Dow Jones futures rose modestly early Thursday, along with S&P 500 and Nasdaq futures. The stock market’s attempted rally showed resilience on Wednesday. Major indexes fell sharply Wednesday morning as Treasury yields and the dollar rallied, but stock indexes rallied to close only slightly lower.
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The market’s upswing has yet to be proven. That could happen soon, but patience and cash are still key.
Tesla (TSLA) continued to slide, with Elon Musk-Twitter ( TWTR ) takeover saga isn’t quite over yet. Enphase Energy ( ENPH ) tumbled, breaking below recent lows on a bad day for solar plays.
Medical names held up well, including Vertex Pharmaceuticals (VRTX), swan (IC), Shockwave Medical (SWAV), Sarepta Therapeutics (SRPT), Greetings cardinal (CAH), Health care option (OPCH) and Neurocrine Biosciences (NBIX). In the meantime, About Semiconductor (ON), Imp (PI) i Arista Networks (ANET) are technological names that resist.
Oil stocks were solid, and OPEC+ agreed to a sizeable output cut at Wednesday’s meeting. Exxon Mobil (XOM) also reported strong third-quarter results. XOM stock showed a buy signal on Wednesday.
VRTX and Neurocrine Biosciences shares are on the IBD leaderboard, with PCTY and Shockwave shares on the watch list. Stocks SWAV, Vertex, Paylocity, Sarepta and Onsemi are in the IBD 50. Arista Networks, Vertex, On Semiconductor and ENPH are in the IBD Big Cap 20. In Semi was Wednesday’s IBD Stock of the Day, with Paylocity, Enphase and ANET shares also recent selections.
Dow Jones futures today
Dow Jones futures advanced 0.35% from fair value. S&P 500 futures rose 0.4% and Nasdaq 100 futures rose 0.5%.
The 10-year Treasury yield fell 2 basis points to 3.74%.
Copper futures rose 2% after the London Metal Exchange said it would ban new deliveries of copper and zinc from Russia’s Ural Mining & Metallurgical Co.
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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Wednesday’s stock market meeting
The stock market’s attempted rally faltered on Wednesday morning, but the major indexes hit session lows, briefly turning positive before fading for narrow losses.
The Dow Jones Industrial Average fell 0.1% in Wednesday’s trading. The S&P 500 index fell 0.2%. The Nasdaq composite was down 0.25%. The small-cap Russell 2000 lost 0.6%
U.S. crude rose 1.4% to $87.76 a barrel, extending strong weekly gains. OPEC+ agreed to cut production quotas by 2 million barrels, at the high end of expectations heading into Wednesday’s meeting.
The 10-year Treasury yield rose 14 basis points to 3.76%, erasing most of this week’s losses.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 1%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.4%. The iShares Extended Technology Software Sector ETF ( IGV ) rose 0.45%. The VanEck Vectors Semiconductor ETF (SMH) gained 1%.
SPDR S&P Metals & Mining ETF ( XME ) fell 0.3%. The Energy Select SPDR ETF ( XLE ) rose 2.1%, with a massive share of XOM shares. The Select Health Sector SPDR Fund (XLV) rose 0.3%.
Reflecting more speculative stocks, the ARK Innovation ETF ( ARKK ) sank 1.8% and the ARK Genomics ETF ( ARKG ) sank 1.9%. Tesla stock remains a top holding in Ark Invest’s ETFs.
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Exxon stock
Shares of XOM rose 4% to 99.12, extending a move above the 50-day line, now up 14% for the week. Exxon shares broke a downtrend line in a four-month consolidation. Investors could use 101.66 as another early entry, with 105.67 as an official buy point. XOM stock’s relative strength line is already at a new high.
Rising energy prices are fueling the latest rally in Exxon shares. Late Tuesday, Exxon showed strong third-quarter results.
Actions that are maintained
Shares of VRTX, Neurocrine Bio and Option Care Health are near buy points and are likely actionable now. SWAV, Cigna and Sarepta stocks are very close to being actionable from trendline entries. So are the shares of ANET and On Semiconductor, which showed early signs of buying, albeit in light volume. PI actions are close.
