Dow Jones futures fell early Thursday along with S&P 500 futures and Nasdaq futures, with some key jobs and inflation data due ahead of the market open.
The stock market rally was looking for direction on Wednesday. The major indices closed slightly mixed. But the details revealed further weaknesses, with losers slightly outperforming winners.
With the uptrend under pressure, it is not a good time to make fresh purchases or hold more than one token exposure.
The medical sector continues to lead, recovering from Tuesday’s losses. UnitedHealth (UNH) moved higher in a buying zone after just breaking out on Wednesday. Apex Pharma (VRTX) recalled an early entry following Tuesday’s pullback. McKesson (MCK) holds key support in its flat base, not far from an aggressive entry. Lantheus (LNTH) is trading around its 50-day moving average and is consolidating after a huge rise earlier this year. All have relative strength lines near record highs.
upscale furniture retailer RH (RH) lowered estimates for the full year, citing weaker demand and a deteriorating economic environment. RH stock fell solidly overnight, signaling a fresh two-year low. Shares are already down 11% this week.
Just good food (SMPL), which manufactures low-carb snacks and shakes, reports its results early Thursday. SMPL shares rose 2% on Wednesday to 41.20, near an early entry of 42.01 amid a consolidation.
A few other food and beverage stocks are doing well, reflecting the market’s defensive mindset. Grain giant General Mills (GIS) jumped 6.35% to 74.72 on Wednesday, breaking out on gains and a dividend hike. post stocks (POST) is true at a purchase point Kellogg (K) builds up.
Tesla shares fell 1.8% this week to 685.47, down 7%. Stocks continue their pullback from their 10-week moving average, moving back to recent lows. LI stock is up 2.7% to 38.08, back above a buy point but remains sharply off major moving averages. Tesla (TSLA) and China EV Startup Li car (LI) will report second quarter sales later this week.
UNH shares are on the IBD leaderboard. LNTH stock is on the Leaderboard watch list. Simply Good Foods, UnitedHealth and VRTX stocks are in the IBD 50. Vertex and MCK stocks are in the IBD Big Cap 20. Lantheus was the IBD stock of the day on Wednesday.
The video embedded in this article analyzed Wednesday’s market action and discussed GIS stocks, McKesson and Neurocrine Life Sciences (NBIX).
Dow Jones futures today
Dow Jones futures fell 0.7% from fair value. S&P 500 futures lost 0.8% and Nasdaq 100 futures fell 0.9%.
The 10-year government bond yield rose 1 basis point to 3.1%.
China’s manufacturing index for China rose 0.6 points to 50.2 in June, moving above the break-even 50 mark for the first time in four months as the country recovers from Covid lockdowns. But it was slightly under views for 50.5. The services index rose to 54.7 in May from 47.8.
The US ISM manufacturing index for June is due Friday morning after several negative regional factory reports.
Investors will get key US jobs and inflation data Thursday at 8:30 am ET. The Labor Department will release jobless claims weekly. The Commerce Department will issue the May Earnings and Expenditure Report, which includes the Federal Reserve’s most popular gauge of inflation.
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 traded in a narrow range on Wednesday.
The Dow Jones Industrial Average fell less than 0.1% in trading on Wednesday. The S&P 500 Index lost a fraction. The Nasdaq Composite rose 0.3%. Small-cap Russell 2000 lost 1%.
US crude prices fell 1.8% to $109.78 a barrel, rebounding from solid gains in the morning. Gasoline futures fell 2.8%.
The 10-year government bond yield fell 12 basis points to 3.09%. The two-year yield collapsed to 3.06%. The yield spread between 2 and 10 years has narrowed to 3 basis points, underscoring recession concerns.
Fed Chair Jerome Powell reiterated on Wednesday that the central bank’s priority is fighting inflation, even at the risk of a recession.
Among the best ETFs, Innovator IBD 50 ETF (FFTY) fell 1.25%, while Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.75%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 0.2%. The VanEck Vectors Semiconductor ETF (SMH) lost 1.8%.
The SPDR S&P Metals & Mining ETF (XME) fell 2.8% and the Global X US Infrastructure Development ETF (PAVE) fell 1.3%. The US Global Jets ETF (JETS) fell 1.5%. The SPDR S&P Homebuilders ETF (XHB) fell 0.4%. The Energy Select SPDR ETF (XLE) tumbled 3.5% and the Financial Select SPDR ETF (XLF) slumped 0.6%. The Health Care Select Sector SPDR Fund (XLV) was up 0.9%, with UNH shares, Vertex and McKesson all making up the ETF.
Mirroring more speculative story stocks, ARK Innovation ETF (ARKK) was down 1.6% and ARK Genomics ETF (ARKG) was down 0.6%. TSLA stock remains a top position among Ark Invest’s ETFs.
The five best Chinese stocks to watch right now
Analysis of the market rally
The stock market rally didn’t show any bullish action, just resulting in a mixed session after Tuesday’s big losses.
The details were less impressive as declines outperformed rising stocks by almost 2 to 1 on both the NYSE and Nasdaq.
The market moved into an “uptrend under pressure” on Tuesday as the Nasdaq Composite and S&P 500 closed below Friday’s following day lows.
Research by Eric Krull, co-author of The Lifecycle Trade, shows that when an index closes below its next-day low, there is a 90 percent chance that the rally will eventually fail.
The rally will not officially end until indices break their recent lows.
The Dow Jones didn’t close below its follow-through daily low, but it’s not far off.
For its part, the Russell 2000 closed Wednesday below Friday’s lows.
Medical devices rallied while defensive food stocks performed well. But energy stocks, which rallied earlier in the week, fell solidly on Wednesday.
Time the market with IBD’s ETF market strategy
The stock market rally is not over yet, but the prospects are not high. The odds are just not in your favor right now. Investors should focus on preserving their intellectual and physical capital and preparing for a sustained market uptrend.
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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