Dow Jones futures were flat overnight, along with S&P 500 and Nasdaq futures, along with the August jobs report. The stock market rally closed again intraday on Thursday, but rebounded to close mixed.
Despite the near-shutdown, there was more damage among key sectors and stocks amid a slew of negative news.
A U.S. ban on sales to China of certain advanced chipsets Nvidia (NVDA) and AMD (AMD) criticized the semiconductor industry. And several huge sales of struggling software makers hit the other big tech space. A lockdown of 21 million people in China for Covid cases also weighed on stocks and fueled a selloff in crude oil, copper and base metals. Meanwhile, Treasury yields and the US dollar soared on strong labor market data ahead of the August jobs report.
More prominent actions – such as Celsius Fund (CELH) and Enphase Energy (ENPH) — are under pressure, although they haven’t cracked yet. Some stocks set up over the past few weeks have broken through key support, like Apple (AAPL), Arista Networks (A NET) and, to some extent, You’re here (TSLA).
Investors should have minimal exposure in the current market environment.
Report on the work
Economists expect Friday’s August jobs report to show nonfarm payrolls rose a solid 293,000 from July’s 528,000. Economists see unemployment remaining at a half-century low of 3.5%.
Participation in the labor market will be essential. A sustained rebound in the labor force would be a near-magical elixir for the economy, easing the pressure on the Federal Reserve to be so aggressive with rate hikes.
But participation has tended to fall in recent months, leaving no room for maneuver in the labor market.
The jobs report follows data this week showing initial jobless claims falling to a two-month low and job openings in July well above expectations.
Dow Jones Futures Today
Dow Jones futures fell 0.1% from fair value. S&P 500 futures fell slightly and Nasdaq 100 futures rose 0.1%.
Late Thursday, Broadcom (AVGO) and Lululemon Athletica (LULU) posted strong earnings and raised its forecast. AVGO and Lululemon stocks rebounded overnight. Neither is close to being exploitable, but it is positive action for the market.
The jobs report will be released at 8:30 a.m. ET, sure to spur big moves in Dow Jones futures, Treasury yields and more.
Stock market rally
The stock market rally started lower on Thursday and continued to weaken before rebounding late in the session to close slightly mixed.
The Dow Jones Industrial Average rose 0.5% on Thursday stock market trading. The S&P 500 index climbed 0.3%. The Nasdaq composite fell 0.3%. The small cap Russell 2000 fell 1.1%.
U.S. crude oil prices fell 3.3% to $86.61 a barrel.
The 10-year Treasury yield jumped 13 basis points to 3.265%, the highest since late June. The benchmark yield, which rose from just under 2.53% on August 2, begins to approach the 11-year high of 3.48% on June 14.
The VanEck Vectors Semiconductor ETF (SMH) lost 2.2%. Nvidia and AMD shares are SMH’s top holdings. NVDA stock fell 7.7% to a two-year low. AMD, less exposed to China’s brakes than Nvidia, fell 3%, still above its June lows.
The SPDR S&P Metals & Mining ETF (XME) fell 3.8%. US Global Jets (JETS) fell 0.6%. The SPDR Energy Select ETF (XLE) lost 2.5% and the Financial Select SPDR ETF (XLF) rose 0.3%. SPDR Healthcare Sector Fund (XLV) increased by 1.6%.
Market rally analysis
Well, the stock market rally was probably due to a rebound. Whether Thursday’s rebound from intraday lows to mixed levels will likely depend on Friday’s jobs report.
Intraday, the main indices suffered more damage.
The Nasdaq and S&P 500 didn’t quite break their July 26 lows, which would have signaled the end of the “higher lows” trend and possibly triggered a move into the “correcting market.” But they are clearly below their 50-day moving averages, just like the Dow Jones.
The small cap Russell 2000 and S&P MidCap 400 fell below their 50-day lines on Thursday.
It was encouraging to see the market battle Thursday afternoon against so many headwinds and headlines. But a market rally is measured in weeks, months, or years, not two-hour increments.
Steel stocks, which a week ago were showing buy signals, have melted. The chip names that seemed so strong last week crashed. Oil stocks are in trouble.
Meanwhile, the bottom fishing rally for Nvidia stocks, Datadog (DDOG) and ARKK ended weeks ago.
Solar, natural gas and pollution control stocks are holding up relatively well, although most of these names are not making progress and are starting to fall. Did Enphase store, Energy Cheniere (LNG) and Celsius on Thursday or will they crash next?
Albemarle (ALB) has back-and-forth on recent gains as lithium games sell off.
Many stocks that had built up could require significant repair work even if the overall market recovers quickly. Apple and Tesla shares closed higher after cutting their 50-day intraday lines. But both are looking at their 200 day lines.
What to do now
Now is not the time to buy stocks. If you have a few stocks with solid gains that are holding up well, you can stick with them, although partial profits aren’t a bad idea.
Investors may differ on when to sell a winning stock, but you have to draw a line in the sand somewhere.
This is not the right time to short circuit. The ideal moment was when the market hit the resistance at the 200 day line a few weeks ago. Short-lived rallies can be fierce, although they are often short-lived. However, if the indices rally back to their 50-day line and stagnate, there could be new short selling opportunities, perhaps even in stocks like Arista, Apple or Tesla.
Work on your watchlists, long and short. Even if you don’t intend to sell short, the exercise can help you with your overall market analysis and prevent you from being too bullish.
Lily The big picture every day to stay in tune with market direction and key stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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