Dow Jones futures rose modestly Friday morning, along with S&P 500 futures and Nasdaq futures, but paring gains, while Treasury yields fall. Nike (NKE) and Micron Technology (MU) earnings are in focus with the Fed’s favorite inflation gauge on deck.
The stock market sold off hard Thursday, wiping out Wednesday’s gains. The S&P 500 hit fresh bear market lows. The Nasdaq composite has not quite undercut its June lows, but the big-cap Nasdaq 100 did, led by Apple stock and Tesla (TSLA).
Treasury yields rebounded somewhat Thursday, while jobless claims fell to a five-month low, something the Federal Reserve does not want to see. Apple (AAPL) and CarMax (KMX) spurred broad losses Thursday. After slashing losses Wednesday spurred by a report of scaled-down iPhone production due to lackluster demand, Apple stock sold off hard Thursday, partly on an analyst downgrade, with iPhone chipmakers also struggling.
CarMax (KMX) badly missed earnings views Thursday morning, warning of “affordability challenges.” For largely similar reasons, Moody’s downgraded its outlook for the global automotive industry to negative from stable. KMX stock crashed, sinking other auto dealers. But General Motors (GM), Ford Motor (F), Stellantis (STLA) and Tesla stock also sold off.
Tesla has a lot of news coming up. Tesla will hold its annual AI Day on Friday night. Over the weekend, Tesla will likely release Q3 delivery figures. But TSLA stock investors won’t have a chance to respond to those events until Monday morning.
Tesla on Thursday night denied a local media report that the EV giant would significantly cut Model 3 and Y prices in China. There has been growing speculation that Tesla would cut some China prices in early October.
Nike earnings and sales narrowly topped fiscal first-quarter consensus. But gross margins fell significantly vs. a year earlier, mostly on liquidating excess inventory in North America. North America inventory surged 65% vs a year earlier. The Dow Jones athletic apparel giant said it will take “decisive action” to get rid of wanted wares.
NKE stock sold off 10% in premarket action. Nike stock slid 3.2% Thursday to 95.52, hitting a fresh two-year low intraday.
Micron earnings slightly topped, while revenue fell short. The memory-chip giant guided significantly lower for the current fiscal first quarter. It also plans to slash wafer fab equipment spending by up to 50% in the current fiscal year vs. fiscal 2022.
MU stock rose more than 1% early Friday. Micron stock fell 1.9% to 50.01 in Thursday’s session, after hitting a 23-month low last week.
Micron’s capital spending cut isn’t good news for memory-exposed chip-equipment giants such as Applied Materials (AMAT), KLA Corp. (KLAC) and Lam Research (LRCX). All three stocks fell slightly early Friday.
In other news, IBM (IBM), slashed its quarterly dividend by 78% to 37 cents a share. IBM stock edged higher in overnight action.
Dow Jones Futures Today
Dow Jones futures advanced 0.3% vs. fair value. NKE stock and IBM are Dow Jones components. S&P 500 futures climbed 0.4% and Nasdaq 100 futures rose 0.4%. Futures are off their morning highs.
The 10-year yield fell 5 basis points to 3.7%.
China manufacturing surveys for September were mixed. The official manufacturing PMI rose to 50.1 from 49.4 in August, just topping the break-even 50 level and beating the 49.8 forecast. But the private Caixin factory gauge fell 1.4 points to 48.1.
China’s central bank is letting cities lower the floor on mortgage rates, if those areas have seen recent home price declines.
At 8:30 a.m. 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 cooler 6.1% gain vs. a year earlier. But core PCE inflation is seen picking up to 4.8% from 4.6%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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Stock Market Thursday
The stock market fell sharply at the open and remained deep in the red all day, closing only modestly above session lows.
The Dow Jones Industrial Average gave up 1.5% in Thursday’s stock market trading. The S&P 500 index sank 2.1%. The Nasdaq composite skidded 2.8%. The small-cap Russell 2000 declined 2.2%.
Apple stock slumped 4.9% to 142.48, hitting its worst levels since early July, though still some distance from June’s low. Bank of America downgraded Apple stock to neutral with a 160 price target.
CarMax earnings fell 54% vs. a year earlier, far below consensus. Used-car pricing has started to come under pressure, and the auto dealer cited affordability issues. KMX stock dived nearly 25%. Carvana (CNVA) plunged 20%.
The CarMax miss and Moody’s industry downgrade slammed automakers. GM stock sank 5.65%, Ford 5.8% and Chrysler parent Stellantis 4.8%. Tesla stock fell 6.8%, tumbling from near its 50-day and 200-day lines, but just held above short-term lows.
The 10-year Treasury yield rose 4 basis points to 3.75%, after hitting 3.81% intraday. That follows Wednesday’s drop of 26 basis points. Even so, the benchmark Treasury yield is still on track for a ninth straight weekly gain.
U.S. crude oil prices fell 1.1% to $81.23 a barrel.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.2%. The iShares Expanded Tech-Software Sector ETF (IGV) shed 1.7%. The VanEck Vectors Semiconductor ETF (SMH) lost 3.15%. MU stock is a notable SMH holding, 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) slipped 1.3%. The Health Care Select Sector SPDR Fund (XLV) dipped 0.8%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) tumbled 5.5% and ARK Genomics ETF (ARKG) 4%, after sharp gains Wednesday. Tesla stock is a major holding across Ark Invest’s ETFs.
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Stock Market Analysis
So much for Wednesday’s stock market bounce. It took just a few minutes Thursday for the major indexes to wipe out all the one-day rebound.
The S&P 500 index undercut Tuesday’s levels, marking a new bear market low. The Nasdaq 100 just undercut its June lows, with Apple and Tesla among the big losers.
The Nasdaq composite itself has not yet undercut its June lows, but did dip below the Sept. 23 intraday low.
The S&P 500 and Nasdaq rally day counts are back to zero. The Dow Jones did not quite break below Tuesday’s bear market intraday low, so Thursday technically was day two of its rally attempt.
Treasury yields rose Thursday, but clawed back only a fraction of Wednesday’s losses. The U.S. dollar lost ground for a second straight session. Still, the 10-year Treasury yield and the dollar are up sharply over the last several weeks.
Apple, CarMax and Nike have raised fresh concerns about consumer spending. Apple stock and iPhone chip names, along with GM, Tesla and the auto sector, are a fairly large share of the market. Nike alone is a $150 billion blue-chip component.
A Meta Platforms (META) hiring freeze and likely downsizing, along with Micron’s weak outlook, added to broader corporate woes.
But you don’t have to go looking for reasons why stocks sold off Thursday. It’s a bear market. The Federal Reserve is raising interest rates aggressively, even as the U.S. economy risks falling into a clear-cut recession.
Wednesday’s bounce was overdue, but also didn’t signal that the severe downtrend was at an end.
The CBOE Volatility Index, or VIX, rose Thursday. But it was an inside day for the market fear gauge following Wednesday’s downside reversal. That suggests that the major indexes may need to break decisively below their June lows before the bear market bottoms.
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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 uptick. Follow-through days are a good way to get into a new market rally quickly, but with at least some indication that it may have staying power.
If you did buy stocks in Wednesday’s bounce, you have to be ready to get back out quickly. A few such as Vertex Pharmaceuticals (VRTX) and DoubleVerify (DV) held up well Thursday. But many intriguing names Wednesday wiped out those gains.
For now, focus on updating your watchlists. Look for stocks with strong relative strength. If they’re holding key moving averages, great, but at this point many relative “winners,” such as World Wrestling Entertainment (WWE), are below their 50-day and 200-day lines.
Read The Big Picture every day to stay in sync with the 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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