The stock market indexes climbed higher overnight but gave up gains in the first half of Tuesday's session. Reuters reported that production at the Shanghai Tesla plant will drop 7% below capacity through the end of 2022, raising demand speculation.
The S&P 500 is trading lower by 0.3% at the noon hour while the Nasdaq composite is holding a 0.5% gain. The Russell 2000 small-cap index has dumped back to even while the Dow Jones Industrial Average is lagging other benchmarks, down by 0.4%.
Volume on the NYSE and the Nasdaq is lower, compared to the same time on Monday. This isn't a bullish sign for the short-term rally attempt.
A countertrend hit the currency markets, lifting the British Pound after Monday's rout. The oversold impulse is supporting speculative assets, with gold up 0.6% and Bitcoin 4.5%. The U.S. Dollar Index is headed in the other direction, down 0.2%.
Treasuries gave up early bounces and are losing ground once again. The 10-year note is trading at 3.97%, just a stone's throw under the psychological 4.00% level.
WTI crude oil surged to $77.00 per barrel, with positive action underpinned by rig shutdowns ahead of Hurricane Ian.
Home prices decelerated in Case-Shiller and FHFA premarket reports but both studies focused on July conditions, offering few insights about the fourth quarter.
Robust August new home sales and September consumer confidence showed no signs of waning demand. Analysts and the Twittersphere responded to the strength with near-universal consensus the positive data won't last.
Will the Fed Trigger Deep Recession?
More than 20 Fed speeches are on this week's schedule but, so far at least, the underlying message remains the same.
Governors Charles Evans, James Bullard and Loretta Mester carried Chairman Jerome Powell's torch in Tuesday's premarket, pressing the need for sustained rate hikes to fight inflation. However, Evans added that he's a "little bit nervous" about raising rates "too quickly," marking the second time this week that caution has entered the Fed's messaging lingo.
Chairman Powell's insistence on "restoring price stability" is shifting the U.S. economy toward a recession that could be deeper and more painful than forecast.
Inflation may have peaked earlier this year while the trio of rate hikes hasn't had time to percolate through the U.S. economic system. As a result, demand destruction could slam the brakes so hard that American consumers without seat belts are in major peril.
Tesla Shanghai Red Flag
Reuters is reporting that Tesla will hold production levels at the Shanghai gigafactory to 93% of capacity into the start of 2023. The decision is raising doubts about China demand, undermined by economic pressures and greater local competition.
China is a hugely-important segment for CEO Elon Musk and Co., comprising nearly 25% of Tesla's worldwide revenue. Tesla shares are up by less than 2% at this hour.
Sources Deny Musk/Twitter Settlement Talks
In other stock market news, scheduled dispositions for Elon Musk and Twitter CEO Parag Agrawal were delayed, raising speculation the two sides are working on a settlement.
TWTR stock has gained just 5 cents so far on Tuesday, failing to show much speculative interest.
That makes sense because sources are denying that settlement discussions are underway. Musk is now scheduled for deposition on Oct. 6 and 7.
Tuesday Stock Market Highlights
Looking at stock market earnings, Jabil beat fiscal Q4 top and bottom-line estimates, jumping 1.4%. JBL shares are building a cup-with-handle base with a 65.98 buy point.
Dow Jones heavyweight McDonald's is down 2.3% after Citigroup maintained a neutral rating on the stock while lowering the price target to 246.
Finally, Lucid Group has rallied more than 1.5% after Cantor Fitzgerald started coverage with an overweight rating.
Managing Stock Market Corrections
In a market correction, the first day the index closes higher counts as Day 1 of its attempted rally.
The action on Day 2 and Day 3 is irrelevant as long as the index doesn't undercut its latest low. If that low is undercut, the rally try is done and the market needs to try again. On Day 4 and later, you are looking for the Nasdaq or S&P 500 to rise sharply in higher volume than the previous session.
That's a follow-through day, giving investors the green light to start buying leading stocks breaking out past correct buy points. It should put your portfolio and mindset in sync with the stock market action by gradually committing capital to leading stocks.
Nevertheless, it is important for investors to put this downtime to good use.
Now is an ideal opportunity to study market bottoms and to build a strong watchlist of top-performing stocks. Many long-term leaders tend to break out at or near the follow-through, which is the market bottoming signal.
Missing that early opportunity can be a costly mistake.
