Dow Jones futures fell sharply Thursday morning, along with S&P 500 futures and Nasdaq futures, as the 10-year Treasury yield continued to tumble amid concerns about global economic growth. China EV sales showed strong Tesla deliveries in that key market last month.
The stock market rally showed slim gains on Wednesday, with the S&P 500 and Nasdaq composite hitting record highs. Crude oil prices and Treasury yields continued to slide, with the Fed minutes offering few surprises. Apple (AAPL), Microsoft (MSFT) and Amazon.com (AMZN) continued to lead on Wednesday. But those three megacaps fell solidly early Thursday.
PayPal (PYPL) rose 1.5% to 297.13, breaking out of a cup-with-handle base with a 296.11 buy point. PYPL stock had topped a 277.96 early buy point on June 17. Upwork (UPWK) now has a handle on its cup base, along with Apple supplier Qorvo (QRVO).
But PayPal fell back into its handle Thursday morning, while UPWK and QRVO were pointing lower.
Meanwhile, highly valued growth stocks that retreated Wednesday were continuing to slide early Thursday, including EV makers Tesla (TSLA) and Nio (NIO). New data showed strong China sales for Tesla in June.
Finally, the latest red-hot meme stock is Newegg Commerce (NEGG), which shot up 148% to 67.57 on Wednesday. NEGG stock is up 522% just since June 29. But Newegg is 234% above its 10-day moving average, extremely extended even by meme stock measures.
NEGG stock fell 13% in extended action, just a sliver of recent gains.
Meanwhile, “old” meme stocks such as AMC Entertainment (AMC), GameStop (GME) and Clover Health (CLOV) have lost considerable ground over the past few weeks. AMC stock sank 9.8% on Wednesday. GME stock slid 4.5% and CLOV stock 2.8%.
Dozens of states filed an antitrust lawsuit vs. Alphabet (GOOGL) related to its Google Play app store. Two other state lawsuits take aim at Google’s search and ad technology. The Justice Department is targeting Google’s dominant search business. Google stock fell nearly 2% early Thursday, but that seems tied to the big market rout.
Tesla stock, PayPal and Microsoft are on IBD Leaderboard. PayPal stock and Microsoft are on IBD Long-Term Leaders.
Dow Jones Futures Today
Dow Jones futures fell 1.3% vs. fair value, actually off their worst levels. S&P 500 futures declined 1.3%. Nasdaq 100 futures lost 1.2%. Dow futures plunged Thursday morning after edging lower Wednesday night.
The 10-year Treasury yield fell six basis points to 1.26%, continuing a stunning slide.
Crude oil prices fell a fraction.
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 Wednesday
The stock market rally closed slightly higher on the major indexes, though small caps and several sectors lost some ground.
The Dow Jones Industrial Average rose 0.3% in Wednesday’s stock market trading. The S&P 500 index also rose about 0.3%. The Nasdaq composite closed one point above breakeven. The small-cap Russell 2000 fell 0.9%, undercutting its 50-day moving average. The small-cap index has a number of banks and energy companies, while AMC stock is a relatively large weight now.
Apple stock rose 1.8% to 144.57, now just above the 5% buy zone. Microsoft stock edged up 0.8% and Amazon stock 0.6%, both slightly extended from their 5% chase zones.
Crude oil futures fell 1.6% to $72.20 a barrel. Late Monday, U.S. crude oil prices hit a six-year high of $76.98. The 10-year Treasury yield slid 5 basis points to 1.32%, the lowest level since February. Intraday, the benchmark yield undercut 1.3%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) retreated 2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged down 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) was just above break-even, with MSFT stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) fell 1.4%.
SPDR S&P Metals & Mining ETF (XME) climbed 1.8% and Global X U.S. Infrastructure Development ETF (PAVE) 1.3%. U.S. Global Jets ETF (JETS) retreated 1.8%. SPDR S&P Homebuilders ETF (XHB) gained 1.7%. The Energy Select SPDR ETF (XLE) slumped 1.6% and the Financial Select SPDR ETF (XLF) edged up 0.1%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) retreated 2.3% and ARK Genomics ETF (ARKG) 2.2%. Tesla stock is the No. 1 holding across ARK Invest’s ETFs.
