Dow Jones futures fell modestly overnight, along with S&P 500 futures and Nasdaq futures. Stocks rallied from key resistance on Monday amid key economic data amid inflation and recession concerns, renewed China worries.
The Nasdaq posted its biggest losses on Monday, leading last week’s gains among the major indexes. Treasury yields to invert, recession warning
Dow Jones Futures Today
Dow Jones futures lost 0.4% and fair value. S&P 500 futures fell 0.5% and Nasdaq 100 futures fell 0.6%.
Crude oil prices fell more than 1%.
The 10-year Treasury yield fell 3 basis points to 2.96%.
Stock market rally
The stock market’s rally lost ground on Monday, with major indexes closing near session lows.
The Dow Jones industrial average fell 0.5% on Monday Stock market trading. The S&P 500 index fell 1.15%. The Nasdaq composite fell 2.3%. The small-cap Russell 2000 fell 2%.
U.S. crude oil prices fell 0.7% to $104.90 a barrel, the lowest in the morning.
The 10-year Treasury yield fell 11 basis points to 2.99%. The two-year yield fell 5 basis points to 3.07%, once again inverting much of the yield curve. The one-year Treasury yield rose 4 basis points to 2.99%, matching the 10-year rate.
in the middle Best ETFsInnovator IBD 50 ETF (FFTY) lost 1.3%, while the Innovator IBD Breakout Opportunities ETF (Botfell 0.7%. The iShares Expanded Technology Software Sector ETF (VATretreated 1.7%. VanEck Vectors Semiconductor ETF (SMHIt gave up to 2.4%.
SPDR S&P Metals & Mining ETF (XME) fell 1.65% and the Global X US Infrastructure Development ETF (sidewalkdecreased by 0.4%. US Global Jets ETF (JETS) decreased by 2.3%. SPDR S&P Homebuilders ETF (XHB) pushed down by 0.5%. Energy Select SPDR ETF (XLE) and Fund Selection SPDR ETF (XLFgave up to 0.8%. Health Care Select Sector SPDR Fund (XLV) skewed lower by 0.25%.
Over the weekend, regulators fined Alibaba. Tencent (TCEHY) and several other tech companies for failing to disclose certain past acquisitions. The 500,000 yuan fines are relatively small, but have raised concerns that Beijing’s crackdown and tech giants are not done yet.
Macau closed casinos and most businesses for a week, renewing fears over China’s Covid restrictions.
Alibaba shares fell 9.4% to 109.57, ending below its 21-day moving average for the first time since late May. Last Thursday, BABA stock moved above its 200-day line and cleared some resistance above the 121 level, giving it an aggressive entry. Shares fell below those key levels on Friday.
While a stronger move above last week’s highs is likely, BABA stock will likely consolidate above its 200-day line.
Li Auto Stock
Li Auto shares fell 4% to 37.33. 37.55 below the buy point. Shares are still largely extended from their 50-day line. LI stock can form a shallow base on top of a long, deep consolidation. The last few weeks can be seen as a handle for the fundamentals going into late 2020.
AstraZeneca shares fell 0.3% to 66.75, flirting with 67.50. Double bottom Buy point, step MarketSmith analysis. The relative strength line for AZN stock, the blue line on the charts provided, is below the highs.
HSY shares rose 0.4% to 220.65, down from 222.75. Handle with cup Point to buy. Even though defense stocks are in favor right now, that doesn’t mean they’re safe. Several food and beverage plays fell on May 18, including shares of Hershey. However, stocks have rebounded since late June.
Kasturi Vs. The Twitter Saga
Faced with buyer’s remorse, Musk said late Friday that he does not want to buy Twitter, something he has signaled strongly over the past several months. Twitter said the deal was a deal, forcing Musk to move forward with a $44 billion, $54-a-share acquisition. Twitter hired a merger law heavyweight to represent it. Legal experts say Kasturi has a weak case.
Twitter stock fell 11.3% in the regular session on Monday to 32.65, its lowest since mid-March. TWTR stock hit a two-year low of 31.30 on February 24.
After the decision, Twitter, through its lawyers, said Musk’s attempt to block the acquisition was “false and misguided.”
Tesla shares, which were slightly higher at the open, fell 6.55% to 701.99. Some or most of Monday’s losses may have reflected growth-led market weakness and China concerns. TSLA stock fell below the 50-day line after closing above that level for the first time in two months on Friday. Shares also fell slightly below their 21-day line.
Market rally analysis
Given the market’s key positions over the past week, Monday’s pullback is not surprising, especially with negative China news and a slew of key data.
The Nasdaq retreated from its 50-day and 10-week moving averages. It acted as a major resistance in 2022. This does not mean that the experiment has already failed. The index may stall for days or weeks before breaking these levels.
The Nasdaq closed slightly below its 21-day moving average. The S&P 500, Dow Jones and Russell 2000 also closed lower in that short period.
Beyond China news, it’s hard to be bold in the current situation with mainstream news.
Consumer price index inflation on Wednesday is expected to show a slight uptick from May’s 40-year high of 8.6%. Core inflation should cool slightly. As petrol prices have fallen significantly since their June 14 peak and commodity prices have fallen sharply over the past few weeks, inflation should moderate. So it’s unclear how markets will react to the June inflation data.
A Fed rate hike of 75 basis points by late July appears locked in, with little chance of a full percentage point. The real impact will be the impact on future Fed rate hikes. But policymakers will get two more CPI and jobs reports before the September meeting, along with other data from the November Fed meeting.
Guidance will be key amid rapid changes in the economy.
What to do now
Investors may not want to add moderate exposure in the short term as the market hits resistance ahead of major economic and corporate news. Some sectors are active, particularly defensive or defensive growth names such as HSY stock and AbbVie. But if the market rebounds strongly, defensive names may sell or lag behind. So don’t focus too much on a particular field or theme.
Investors may want to take partial profits from any recent winners.
According to Big picture Each day should be in sync with the direction of the market and the leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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