Dow Jones futures tilted lower overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally backed off again on Wednesday as hot labor data raised the prospect of a bigger rate hike, while JPMorgan’s Jamie Dimon warned of a “storm” in the economy. Major indices slightly reduced losses as the Federal Reserve saw slower growth in most of the US
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Lithium producers Albemarle (ALB) at Lively (LTHM) has collapsed as agriculture performs as such ADM (ADM) at Bunge (BG) fell sharply following bullish moves on Tuesday.
Conversely, energy stocks continued to thrive, along with LNG games Golar LNG (LNG) at Enhance Energy (EE), a recent IPO, flashing buy signals. Callon Petroleum (CPE) will shoot up close to a buy point, constantly racing from under a V-shaped cup base. All three are volatile, though.
Printers and PC giants HP Inc. (HP) rose 3.9% to 40.34, a record close, following better -than -expected earnings late Tuesday. HP stock cleared a draw-the-line 39.81 early entry that also lined up at the top of an earlier base.
Meanwhile, megacaps are not leading the market rally. However, Microsoft’s stock is the only one approaching its 50-day line Apple (AAPL) and parent Google Alphabet (GOOGL) is moving near their 50-day descending line. Tesla (TSLA) fell 2.4% on Wednesday. TSLA stock, after a big bounce last week, is hitting resistance at its 21-day exponential moving average.
Data storage is playing NetApp (NTAP) at Pure Storage (PSTG) reported earnings late Wednesday, including Hewlett Packard Enterprise (HPE) and software makers MongoDB (MDB) at Veeva Systems (VEEV). NetApp, Pure Storage, MongoDB and Veeva rose in extended trading on strong results, while HPE fell after a slight loss. Everything is pretty off highs.
Albemarle’s stock is on the IBD Leaderboard. Microsoft (MSFT) and Google stocks are IBD Long-Term Leaders. Callon Petroleum and BG stocks are at IBD 50, which selected CPE as IBD 50 Stock To Watch on Wednesday.
Dow Jones Futures Today
Dow Jones futures have lost a fraction compared to fair value. The S&P 500 futures and Nasdaq 100 futures were down 0.1%.
Note that overnight action on Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they review actionable stocks in the stock market rally on IBD Live
Economic Data
The April JOLTS survey showed that job vacancies came in at 11.4 million, according to the views. That’s not too high on the record, but very close. Job vacancies in March were changed to 11.855 million from 11.549 million. People stopped at near-record levels, as layoffs reached new lows. The Federal Reserve clearly wants to see labor markets soften. It probably started happening in May. But it’s not in the April JOLTS report.
The May employment report is set for Friday.
Meanwhile, the ISM manufacturing index rose to 56.1 in May from 55.4 contrary to views for a small drop to 54.5.
The Fed’s Beige Book report, released at 2 pm ET, showed that economic growth has cooled in some districts, where customers are nodding at some high prices.
Atlanta Fed President Raphael Bostic walked back to talk about a “pause” in September. San Francisco Fed President Mary Daly doesn’t see a pause until the fed funds rate is approximately 2.5%. With the benchmark rate at 0.75% -1% today, that indicates at least three more half-point rate increases.
Finally, JPMorgan CEO Jamie Dimon warned about an economic “storm” coming upon us. “You better brace yourself,” he said at a financial conference. “JPMorgan is bracing ourselves.” Dimon said the question is whether it will be a minor or major storm.
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Stock Market Rally
The stock market rally opened on Wednesday with solid gains, but hot economic data and “Hurricane Dimon” quickly changed the climate, with major indices reversing lower. The indexes reduced losses in the afternoon, helped by the Fed’s Beige Book, but faded again.
The Dow Jones Industrial Average fell 0.5% in stock market trading on Wednesday. The S&P 500 index was down 0.75%, with the ALB stock performing the worst. The Nasdaq composite sank 0.7%. The small-cap Russell 2000 gave 0.6%.
US crude oil prices rose 0.5% to $ 115.26 per barrel. Gasoline, diesel and natural gas futures showed greater benefits.