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Fed Meeting Minutes
Federal Reserve policymakers were getting closer last month to discussing scaling back asset purchases, according to newly released Fed minutes from the June meeting. Some members “expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated at previous meetings.”
Fed chief Jerome Powell had already said that the June meeting was the “talking about talking about” Fed meeting, suggesting that taper talk might start at the late July or September meetings, with actual tapering a few months after that.
The Fed minutes had little impact on Wednesday afternoon trading in stocks or Treasury yields.
Tesla Stock, China EV Sales
Early Thursday, the China Passenger Car Association released China EV sales for June. BYD Co. (BYDDF), Nio and peers Xpeng (XPEV) and Li Auto (LI) have already reported June delivery figures.
But CPCA reported Tesla wholesale sales of 33,155 in June. That includes 28,138 local sales, up from 21,936 in May and up sharply from April. Tesla exported 5,017 vehicles, down from April and May.
The U.S. EV giant had already reported record global deliveries for the second quarter.
Tesla stock fell more than 2% in premarket trading, suggesting a move to or below its 50-day and 200-day moving averages.
Shares retreated 2.3% to 644.65 on Wednesday.
Nio stock tumbled 8.45% to 46.04 on Wednesday, its fourth straight loss after a sharp run-up. Shares could have a 55.23 handle buy point after Thursday. Nio is holding its annual Nio Day on Friday, with EV product announcements or updates expected.
BYD stock dipped 0.7% to 28.46, finding support just above its 21-day line. The electric-car, bus and battery maker already has a cup-with-handle buy point of 31.40.
Li Auto stock sank 4.6% to 32.03. Like Nio stock, the China EV play is likely to have a handle after Thursday. But the base is 66% deep. An extended handle, or even a short base within the larger consolidation, would be more attractive than a tiny handle.
XPEV stock skidded 5.9% to 41.47, after Xpeng debuted a secondary listing on the Hong Kong exchange. Shares are forming a handle-like pattern, but it’s below the midpoint of a very deep base.
Nio stock, XPEV and LI all retreated solidly Thursday morning. BYD, which trades over the counter in the U.S., was not yet trading.
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Market Rally Analysis
The stock market rally eked out tiny gains on Wednedsday, with the S&P 500 and Nasdaq hitting record intraday highs once again. At Wednesday’s close, the Nasdaq was 5.5% above its 50-day moving average while the big-cap Nasdaq 100 is now 6.8% above that level. That raised some concerns of a market rally pullback, which is what Dow futures and Nasdaq 100 futures are indicating now.
With Apple, Amazon and Microsoft leading the way, gains in the major indexes can mask underlying weakness. Many growth stocks, especially highly valued names like Palantir (PLTR), Tesla, Nio and ARK-style stocks, have been pulling back after hefty rebounds.
A tumbling 10-year Treasury yield has clearly contributed to tech stocks’ advance over the last several weeks, though Thursday’s drop in yields was pressuring futures across the board. Is this a sign of weaker global economic growth, or a downshift in economic outlooks? The U.S. and global economy appear to be expanding rapidly while inflation has heated up, at least temporarily. Yes, the Delta variant of the coronavirus has pushed up new infections worldwide, but hospitalizations and deaths are picking up dramatically. So it’s not clear what’s driving Treasury yields so much lower. But bond market uncertainty has clearly spilled over to the stock market.
Crude oil reversed lower from early morning gains on Tuesday and Wednesday, despite a seemingly bullish backdrop of no OPEC+ production hike. That may be a sign that crude oil has topped in the short run. Energy stocks may need to take a breather if that’s the case. But so far, most leading energy stocks, such as Denbury Resources (DEN), have held key support.
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