Dow Jones futures rose slightly early Thursday, along with S&P 500 futures and Nasdaq futures, on China stimulus hopes. CSCO stock and Walmart headlined earnings movers before the open, with key economic data on tap.
The reeling stock market rally saw significant losses, with the Nasdaq starting to lose sight of its 50-day line as Fed meeting minutes showed policymakers fearing "upside risks" to inflation. The 10-year Treasury hit its highest level since 2008.
Nvidia reversed lower despite a steady stream of analysts touting the chip giant ahead of next week's earnings. NVDA stock, which has been flirting with aggressive entries, looks better than almost all techs, especially chip and AI plays.
Tesla continued its steady retreat amid further margin-killing price cuts.
Investors should be defensive as the major indexes break support and leading stocks look increasingly damaged.
Nvidia stock is on IBD Leaderboard.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures advanced 0.2% and Nasdaq 100 futures climbed 0.3%. CSCO stock is a Dow Jones, S&P 500 and Nasdaq component. WMT stock is a Dow and S&P 500 member.
The 10-year Treasury yield rose a few basis points to 4.28%.
Hong Kong's Hang Seng Index closed flat after several days of sharp declines. China's Premier Li Qiang said late Wednesday that the country will work reach economic growth targets for 2023. That again raises stimulus hopes after weak economic data.
Crude oil futures rose nearly 1% and copper prices climbed more than 1% on China stimulus hopes.
At 8:30 a.m. ET, the Labor Department will release weekly jobless claims data. The Philadelphia Fed will disclose the Philly Fed manufacturing index for August.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Earnings
Cisco Systems, Synopsys, Wolfspeed and Warren Buffett-backed StoneCo reported Wednesday night.
CSCO stock rose modestly early Thursday. Cisco earnings and sales beat fiscal Q4 views. The networking giant guided up on Q1 EPS and in line for sales, but guided low on fiscal 2024 revenue. Shares dipped 0.7% to 52.96 on Wednesday. Cisco stock has been trading near a 53.89 buy point from a three-weeks-tight pattern with the entry just out of range of a cup-with-handle base.
SNPS stock rose slightly in extended action after Synopsys earnings and revenue topped views. The chip-design software maker also raised guidance and named a new CEO. Shares retreated nearly 2% on Wednesday to 428.21, stuck below the 21- and 50-day lines. Synopsys stock has a 465.67 buy point from a cup-with-handle base. A decisive move above the 50-day would break the downtrend of the handle.
WOLF stock turned tail after reporting a wider-than-expected Q4 loss and offering weak Q1 guidance. The chipmaker with heavy EV exposure has already been struggling for months, but the news could hit other EV-related chip plays.
STNE stock climbed modestly overnight after StoneCo earnings and revenue showed solid growth. The Brazilian fintech also gave a solid outlook. The stock has a double-bottom base with a 14.83 high-handle buy point. On Wednesday, StoneCo stock fell 2.1% to 13.34. A move over Wednesday's high of 14.15 could offer an early entry.
WMT stock rose slightly after beating Q2 views and raising full-year EPS guidance. The discount giant rose 8 cents to 159.26 on Wednesday, holding the 21-day line. WMT stock is still in range from a 154.45 alternate entry originally cleared on June 12.
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Stock Market Rally
The stock market rally started narrowly mixed but gradually worsened, especially after the Fed minutes release. The major indexes closed near session lows.
The Dow Jones Industrial Average fell 0.5% in Wednesday's stock market trading. The S&P 500 index retreated 0.8%. The Nasdaq composite slumped 1.15%. The small-cap Russell 2000 gave up 1.3%.
U.S. crude oil prices fell 2% to $79.38 a barrel, as China concerns outweigh tight supply. Crude is down 4.6% so far this week.
Copper futures dipped 0.3% to their lowest since May 31.
The 10-year Treasury yield rose 4 basis points to 4.26%, their fifth straight gain. The yield is just below Wednesday's intraday high of 4.27% and the 15-year high of 4.33% set last October. But it is the highest close since June 2008.
