Dow Jones futures edged lower early Friday, while S&P 500 futures and Nasdaq futures fell further. Netflix subscriber guidance sent NFLX stock plunging overnight, with streaming rival Walt Disney also losing ground. Meanwhile, Bitcoin tumbled while crude oil futures and Treasury yields fell in a rush to reduce risk across assets.
For a second straight session, the major indexes tried to rebound Thursday, but reversed lower for sharp losses, extending the stock market correction.
Bulls don't like being penned in, but investors who rushed to buy the morning rebounds of Wednesday and Thursday have suffered painful losses.
Netflix and CSX reported earnings Thursday night. Oilfield services giant Schlumberger released results Friday morning.
Dow Jones insurance giant Travelers and ocean shipping firm Matson moved into buy range, at least intraday, on strong earnings news. Both are in leading groups right now, with peers also acting well. Their relative strength lines are hitting at least recent highs. In a better market, both TRV stock and MATX would be flashing strong buy signals. But it's hard to have conviction about any stock in a correction, especially with the market staging ugly reversals.
Tesla Stock
Tesla stock edged up 0.1% on Thursday to 996.27, but reversed from intraday highs of 1,041.66. The EV maker continues to hit resistance near its now-slipping 50-day moving average. Tesla is holding up much better than most high P-E stocks. And there's a bright side to TSLA stock pausing now. After plunging from its early January highs, Tesla stock tried to race higher again. It's unusual for a stock to run straight up from a vertical dive. But as time has passed, that's less of a concern. Also, as a practical matter, Tesla earnings are on tap next week. That could be a catalyst for big gains, but also big losses.
Tesla stock is on IBD Leaderboard and the IBD 50.
Peloton Stock Meltdown
While many beaten-down growth stocks rebounded Thursday, Peloton Interactive crashed 24% on reports that it's halted production of its connected bikes and treadmills due to weak demand. Late Thursday, Peloton denied that it's suspended "all production."
PTON stock had already plunged 81% from its January 2021 record high of 171.09 as of Wednesday, so investors may have thought it was a bargain. But just because a stock has crashed doesn't mean it can't fall further. Peloton stock has now fallen to its worst level since March 2020.
PTON stock bounced early Friday.
Key Earnings
Netflix earnings easily beat views while subscriber growth narrowly topped analyst views but missed the company's own guidance. The streaming giant, which just announced monthly fee increases, also gave weak subscriber guidance for Q1.
NFLX stock plunged 20% early Friday, signaling a drop to its worst levels since June 2020. Shares reversed lower for a 1.5% decline on Thursday. Since hitting a record 700.99 on Nov. 17, Netflix stock has fallen sharply.
Disney stock fell 3.5%, as the Netflix subscriber guidance doesn't bode well for Disney+ and other Disney streaming properties. DIS stock could hit its worst levels since late 2020.
CSX earnings just edged past views. CSX stock fell slightly in extended trade. Shares for the railroad operator faded Thursday to close down 1 cent to 35.24 after initially rallying on solid results from rival Union Pacific.
Schlumberger earnings modestly topped views early Friday. SLB stock edged lower, dipping below a buy point. Fellow oil-field services giant Baker Hughes reported mixed results early Thursday, but BKR stock rose, briefly clearing a buy point.
Dow Jones Futures Today
Dow Jones futures dipped 0.2% vs. fair value, with DIS stock weighing on blue chips. S&P 500 futures sank 0.5%. Nasdaq 100 futures fell 0.8%. NFLX stock led the decline in tech futures.
The 10-year Treasury yield fell 5 basis points to 1.78%. Crude oil futures declined more than 1%.
Bitcoin dived well below $40,000, as investors dump cryptocurrencies along with other risk assets.
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 Correction
The stock market correction continued to hit new lows, as the major index reversed lower for a second straight session.
The Dow Jones Industrial Average fell 0.9% in Thursday's stock market trading. The S&P 500 index gave up 1.1%. The Nasdaq composite slumped 1.3% after rising as much as 2.1% intraday. The small-cap Russell 2000 tumbled 1.8%.
The 10-year Treasury yield was roughly flat at 1.83%. February crude oil futures edged down 0.1% to $86.90 a barrel as the contract expires. March crude futures dipped 0.3% to $85.55.
Among the best ETFs, the Innovator IBD 50 ETF tumbled 2.1%, while the Innovator IBD Breakout Opportunities ETF gave up 1.6%. The iShares Expanded Tech-Software Sector ETF gave up 0.7%. The VanEck Vectors Semiconductor ETF tumbled 3.1%.
SPDR S&P Metals & Mining ETF skidded 3.6% and Global X U.S. Infrastructure Development ETF 1.6%. U.S. Global Jets ETF dipped 0.5%. SPDR S&P Homebuilders ETF skidded 2.1%. The Energy Select SPDR ETF retreated 0.9% while the Financial Select SPDR ETF ceded 0.6%. The Health Care Select Sector SPDR Fund backed off 0.65%.
Reflecting more-speculative story stocks, ARK Innovation ETF edged up 0.2% and ARK Genomics ETF fell less than 0.1%. Tesla stock remains the top holding across ARK Invest's ETFs.
Five Best Chinese Stocks To Watch Now
Market Analysis
In like a lion, out like a lamb. Market corrections and bear markets are prone to strong opens and weak closes. On Wednesday, a market bounce fizzled in the first hour of trading, with the major indexes closing down sharply.
On Thursday, the key averages rebounded even more, but began to fade by late morning, with the retreat intensifying during the afternoon.
The Nasdaq composite is starting to lose sight of the 200-day line. The tech-heavy index moved below its early October lows to its worst levels since June. Those October lows essentially correspond to Nasdaq highs back in February 2021.
The big-cap Nasdaq 100 fell below its 200-day line, along with the Dow Jones Industrial Average. The S&P 500 index is closing in on that long-term level, hitting a three-month low Thursday. The Russell 2000 is headed due south, hitting a fresh 52-week low.
A few stocks look interesting, such as Matson or TRV stock. But it's hard to feel confident about any stock in a market correction.
Time The Market With IBD's ETF Market Strategy
What To Do Now
At this point, a market bounce — one that actually holds through an entire session — wouldn't be a surprise, as various indicators suggest the indexes are oversold, though the Netflix stock crash is pushing futures lower.
But when stocks do have a solid session, that doesn't mean a strong market rally is underway.
If you try to catch the first day of a stock market rally, you'll eventually succeed. The problem is that you'll also catch many dead-cat bounces, suffering a bunch of little losses or a few big ones. Anyone who bought at the Wednesday or Thursday intraday highs is likely sitting on modest to solid losses.
It's far better to wait a few days to see if big institutions support a new rally attempt. A follow-through day is needed confirm a new uptrend. Not all confirmed market rallies work, but your odds are much better if you wait for a FTD.
Still, with a market rally attempt underway, you definitely want to be building your watchlists. You don't run to jump the gun, but you want to be ready to pull the trigger on the right stocks.
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.
