Dow Jones futures rose slightly early Thursday, along with S&P 500 futures and Nasdaq futures, but off morning highs. Tesla production and sales are ramping back up while Nio gave some disappointing guidance, while Chinese regulators rebuffed reports of an revived Ant Group IPO.
The major indexes retreated Wednesday on economic concerns. The OECD slashed U.S. and global economic growth forecasts, coming on the heels of Tuesday's Target warning. Intel and Altria tumbled as analysts grow wary in the current environment.
Oceangoing shipping stocks such as ZIM Integrated Shipping and Star Bulk Carriers plunged to their 50-day lines and beyond, wiping out a few weeks of gains. It's not clear if the sector faces a long slide or simply a short pause, but Wednesday's action was ugly. Rail, trucking and other shipping stocks also tumbled.
Travel, mining and especially steel stocks were notable losers amid broad-based selling.
Meanwhile, Eli Lilly, Synopsys, Equinor, Westlake and Callon Petroleum are all near buy points. LLY stock is among several big drugmakers holding up well. Synopsys is a rare growth stock showing some strength. Norwegian state-owned oil and gas play Equinor and shale operator Callon are in the energy space. WLK stock is among several solid chemicals names.
Eli Lilly stock is on IBD Leaderboard. SNPS stock is on IBD Long-Term Leaders. ZIM, Westlake, Synopsys and CPE stock are on the IBD 50. Westlake was Wednesday's IBD Stock Of The Day.
China Stocks In Focus
U.S.-listed Chinese stocks fell before the open amid several factors.
Shanghai will lock down seven districts on June 11 for widespread testing, its first Covid restrictions since largely ending the lockdown on June 1. However, Shanghai Disney will partially reopen starting Friday.
China denied a Bloomberg report that it would revive the IPO for Ant Group, a digital financial giant closely affiliated with Alibaba and its founder Jack Ma. China's last-minute halt to the Ant IPO in late 2020 marked the beginning of China's tech crackdown.
Meanwhile, Bilibili reported a wider-than-expected loss before the open, while Nio guidance disappointed.
Alibaba and several other Chinese internets and other U.S.-listed stocks fell, while BILI tumbled.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures advanced 0.1% and Nasdaq 100 futures climbed a fraction. Futures are well off morning highs, likely on China-related concerns and as Treasury yields turn fractionally higher.
The 10-year Treasury yield rose 2 basis points to 3.05% after drifting lower earlier.
Crude oil prices edged lower changed early Thursday. Natural gas prices fell solidly Thursday, extending Wednesday's losses on an LNG-export terminal fire.
Copper prices fell on renewed China lockdown concerns and broader economic worries.
The European Central Bank on Thursday agreed to end asset purchases as of July 1. It also signaled it will raise rates by a quarter-point at the July meeting and again in September.
The Labor Department will release weekly jobless claims data at 8:30 a.m. ET, followed by the consumer price index on Friday morning. That comes ahead of the Fed policy meeting next week, with another half-point hike priced in.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Tesla News
Tesla sold 32,165 made-in China vehicles last month, well below normal, but up from just 1,512 in April. Tesla Shanghai produced 33,544 vehicles, up from 10,757 in April, when the Shanghai plant was shut down for most of the month. The May figures are part of industrywide data from the China Passenger Car Association. Official media said Tesla has just now returned to full daily production.
Of the May vehicles sold, 22,340 were exported and 9,825 were sold locally. Shanghai, Tesla's biggest market in China, only ended its Covid lockdown on June 1.
Tesla stock rose 3% before the open, signaling a move back to the 21-day moving average. Shares climbed 1.25% to 725.60 on Wednesday but off morning highs. TSLA stock is well below its 50-day and 200-day lines.
On Wednesday, China EV giant BYD said it will supply Tesla with batteries. BYD, which is passing Tesla in vehicle sales for the first time this quarter, climbed 1.8% to 38.80. On track for a fifth straight weekly gain, BYD stock is not far from record highs.
Tesla CEO Elon Musk's Twitter takeover saga has weighed on TSLA stock, amid fears that Musk will have to sell a lot more shares. On Wednesday, Twitter's board reportedly will give Musk access to all its internal data. Musk, after signing a $44 billion Twitter deal and waiving away due diligence, has threatened to try to walk away unless he gets more data about fake users. TWTR stock rose 0.8% on Wednesday 40.44, hitting its highest level intraday since May 13. But Twitter is still well below Musk's $54.20 takeover price.
Tesla Vs. BYD: Meet The New EV King
Nio Earnings
Nio reported a first-quarter loss of 13 cents a share vs. a 4-cent loss a year earlier. Revenue climbed 24% to $1.56 billion. Analysts had expected the Chinese EV startup to report a 13-cent loss with sales of $1.512 billion, according to FactSet.
For the second quarter, Nio sees deliveries of 23,000-25,000, up 5%-14% vs. a year earlier. Nio has already reported EV deliveries of 5,074 in April and 7,024 in May, so that forecast implies June deliveries of roughly 10,900-12,900.
Nio also sees Q2 revenue of RMB9.34 billion ($1.47 billion) and RMB10.088 billion ($1.59 billion). That would be a year-over-year gain of 10.6%-19.4% in local currency terms, but below forecasts.
