Dow Jones futures rose modestly Friday morning, along with S&P 500 futures and Nasdaq futures. Alibaba and other Chinese-listed stocks skidded as several state-owned firms announced plans to delist.
The stock market rally came off Thursday morning highs as the major indexes neared fresh resistance levels, while energy prices and Treasury yields picked up.
China Delistings
Several Chinese state-owned enterprises, including PetroChina, China Petroleum & Chemical, China Life Insurance, Sinopec and Aluminum Corp. of China, announced Friday that they will voluntarily delist from exit from the New York Stock Exchange. That comes amid an ongoing U.S.-China dispute with the SEC threatening to delist Chinese firms if they don't comply with U.S. auditing rules.
Alibaba, JD.com, Pinduoduo, Nio, Xpeng and many other U.S.-listed Chinese firms fell, though they have pared some initial premarket losses.
Earnings
Shares of Rivian was little changed amid up-and-down trading after the EV startup reported mixed second-quarter results. RIVN stock rose 4.1% in Thursday's session. Illumina dived 15% after missing Q2 targets and offering weak guidance.
Moving into the late earnings season, the bulk of June quarter earnings have so far met or exceeded expectations. But the market continues to treat missteps with no mercy. It's a healthy reminder that investors should stay nimble, ready to react to market strength or weakness.
Onsemi, EQT Corp., Penske Automotive Group, Builders FirstSource and Tesla are working on handle or handle-like patterns. EQT and BLDR stock are actionable, while ON stock quickly backed off an early entry Thursday.
Builders FirstSource is on SwingTrader and was Thursday's IBD Stock Of The Day. ON stock is on the IBD 50.
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Dow Jones Futures Today
Dow Jones futures rose 0.4% vs. fair value. S&P 500 futures advanced 0.4% and Nasdaq 100 futures climbed 0.5%.
Crude oil futures declined nearly 2%. Natural gas prices sank 3%.
The 10-year Treasury yield fell 3 basis points to 2.86%.
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 started off strong, then faded, with the indexes turning mixed.
The Dow Jones Industrial Average settled up less than 0.1% in Thursday's stock market trading. The S&P 500 index booked a fractional loss. The Nasdaq composite closed down 0.6% with software names Workday and Okta at the bottom of the index. The small-cap Russell 2000 finished with a 0.3% gain.
U.S. crude oil prices rose 2.6% to $94.34 a barrel. Natural gas prices jumped 8.2%.
Rising oil and gas prices are good news for energy stocks, which helped to prop up Thursday's stock action. But if the energy-price rebound continues, it could stall or reverse some relief at the pump and inflation overall.
The 10-year Treasury yield opened lower but rebounded to gain 10 basis points to 2.89%, the highest yield in three weeks. That's despite another tame inflation report.
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Stocks Near Buy Points
Onsemi stock took advantage of this week's Nvidia and Micron warnings to pause its big run and carve a handle. It now has a 69.36 buy point within a seven-month consolidation. On Thursday, ON stock broke the downtrend in the handle, hitting 68.74 intraday, but shares closed down 0.2% at 66.36.
EQT stock is working on a 46.81 cup-with-handle buy point. The natural gas play has been finding support around the 21-day and 50-day lines. On Thursday, EQT stock rose 5.3% to 45.80, extending a bounce from the 21-day line. But volume was below average.
BLDR stock has a 74.58 cup-with-handle buy point. Shares rose 2.8% to 70.26 on Thursday in above-average trade. The rebound from the 200-day line and breaking the downtrend of the handle offered an aggressive entry.
PAG stock rose 0.8% to 118.28, moving toward a 121.55 cup-with-handle buy point, according to MarketSmith analysis.
Tesla stock fell 2.6% to 859.89. Unlike the other stocks mentioned here, the EV giant doesn't have a proper handle, and is trading below the 200-day line. A bullish move above the 200-day line, perhaps clearing last week's high of 940.82, could offer an aggressive entry.
Market Rally Analysis
The stock market rally started off Thursday with solid gains, building on Wednesday's big advance. But key indexes pulled back, with the Nasdaq closing lower. Trading was higher, with Nasdaq volume rising significantly.
The Russell 2000 peaked intraday just below its 200-day line. The big-cap indexes are a little further from that long-term average, but the Nasdaq hit resistance at the 13,000 level.
While the market rally just entered a power trend after Wednesday, the last power trend fizzled almost immediately in early April. The market direction seems uncertain in the very short term.
Perhaps the market quickly runs higher, as the major indexes did Wednesday following the Monday morning reversal. Or perhaps this is the start of a pullback.
A pullback would let more stocks form handles and allow moving averages to catch up. But the pullback could turn out to be something more serious.
Market leadership has been broadening out.
The energy sector is reviving once again, especially natural gas plays such as EQT stock. Oil and natural gas prices are bouncing back. If that continues, fossil fuel stocks could lead once again.
But when energy stocks thrive, other sectors have struggled in 2022, due to broader economic concerns. If inflation concerns send Treasury yields sharply higher, growth stocks in particular could be affected.
For now, hot chip stocks like Onsemi took a breath recently but could easily run higher, especially if the market rally keeps climbing.
Lithium plays are strong, while some metals stocks look interesting. Medicals continue to be an area of strength, though different health care segments will shift in leadership.
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What To Do Now
It's not necessarily a good time to be adding exposure in the very short term, except for possibly the energy sector. Consider taking some partial profits.
Work on your watchlists, long and short. With the major indexes and many stocks coming up to key levels, often in low volume, there could be a number of shorting opportunities if the market pulls back.
If nothing else, just considering short setups may help temper an overly bullish mindset. Keeping an open mind is key to long-term investing success.
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.