The 10-year Treasury yield jumped nine basis points to 2.93% in the wake of the JOLTS report and Fed comments. That was after a 10-basis-point pop on Tuesday. Investors forecasting a half-point rate hike this month and in July are now pricing a 50-basis-point move in September.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) was up 1.15%, while the Innovator IBD Breakout Opportunities ETF (BOUT) was up 0.6%.
IShares Expanded Tech-Software Sector ETF (IGV) advanced 0.6% as Salesforce.com (CRM) reported strong revenue and Service Today (NOW) raised the guide. MSFT stock is also a large IGV holding.
VanEck Vectors Semiconductor ETF (SMH) dipped 1.6%.
The SPDR S&P Metals & Mining ETF (XME) and the Global X US Infrastructure Development ETF (PAVE) both dropped 0.2%. The US Global Jets (JETS) dropped 3.1%. SPDR S&P Homebuilders (XHB) sank 1%. The Energy Select SPDR ETF (XLE) rose 1.6%, and the Financial Select SPDR ETF (XLF) fell 1.6%.
Reflecting stocks with more speculative stories, the ARK Innovation ETF (ARKK) was down 3.6% and the ARK Genomics (ARKG) was down 3.4%. Tesla stock remains No. 1 holding in Ark Invest ETFs.
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Lithium Stocks Chilled
Albemarle stock fell 7.8% while Livent stock fell 14%, dropping early buying points after solid losses on Tuesday. Earlier this week, Goldman Sachs called a leader in battery metals, predicting a big drop in white-hot lithium prices in 2023.
ALB stocks and Livent jumped last week beyond key resistance levels as the Nasdaq followed. The moves are also a late reaction to Albemarle’s second hike guidance hike in a month.
ALB stock, at least, has found support on its 21-day moving average. On a monthly chart, Albemarle and LTHM stocks don’t look too bad, given their big gains in May. Perhaps these stocks will form handles, but probably not.
Anyone who bought these stocks on Thursday-Friday, even near entry points, is sitting on moderate to painful losses.
Agricultural Stocks are withering
ADM stock fell 4.6% to 86.67, fell below the 50-day line and erased several days of gains. On Tuesday, ADM stock rose 2.1%, crossed the 50-day line and flashed an early entry. Bunge stock showed similar action on Tuesday with 3.1% gain. But it fell 3.6% to 114.10 on Wednesday, back below the 50-day line.
Fertilizer stocks such as Mosaic (MOS), which had strong gains on Tuesday, sold on Wednesday.
Market Rally Analysis
The stock market rally suffered moderate losses for the second consecutive session, off intraday lows but fading again at the close. The Nasdaq continues to find support with its 21-day moving average.
One concern with the current market rally is that there aren’t too many stocks to buy. That situation hasn’t improved, with some promising moves reversing sharply, including LTHM stocks, ADM stocks and more. Drug makers aren’t separating, but aren’t having a good time this week.
Meanwhile, some stocks setting up are struggling again, including travel games like Delta Air Lines (DAL).
Will many of these names recover if the market rally stabilizes? Of course. In a positive scenario, the current market pullback could allow the formation of new handles and pullbacks. But for now, stocks are falling.
An exception is oil and gas. This sector continues to do well overall, with few stocks at or near buying points. But these names are prone to volatility.
Growth names remain heavily damaged, with renewed concern over Treasury yields. Although the market rally is showing long -term power and Microsoft, Google and Apple stocks are shaping up, it’s unclear if these megacaps will outperform in the foreseeable future.
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What to do now
If you get limited exposure on Thursday or Friday, you may not be too hurt and may still wake up. But if you go in more aggressively and continue to add to the holdings on Tuesday, you could have some unsatisfactory losses. That’s especially true if you buy more dynamic names.
Remember, if you’re going to be aggressive in entering, you need to be aggressive in scaling back.
Yes, it is possible that you sell positions and then the stocks and markets rebound quickly. But if that’s the case you can buy those stakes again – or a better one. That’s a small cost for protection against a steeper sale.
Read The Big Picture daily to stay in sync with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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