Nio stock fell 6% before Thursday's open. But shares have risen for nine of the last 10 sessions. On Wednesday, Nio stock rose 3.7% to 20.38, continuing to rise from its long-sliding 50-day line.
AMD Analyst Day
Advanced Micro Devices on Thursday holds an analyst day. On Wednesday, AMD stock fell 3.2% to 101.90, moving back toward its falling 50-day line. Several analysts cut its archrival Intel's earnings estimates Wednesday, following cautious comments from management. INTC stock sank 5.3% to its lowest close since late 2017.
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Stock Market Rally
The stock market rally was mixed for much of the morning, but the key indexes closed with solid losses.
The Dow Jones Industrial Average sank 0.8% in Wednesday's stock market trading. The S&P 500 index slumped 1.1%. The Nasdaq composite gave up 0.7%. The small-cap Russell 2000 fell 1.55%.
U.S. crude oil prices rose 2.5% to $122.11 a barrel, a three-month high. Gasoline futures are just below record levels. Natural gas sank 6.4%, still near a 14-year high. Wednesday's drop was spurred by a fire at a Texas liquefied natural-gas export terminal, which will be shut down for a few weeks. LNG-related stocks retreated Wednesday.
The 10-year Treasury yield rose 6 basis points to 3.03%.
Among the best ETFs, the Innovator IBD 50 ETF lost 2.3%, while the Innovator IBD Breakout Opportunities ETF fell 1.7%. The iShares Expanded Tech-Software Sector ETF fell 0.7%. The VanEck Vectors Semiconductor ETF dropped 2.1%. AMD stock and Intel are notable SMH components.
SPDR S&P Metals & Mining ETF stumbled 3.8% and the Global X U.S. Infrastructure Development ETF gave up 2.5%. U.S. Global Jets ETF descended 2.6%. SPDR S&P Homebuilders ETF retreated 2%. The Energy Select SPDR ETF edged up 0.2% and the Financial Select SPDR ETF declined 1.8%. The Health Care Select Sector SPDR Fund fell 0.8%
Reflecting more-speculative story stocks, ARK Innovation ETF rose 2.7% and ARK Genomics ETF 2.4%. Tesla stock remains the No. 1 holding for Ark Invest. Ark, which sold quite a bit of TSLA stock over several months, has been buying up a lot of shares since late May, including on Tuesday. Cathie Wood's fund also owns some BYD and Nio stock.
Five Best Chinese Stocks To Watch Now
Stocks Near Buy Points
Eli Lilly stock edged up 0.4% to 313.47 on Wednesday, hitting resistance around the old buy point of 314.10. LLY stock has rebounded this week from its 21-day and 10-week lines, after retreating last week amid price control buzz. The relative strength line for Lilly stock is just below record highs. The RS line, the blue line in the charts provided, tracks a stock's performance vs. the S&P 500 index.
SNPS stock retreated 2% to 322.89. Investors could treat its current consolidation as a double-bottom base with a 342.69 buy point. It's possible Synopsys stock could be starting work on a handle, which would lower the official entry. While SNPS stock is well off highs, its RS line is at record highs.
EQNR stock edged down 0.3% to 37.75, working on a 38.80 cup-with-handle entry, according to MarketSmith analysis. The RS line for Equinor stock is right at highs.
WLK stock fell 1.5% to 131.92, consolidating near its 10-week line. Westlake Chemical stock is on track to have a flat base with a 141.29 buy point at the end of the week. Investors might take an early entry above short-term highs at 136-137. The RS line is right at highs.
CPE stock nudged 0.1% higher to 62.50. Intraday, Callon stock reached 63.96, just clearing a 63.44 cup-with-handle buy point. The major indexes retreating Wednesday weighed on the shale producer. But CPE stock has a recent history of big intraday gains that wither or turn into losses by the close. The RS line for CPE stock is at highs.
Market Rally Analysis
The stock market rally retreated solidly Wednesday. Nasdaq volume rose vs. the prior session, marking a new distribution day.
Overall, the major indexes continue to show sideways action, finding support at their 21-day moving averages. However, the S&P 500 and Dow Jones hit resistance at their 10-week lines, while the Russell 2000 dropped back below its 50-day and 10-week lines.
Further sideways action could be constructive for the market rally, letting more bases and handles form. But with the 21-day the lone line trending higher, and the 50-day and 10-week lines coming down steadily, the major indexes could come under pressure to break higher or lower.
Energy stocks remain standouts, though individual names can certainly have some big daily or weekly swings. Meanwhile, other sectors struggle to show leadership for any length of time. The relative lack of stocks to buy — and the high rate of failure among new buying opportunities — has been a worrisome aspect of the current market rally.
ZIM and Star Bulk gave up a few weeks of gains on Wednesday, while TimkenSteel and Amphastar Pharmaceuticals tumbled back below buy points after impressive breakouts Tuesday.
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What To Do Now
If you've built up a modest exposure over the past couple of weeks, there isn't a great reason to be adding positions right now. The market rally is rangebound, with the May CPI report due Friday and a Fed meeting on tap next week. Investors should be quick to cut losses and consider taking at least partial profits relatively early.
The market rally could deteriorate, pushing investors back to the sidelines. Or it could rapidly improve, triggering a wave of buying opportunities. Investors need to be alert to market changes and ready to act.
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