The U.S. dollar rose slightly to around 2023 highs.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF fell 1.3%. The iShares Expanded Tech-Software Sector ETF declined 0.9%. The VanEck Vectors Semiconductor ETF retreated 1.6%, with Nvidia stock the top holding. SNPS stock is in both SMH and IGV.
Reflecting more-speculative story stocks, ARK Innovation ETF slumped 2.2% and ARK Genomics ETF tumbled 3.2%. Tesla stock is the No. 1 holding across Ark Invest's ETFs. Cathie Wood's Ark also has positions in STNE stock and Nu Holdings.
SPDR S&P Metals & Mining ETF edged up 0.3% and the Global X U.S. Infrastructure Development ETF ceded 0.75%. U.S. Global Jets ETF descended 1.2%. SPDR S&P Homebuilders ETF gave up 1.35%. The Energy Select SPDR ETF declined 0.9% and the Health Care Select Sector SPDR Fund sank 0.8%.
The Industrial Select Sector SPDR Fund fell 0.6%.
The Financial Select SPDR ETF edged down 0.15%. The SPDR S&P Regional Banking ETF sank 1.1%.
Five Best Chinese Stocks To Watch Now
Nvidia Stock
Raymond James raised its NVDA stock price target on Wednesday, at least the fourth major Wall Street firm to bang the table for the chip giant.
Shares initially rose, but reversed for a 1% loss to 434.86, just above the 50-day line but a fraction under the 10-week. A move above Tuesday's high of 452.68 would offer a buy point, but Nvidia earnings are due Aug. 23.
Expectations are high, and not just for NVDA stock. The AI-led market rally could use bullish earnings and guidance from the AI leader.
Tesla Stock
TSLA stock fell 3.2% to 224.86, its ninth drop in the last 10 sessions. Shares are at a two-month low and more than 13% below their 50-day line. The silver lining is that August's losses have come on light volume.
On Wednesday, Tesla sharply raised Model S and X discounts on China inventory. That follow China price cuts on some Model Y variants and new, range-limited Model S and X vehicles in the U.S. that are $10,000 cheaper than the prior base trims.
This continues a large number of price cuts and discounts in Q3, signaling further pressure on profit margins.
A long-rumored Model 3 upgrade could go on sale in China this month, but little is known about the changes or possible production cost savings.
Time The Market With IBD's ETF Market Strategy
Stock Market Rally Analysis
The market rally remains an "uptrend under pressure," though an argument could be made that we are in a correction.
The Nasdaq is now 2.3% below its 50-day line. The S&P 500 and Russell 2000 lost more ground vs. the 50-day as well. The Dow Jones is still above its 50-day, but is heading that way after breaking its 21-day on Tuesday.
Many leading stocks have suffered significant damage. Some are holding up, but are prone to giving up intraday gains or round-tripping solid advances.
Overall market breadth has weakened considerably, with the Nasdaq advance/decline line flirting with the long-term low set in early May. The NYSE A/D line is trending down but modestly.
Two silver linings: First, the stock market is becoming extremely oversold, suggesting a bounce is likely. But it doesn't have to happen right away, and it doesn't have to last.
Second, excessive bullish sentiment is gone. The latest bulls-bears reading of investment newsletters has tumbled to 47.1% from 57.2% just two weeks ago.
What To Do Now
The risk-reward scenario for making new buys continues to worsen.
Here and there some stocks have flashed buy signals this week. But often those have been short-lived. Some plays that looked intriguing Wednesday morning, including NU stock, Saia, Terex, quickly pared gains or reversed lower.
With the market rally possibly on its last gasp, investors should get more defensive, if only from taking partial profits or cutting losses on individual holdings.
If the market shows renewed strength — not just a solid open — a large number of stocks would quickly look actionable.
So you want to be prepared. Keep working on watchlists, emphasizing stocks showing relative 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 Twitter at @IBD_ECarson for stock market updates and more.
