Dow Jones futures fell sharply early Thursday, along with S&P 500 futures and Nasdaq futures, with some important jobs and inflation data due before the market open.
The stock market rally searched for direction Wednesday. The major indexes closed narrowly mixed. But the details showed further weakness, with losers easily trumping winners.
With the uptrend under pressure, it's not a good time to be making new buys or holding more than token exposure.
The medical sector continues to lead, bouncing back from Tuesday losses. UnitedHealth moved higher in a buy zone after just breaking out Wednesday. Vertex Pharmaceuticals reclaimed an early entry after Tuesday's retreat. McKesson is holding key support in its shallow base, not far from an aggressive entry. Lantheus is trading around its 50-day line, consolidating after a huge run-up earlier this year. All have relative strength lines near record highs.
Upscale furniture retailer RH trimmed full-year estimates, citing weaker demand and a deteriorating economic environment. RH stock tumbled early Thursday, signaling a fresh two-year low. Shares are already down 11% so far this week.
Simply Good Foods, which makes low-carb snacks and shakes, reported better-than-expected fiscal Q3 earnings early Thursday. SMPL stock edged higher before the open. Share rose 2% to 41.20 Wednesday, near a 42.01 early entry within a consolidation.
Some other food and beverage stocks are faring well, reflecting the defensive mindset in the market. Cereal giant General Mills jumped 6.35% on Wednesday to 74.72, breaking out on earnings and a dividend hike. Post Holdings is right at a buy point while Kellogg is setting up.
Tesla stock fell 1.8% to 685.47, down 7% so far this week. Shares are continuing a retreat from their 10-week moving average and are heading back toward recent lows. LI stock rose 2.7% to 38.08, back above a buy point, but remains highly extended from key moving averages. Tesla and China EV startup Li Auto will report Q2 sales later this week.
UNH stock is on IBD Leaderboard. LNTH stock is on the Leaderboard watchlist. Simply Good Foods, UnitedHealth and VRTX stock are on the IBD 50. Vertex and MCK stock are on the IBD Big Cap 20. Lantheus was Wednesday's IBD Stock Of The Day.
The video embedded in this article analyzed Wednesday's market action and discussed GIS stock, McKesson and Neurocrine Biosciences.
Dow Jones Futures Today
Dow Jones futures retreated 1.25% vs. fair value. S&P 500 futures lost 1.5% and Nasdaq 100 futures tumbled 1.7%.
Bitcoin tumbled to $19,000. Late Wednesday, the SEC rejected Grayscale's bid to turn Grayscale Bitcoin Trust, the biggest Bitcoin fund, into an outright ETF tracking the Bitcoin spot price.
The 10-year Treasury yield declined 6 basis points to 3.04%.
Crude oil prices fell 1%, while gasoline futures sank more than 3%, continuing a retreat from record highs. OPEC+ meets today to discuss production quotas, but it's unclear how much more actual output the cartel and Russia can provide.
Copper prices sank 2%.
China's manufacturing index for China rose 0.6 point in June to 50.2, moving back above the break-even 50 level for the first time in four months as the country recovers from Covid lockdowns. But it was slightly below views for 50.5. The services index jumped to 54.7 vs 47.8 in May.
The U.S. ISM manufacturing index for June is due Friday morning, following several negative regional factory reports.
At 8:30 a.m. ET on Thursday, investors will get key U.S. jobs and inflation data. The Labor Department will release weekly jobless claims. The Commerce Department will issue the May income and spending report, which includes the Federal Reserve's favorite inflation gauge.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market 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 Wednesday.
The Dow Jones Industrial Average fell less than 0.1% in Wednesday's stock market trading. The S&P 500 index lost a fraction. The Nasdaq composite climbed 0.3%. The small-cap Russell 2000 lost 1%.
U.S. crude oil prices fell 1.8% to $109.78 a barrel, reversing from solid morning gains. Gasoline futures fell 2.8%.
The 10-year Treasury yield sank 12 basis points to 3.09%. The two-year yield slumped to 3.06%. The two-to-10-year yield spread is down to 3 basis points, highlighting recession concerns.
Fed chief Jerome Powell once again stressed Wednesday that the central bank's priority is fighting inflation, even at the risk of a recession.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF fell 1.25%, while the Innovator IBD Breakout Opportunities ETF climbed 0.75%. The iShares Expanded Tech-Software Sector ETF rose 0.2%. The VanEck Vectors Semiconductor ETF sank 1.8%.
SPDR S&P Metals & Mining ETF slumped 2.8% and the Global X U.S. Infrastructure Development ETF retreated 1.3%. U.S. Global Jets ETF gave up 1.5%. SPDR S&P Homebuilders ETF dipped 0.4%. The Energy Select SPDR ETF tumbled 3.5% and the Financial Select SPDR ETF slipped 0.6%. The Health Care Select Sector SPDR Fund advanced 0.9%, with UNH stock, Vertex and McKesson all in the ETF.
Reflecting more-speculative story stocks, ARK Innovation ETF retreated 1.6% and ARK Genomics ETF lost 0.6%. TSLA stock remains a top holding across Ark Invest's ETFs.
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Market Rally Analysis
The stock market rally didn't show bullish action, only managing a mixed session after Tuesday's big losses.
The details were less impressive, with decliners outpacing advancing stocks by nearly 2-to-1 on both the NYSE and Nasdaq.
The market moved to "uptrend under pressure" on Tuesday as the Nasdaq composite and S&P 500 closed below the lows of their Friday follow-through day.
Research from Eric Krull, co-author of The Lifecycle Trade, shows that there's a 90% chance that the rally will ultimately fail when an index closes below its follow-through day low.
The rally is not officially over until the indexes undercut their recent lows.
The Dow Jones hasn't closed below its follow-through day low, but it isn't far off. Dow futures point to blue chips opening below the FTD low, but it's the close that counts
The Russell 2000, for its part, closed below Friday's lows on Wednesday.
Medicals rebounded, while defensive food stocks did well. But energy stocks, which bounced earlier in the week, fell solidly on Wednesday.
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What To Do Now
The stock market rally isn't finished, but the prospects aren't high. The odds simply aren't in your favor right now. Investors should be focusing on preserving their mental and physical capital and preparing for a sustained market uptrend.
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.
