Futures rise, yields slip with key inflation data

Futures rise, yields slip with key inflation data

Dow Jones futures rose slightly Friday morning, along with S&P 500 and Nasdaq futures, as Treasury yields fell. Nike (NKE) and Micron Technology (MU) earnings are in focus with the Fed’s favorite inflation gauge on deck.


The stock market sold hard on Thursday, wiping out Wednesday’s gains. The S&P 500 hit new lows in the bear market. The Nasdaq composite didn’t quite undermine its June lows, but the large-cap Nasdaq 100 did, led by Apple stocks and You’re here (TSLA).

Treasury yields rebounded somewhat on Thursday, while jobless claims fell to a five-month low, something the Federal Reserve doesn’t want to see. Apple (AAPL) and CarMax (KMX) caused large losses on Thursday. After paring losses on Wednesday, spurred by a report on iPhone production cuts due to lackluster demand, Apple shares sold hard on Thursday, partly on a downgrade by analysts, manufacturers of iPhone chips also being in trouble.

CarMax (KMX) largely missed earnings views on Thursday morning, warning of “affordability challenges.” For broadly similar reasons, Moody’s lowered its outlook for the global auto industry from stable to negative. KMX stock crashed, sinking other car dealerships. But General Motors (GM), Ford engine (F), Stellantide (STLA) and Tesla shares were also sold.

Tesla has a lot of news coming. Tesla will hold its annual AI Day on Friday evening. Over the weekend, Tesla will likely release third quarter delivery numbers. But investors in TSLA stocks won’t have a chance to react to these events until Monday morning.

Tesla on Thursday evening denied a local media report that the electric vehicle giant would drastically cut prices for the Model 3 and Model Y in China. There was growing speculation that Tesla would cut some prices in China in early October.

Key wins

Nike’s earnings and sales narrowly beat the first-quarter fiscal consensus. But gross margins fell significantly from a year earlier, mainly due to the liquidation of excess inventory in North America. Inventories in North America jumped 65% from a year earlier. Sportswear giant Dow Jones said it would take “decisive action” to get rid of the wanted goods.

NKE shares sold over 9% in extended action. Nike stock slid 3.2% in Thursday’s session to 95.52, hitting a new two-year low intraday.

Micron’s revenue edged higher, while revenue was lower. The memory chip giant has guided a significant decline for the current fiscal first quarter. It also plans to reduce wafer manufacturing equipment spending by up to 50% in the current fiscal year compared to fiscal 2022.

Shares of MU rose 3% early Friday. Micron shares fell 1.9% to 50.01 in Thursday’s session, after hitting a 23-month low last week.

Micron’s capex cut isn’t good news for memory-exposed chip gear giants such as Applied materials (AMAT), KLA Corp. (KLAC) and Search Lam (LRCX). The three stocks were little changed early Friday after falling slightly Thursday evening.

In other news, IBM (IBM), cut its quarterly dividend by 78% to 37 cents per share. IBM stock rose slightly in overnight stock.

Dow Jones Futures Today

Dow Jones futures were up 0.7% relative to fair value. NKE and IBM shares are components of the Dow Jones. S&P 500 futures climbed 0.9% and Nasdaq 100 futures rose 0.8%.

The 10-year yield fell 6 basis points to 3.69%, reversing from Thursday night’s modest gains.

China’s central bank is letting cities lower the floor on mortgage rates, if those regions have seen a recent drop in house prices.

At 8:30 a.m. ET, the Commerce Department will release its August personal income and consumer spending report. Investors will focus on the PCE price index, the Fed’s favorite inflation gauge. The overall PCE index is expected to post a slightly cooler gain of 6.1% from a year earlier. But core PCE inflation is expected to rise to 4.8% from 4.6%.

Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.

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Stock market Thursday

The stock market fell sharply on the open and remained deep in the red all day, closing only slightly above session lows.

The Dow Jones Industrial Average fell 1.5% in Thursday’s stock trading. The S&P 500 index fell 2.1%. The Nasdaq composite slipped 2.8%. The small-cap Russell 2000 fell 2.2%.

