Dow Jones futures fell modestly Friday morning, along with S&P 500 futures and Nasdaq futures.
The stock market rally, increasingly under pressure, saw further losses Thursday. The 10-year Treasury yield spiked as high as 4.996%, a whisker below 5%. One positive is that market fear gauges are starting to run higher. That contrarian indicator raises hopes for a stock market bounce.
Tesla plunged in massive volume, as weak earnings and Elon Musk warnings signaled that the long-term growth stock lacks growth or even a tangible growth story.
This is a time to be looking for stocks setting up, but not ramping exposure.
Adobe, Arista Networks, Microsoft, Palantir Technologies and Meta Platforms are stocks to watch near buy points. ANET stock and Meta Platforms are on IBD Leaderboard. ADBE stock, Arista Networks and Meta are all on the IBD 50. MSFT stock is on the IBD Long-Term Leaders list.
Earnings
Oil services giant SLB just edged past EPS views Friday morning, while slightly missing on revenue. The report could give insight into the energy sector and demand for services, drilling and machinery. Shares fell modestly in premarket trading. SLB stock is near a buy point and early entries.
American Express comfortably beat Q3 EPS views, while also topping on sales. The Dow Jones card giant gave some upbeat comments on consumer spending. AXP stock waslittle changed in premarket trade.
Thursday night, Intuitive Surgical slightly topped EPS views but just missed on revenue. ISRG stock tumbled overnight after edging lower Wednesday. The medical device/products sector has plunged in recent weeks on fears that weight loss drugs from Novo Nordisk and Eli Lilly will slash demand long term for the sector.
Rail giant CSX just missed EPS views while squeaking by sales targets. Shares fell modestly in extended trade. CSX stock dipped 0.4% Thursday after rival Union Pacific reported mixed results before the open.
SolarEdge Technologies warned of sharply weaker demand in Europe. SEDG stock, already a huge loser in 2023, plunged in premarket trade, with big losses for a slew of solar plays, including Enphase Energy, First Solar and more.
Dow Jones Futures Today
Dow Jones futures lost 0.4% vs. fair value. S&P 500 futures declined 0.45%. Nasdaq 100 futures fell 0.5%. ISRG stock is an S&P 500 and Nasdaq 100 stock.
The 10-year Treasury yield edged down to 4.98%, but off early morning lows of around 4.93%
Crude oil prices rose more than 1%, back above $90 a barrel.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally retreated amid surging Treasury yields, closing near session lows. Volume rose, another negative signs.
The Dow Jones Industrial Average fell 0.75% in Thursday's stock market trading. The S&P 500 index lost 0.85%. The Nasdaq composite tumbled nearly 1%. The small-cap Russell 2000 skidded 1.5%, hitting a six-month low and a 52-week closing low.
Since the Nasdaq peaked on July 19, the indexes and the overall market have been in a downtrend, with a couple of lower lows and lower highs. The Nasdaq needs to move decisively above the 50-day line, clearing the Oct. 12 high. But right now the Nasdaq and S&P 500 are heading toward recent lows.
A Nasdaq close below the low of its Oct. 6 follow-through day would be a highly bearish sign. The Sept. 27 Nasdaq low isn't much below that.
The 10-year Treasury yield leapt 8.5 basis points to nearly 4.99%, getting to 4.996% intraday. Notably, the two-year Treasury yield, more closely tied to Fed policy, sank five basis points to 5.17%.
Fed chief Jerome Powell said midday Thursday more tightening may be needed if economic data remains strong, but noted that "financial conditions have tightened significantly" with the rise of long-term bond yields. That reinforced expectations of no Fed rate hikes in the near future. Indeed, markets fully priced out a November rate hike and modestly lowered the odds of a December hike to 29%.
U.S. crude oil prices rose 1.2% to $89.37 a barrel.
It's hard to see the market rally reviving if long-term Treasury yields are continuing to rise. A move above 5%, especially if sustained, could easily send the major indexes tumbling to or below recent lows.