Enphase stock
Enphase shares fell 9.25% to 261.60, breaking well below recent lows on the biggest volume since the July 27 earnings gap. Shares of ENPH, which looked above its 50-day line and showed a buy signal on Tuesday, are now decisively below that key level, according to MarketSmith analysis.
First solar ( FSLR ), which settled above a short consolidation on Tuesday, fell 5.9% on Wednesday, with several other solar plays selling off.
Tesla stock
Tesla shares fell 3.5% to 240.81, but were off their intraday low of 233.27. For the week, TSLA shares have fallen 9.2%, extending significant losses since reversing lower on September 21. Stocks are still recovering from weak third-quarter deliveries on Sunday, which reflected weak demand from China.
Meanwhile, CEO Elon Musk’s stated intention to push through the $44 billion Twitter deal raises concerns that he will sell more TSLA stock to help pay for it.
The Musk-Twitter takeover saga isn’t over. While Musk says he’s willing to move forward with the original $54.20 per share deal, Twitter won’t just take him at his word and agree to stop the lawsuit. The two parties are in talks with the aim of agreeing terms that provide real guarantees.
Musk could own Twitter in just a few days. But for now, the Musk-Twitter takeover trial is still scheduled to begin on October 17.
Shares of Twitter fell 1.35% to 51.30 on Wednesday. That’s after rising 22% to 52 on Tuesday, after Musk stepped down.
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Analysis of market concentration
The attempt to rally the stock market is at a key moment. Is this the start of a significant uptrend or just a short-lived bounce from oversold conditions?
Wednesday’s action didn’t answer those questions, but it was encouraging.
The market made big gains on Monday and Tuesday. On Wednesday, the bulls showed they weren’t going to give up at the first sign of trouble.
The Dow Jones, S&P 500 and Nasdaq fell from near their 21-day moving averages at the open, giving up most of Tuesday’s gains early. But they steadily cut losses and turned positive before a last-minute move back into the red.
The Dow Jones and S&P 500 briefly looked above their 21-day lines as the Nasdaq composite edged higher.
The Russell 2000 managed to hold its 21-day high, which is shaping up to be a key near-term level for all indexes.
Losers easily beat winners on Wednesday as market breadth was weaker than index closes suggest.
Meanwhile, the decline in the 10-year yield and the decline in the greenback were big catalysts for the market’s rally from Monday to Tuesday. So it’s no surprise that stocks sold off Wednesday morning with Treasury yields and the dollar rallying.
Major indexes pared losses even as returns held close to session highs. This can happen on a specific day. But over time, stocks are unlikely to advance significantly, or even sustain, if Treasury yields rise.
Key sectors
Oil, gas and coal stocks such as Exxon advance thanks to the recovery in energy prices.
Medical names like Vertex and Option Care Health have held up relatively well, even at the market’s intraday lows. So did Arista, PCTY and ON. Some farming and metal plays are being set up.
Several major stocks fell sharply, at least intraday. Some still have decent charts, while others such as ENPH shares suffered significant damage.
Investors can now look for a follow-up day to confirm the new rally. Friday’s jobs report could be the catalyst for a strong market recovery or selling.
A follow-up day would be a positive sign, but not a guarantee. For now, it is still an attempt to recover the stock market in a sharp bear market.
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what to do now
Investors should be patient. An attempted market recovery saw strong gains this week, with a number of leading stocks at or near buy points. But he has done nothing to indicate that he has staying power.
Being all cash, or with minimal exposure, is still a good strategy. If this turns out to be a significant market rally, there will be plenty of opportunities after a tracking day.
For investors who tiptoed into some promising names this week, be prepared to exit if the trades turn against you.
That said, a confirmed stock market rally could come at any moment. A number of stocks are showing strength and could probably perform with more market strength. Therefore, investors need to stay engaged and working on their watch lists.
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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