dow Jones futures were flat compared to fair value. The shares of NKE and IBM are components of the Dow Jones. S&P 500 futures rose 0.2% and Nasdaq 100 futures rose 0.25%.
The 10-year yield rose 3 basis points to 3.78%.
China’s central bank is letting cities lower the floor on mortgage rates, if those areas have experienced recent falls in house prices.
At 8:30 am ET, the Commerce Department will release its August personal income and consumer spending report. Investors will focus on the PCE price index, the Fed’s favorite inflation gauge. The overall PCE index should show a slightly lower 6.1% gain compared to the previous year. But core PCE inflation is seen rising to 4.8% from 4.6%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next normal stock market session.
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Thursday stock market
The stock fell sharply at the open and remained in the red throughout the day, closing only modestly above session lows.
The Dow Jones Industrial Average was down 1.5% in Thursday’s trading. The S&P 500 sank 2.1%. The Nasdaq composite slipped 2.8%. The small-cap Russell 2000 declined 2.2%.
Apple shares fell 4.9% to 142.48, hitting their worst levels since early July, although they were still off the June low. Bank of America downgraded Apple shares to neutral with a price target of 160.
CarMax’s earnings fell 54% from a year earlier, well below consensus. Used car prices have started to come under pressure and the car dealer cited affordability issues. KMX shares fell nearly 25%. caravan (CNVA) fell 20%.
Downing CarMax and Moody’s industry rattled automakers. GM shares sank 5.65%, Ford 5.8% and Chrysler parent Stellantis 4.8%. Tesla shares fell 6.8%, falling from near its 50-day and 200-day lines, but remained above near-term lows.
The 10-year Treasury yield rose 4 basis points to 3.75%, after reaching 3.81% intraday. That follows Wednesday’s drop of 26 basis points. Still, the benchmark Treasury yield is still on track for a ninth straight weekly gain.
The price of US crude fell 1.1% to $81.23 a barrel.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 1.2%. The iShares Extended Technology Software Sector ETF ( IGV ) was down 1.7%. The VanEck Vectors Semiconductor ETF (SMH) lost 3.15%. MU stock is a notable holding of SMH, along with AMAT, LRCX and KLAC.
SPDR S&P Metals & Mining ETF (XME) retreated 1.8%. The Energy Select SPDR ETF ( XLE ) and the Financial Select SPDR ETF ( XLF ) fell 1.3%. The Select Healthcare Sector SPDR Fund ( XLV ) fell 0.8%.
Reflecting more speculative stocks, ARK Innovation ETF ( ARKK ) fell 5.5% and ARK Genomics ETF ( ARKG ) fell 4%, after big gains on Wednesday. Tesla stock is a major holding in Ark Invest’s ETFs.
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Stock market analysis
That’s Wednesday’s stock market bounce. It took a few minutes for the major indexes to erase all of their one-day bounce on Thursday.
The S&P 500 index pulled back from Tuesday’s levels, marking a new market low. The Nasdaq 100 just hit its June lows, with Apple and Tesla among the biggest losers.
The Nasdaq composite itself has yet to break off its June lows, but fell below the Sept. 23 intraday low.
The rally day count for the S&P 500 and Nasdaq has returned to zero. The Dow Jones didn’t break below Tuesday’s intraday bear market low, so Thursday was technically the second day of its attempted recovery.
Treasury yields rose on Thursday, but recovered only a fraction of Wednesday’s losses. The US dollar lost ground for the second session in a row. Still, the 10-year Treasury yield and the dollar have risen sharply in recent weeks.
Apple, CarMax and Nike have raised new concerns about consumer spending. Apple and iPhone stock chip names, along with GM, Tesla and the auto sector, are a pretty big part of the market. Nike alone is a $150 billion top tier component.
A Metaplatforms ( META ) hiring freeze and likely downsizing, along with Micron’s weak outlook, have added to broader business woes.
But you don’t have to go looking for reasons why stocks sold off on Thursday. It’s a bear market. The Federal Reserve is raising interest rates aggressively, even as the US economy risks slipping into a clear recession.
Wednesday’s bounce was overdue, but it also didn’t signal that the severe downtrend was over.
The CBOE Volatility Index, or VIX, rose on Thursday. But it was an inside day for the market’s fear indicator after Wednesday’s bearish reversal. This suggests that the major indices may have to break decisively below the June lows before the bear market bottoms out.
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what to do now
Investors need patience. At some point the bear market will end and a new sustained uptrend will develop. But don’t jump at the first boost. Tracking days are a good way to get into a new market rally quickly, but at least with some indication that it may have staying power.
If you bought stocks during Wednesday’s bounce, you should be ready to exit quickly. A few com Vertex Pharmaceuticals (VRTX) and DoubleVerify (DV) held up well on Thursday. But several intriguing names on Wednesday erased those gains.
For now, focus on updating your watchlists. Look for stocks with strong relative strength. If they have key moving averages, great, but at this point there are a lot of relative “winners” like now World Wrestling Entertainment (WWE), are below their 50-day and 200-day lines.
Read The Big Picture every day to stay in sync 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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