Market Fear Gauge Spikes
The CBOE Volatility Index, or VIX, jumped Thursday to its highest level since late March. The VIX is often touted as the market's fear gauge. Shifts in options trading raise doubts about long-term VIX comparisons, but it's still useful for shorter-term comparisons.
Excessive fear raises the prospect of a stock market bounce in the near term. But it doesn't have to be right away and it doesn't have to last.
It's certainly possible that the VIX could rise much further. The CBOE Volatility Index might not peak until the Nasdaq or S&P 500 undercut their recent lows.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF slumped2.3%. The iShares Expanded Tech-Software Sector ETF fell 0.6%. ADBE stock and Microsoft are huge IGV holdings, with PLTR stock also a component. The VanEck Vectors Semiconductor ETF retreated 0.7%.
Reflecting more-speculative story stocks, ARK Innovation ETF gave up 2.2% and ARK Genomics ETF 2.7%. Tesla stock is the No. 1 holding across Ark Invest's ETFs. Cathie Wood's Ark also owns some Palantir stock.
SPDR S&P Metals & Mining ETF lsot 1.9% and the SPDR S&P Homebuilders ETF stepped down 2%. The Energy Select SPDR ETF edged down 0.2%, with SLB stock a notable XLE holding. The Health Care Select Sector SPDR Fund shed 1%.
The Industrial Select Sector SPDR Fund fell 0.9% and the Financial Select SPDR ETF declined 1.3%.
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Tesla Stock
TSLA stock plunged 9.3% on Thursday to 220.11 in heavy volume, following a wider-than-expected Tesla earnings decline and several warnings from CEO Elon Musk on the call. Musk warned that the upcoming Cybertruck will not be a cash flow contributor for 12-18 months, saying "we dug our own grave" with the hard-to-build EV. More broadly, a low-energy Musk tamped down on expectations. Analysts are slashing 2023 and 2024 earnings estimates as near-term growth drivers fizzle.
Musk says he still expects Tesla to achieve fully autonomous driving and robotics. Much of Tesla's still-huge valuation reflects hopes or expectations that those moonshots will come to fruition. But they may not.
Tesla stock is coming down to a key support area, which includes the 200-day line, its August lows, and the top of the February-June consolidation.
Late Thursday, Tesla cut Model Y prices in Canada, a few days after reducing base Model 3 prices in the U.K.
Shares fell slightly in premarket trade.
Stocks To Watch
Adobe stock is slightly below a 570.24 flat-base buy point. The relative strength line, the blue line in the charts provided, tracks a stock's performance vs. the S&P 500 index. ADBE stock edged down 0.4% to 555.74 on Thursday.
Meta stock is just below a 326.20 buy point. The RS line has also been hitting highs. Meta stock slipped 1.3% to 312.81 on Thursday.
Microsoft stock is working on a 366.78 consolidation buy point, reclaiming the 50-day line recently. Shares are close to a 340.86 early entry. The RS line is not at a high, but improving. MSFT stock nudged 0.4% higher to 331.32.
PLTR stock edged down 0.8% to 17.06 on Thursday. Shares are working on an 18.44 buy point from a cup-with-handle base.
ANET stock is just below a 198.46 cup-with-handle buy point, according to MarketSmith analysis. The RS line also has been at multiyear highs. ANET stock fell 1.4% to 191.48.
Adobe earnings likely aren't due until December, but Microsoft reports on Oct. 24 with Meta earnings on Oct. 25. Arista is due Oct. 30, but its top customers are Meta and Microsoft. Palantir reports on Nov. 2.
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What To Do Mow
This is still a time for patience. The market rally is clearly straining from surging Treasury yields. A massive wave of earnings reports loom next week, including from Microsoft and Meta.
Investors should have modest exposure at most, paring positions in recent days due to sell signals or simple profit taking.
You do want to paying close attention and being prepared. A large number of stocks are not from breaking out or clearing entries. They just need the market rally to show clear signals of renewed strength
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on X/Twitter at @IBD_ECarson, Threads at @edcarson1971 and Bluesky at @edcarson.bsky.social for stock market updates and more.