Apple stock fell 4.9% to 142.48, hitting its worst levels since early July, although still a long way from the June low. Bank of America downgraded Apple stock to neutral with a price target of 160.

CarMax earnings fell 54% from a year earlier, well below consensus. Used car prices began to come under pressure and the car dealer cited affordability issues. KMX stock plunged almost 25%. carvana (CNVA) plunged 20%.

CarMax’s failure and Moody’s industry downgrade brought criticism to automakers. GM stock fell 5.65%, Ford 5.8% and Chrysler parent Stellantis 4.8%. Tesla stock fell 6.8%, falling near its 50- and 200-day lines, but just held above short-term lows.

The 10-year Treasury yield rose 4 basis points to 3.75%, after hitting 3.81% intraday. This follows Wednesday’s 26 basis point decline. Even so, the benchmark Treasury yield is still on course for a ninth straight weekly gain.

U.S. crude oil prices fell 1.1% to $81.23 a barrel.


Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.2%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 1.7%. ETF VanEck Vectors Semiconductor (SMH) lost 3.15%. The MU stock is a notable holding of SMH, along with AMAT, LRCX and KLAC.

The SPDR S&P Metals & Mining ETF (XME) fell 1.8%. ETF Energy Select SPDR (XLE) and ETF Financial Select SPDR (XLF) fell 1.3%. The SPDR healthcare sector fund (XLV) fell 0.8%.

Reflecting more speculative stocks, ARK Innovation ETF (ARKK) fell 5.5% and ARK Genomics ETF (ARKG) 4%, after strong gains on Wednesday. Tesla stock is a major holding in Ark Invest’s ETFs.

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Stock market analysis

So much for Wednesday’s stock market rebound. It only took a few minutes on Thursday for the major indices to wipe out the entire one-day bounce.

The S&P 500 index rose above Tuesday’s levels, marking a new bear market low. The Nasdaq 100 just broke its June lows, with Apple and Tesla among the big losers.

The Nasdaq composite itself has yet to break above its June lows, but has fallen below the September 23 intraday low.

The S&P 500 and Nasdaq rally day count has returned to zero. The Dow didn’t quite cross Tuesday’s intraday bear market low, so Thursday was technically the second day of its attempted rally.

Treasury yields rose on Thursday, but only recovered a fraction of Wednesday’s losses. The US dollar lost ground for a second straight session. Still, the 10-year Treasury yield and the dollar have risen sharply in recent weeks.

Apple, CarMax and Nike raised new concerns about consumer spending. Apple stocks and iPhone chip names, along with GM, Tesla and the auto sector, make up a pretty big chunk of the market. Nike alone is a $150 billion blue chip component.

A Metaplatforms (META) hiring freeze and likely downsizing, along with Micron’s weak outlook, have compounded the companies’ broader problems.

But you don’t have to look for reasons why stocks sold off on Thursday. It’s a bear market. The Federal Reserve is raising interest rates aggressively, even as the US economy risks sliding into an overt recession.

Wednesday’s rebound was late, but also did not signal the end of the strong downtrend.

The CBOE Volatility Index, or VIX, rose on Thursday. But it was an inside day for the market’s fear gauge after Wednesday’s downside reversal. This suggests that the major indexes may need to break decisively below their June lows ahead of the bear market lows.

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What to do now

Investors need patience. At some point, the bear market will end and a new sustained uptrend will develop. But don’t jump on the first rise. Tracking days are a good way to quickly enter a new market rally, but with at least some indication that it may last.

If you bought stocks on Wednesday’s rally, you should be ready to come back quickly. a few like Vertex Pharmaceuticals (VRTX) and DoubleVerify (DV) held up well on Thursday. But many intriguing names on Wednesday wiped out those gains.

For now, focus on updating your watchlists. Look for stocks with high relative strength. If they hold key moving averages, fine, but at this point many relative “winners”, such as World wrestling entertainment (WWE), are below their 50 and 200 day lines.

Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.


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