Dow Jones futures rose overnight, along with S&P 500 futures and Nasdaq futures.
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A fresh stock market correction led to heavy losses again Thursday, as 10-year Treasury yields rose in two one-day reactions to the Fed’s meeting. The S&P 500 pared its August lows, while the Nasdaq and Dow Jones edged closer.
Leading stocks came under heavy pressure. Nvidia (NVDA), looks similar to the Nasdaq, which is nearing its August low. Celsius Holdings (CELH) broke the 50-day line and sold off sharply for a second day. Adobe (ADBE), Uber Technologies (UBER), Draft Kings (D.K.N.G), visa (V) and Amazon.com (AMZN) gap below their 50-day moving average after holding that position for a few days.
Tesla (D.S.L.A) has roundtripped recent gains but holds key support while forming a new buy point. Meta platforms (Meta) has a new, lower entry. General Electric (GE), Lululemon Athletica (Lulu), Dorian LPG (LPG), Vertex Pharmaceuticals (VRTX), Arch Capital Group (ACGL) and Costco Wholesale (cost) stocks are also doing relatively well – for now.
Investors should have limited exposure and not make new purchases until the market shows real strength.
Nvidia shares, Meta, Tesla, Uber and Celsius all IBD Leaderboard Stocks, DKNG stock on leaderboard watchlist. Tesla, Celsius, Lululemon and Meta have shares IBD 50. Tesla has stock IBD Big Cap 20. Dorian LPG was the IBD Stock of the Day on Thursday.
Dow Jones Futures Today
Dow Jones futures rose a fraction and fair value. S&P 500 futures rose and Nasdaq 100 futures rose 0.1%.
The 10-year yield rose slightly to 4.5%.
Overnight, the Bank of Japan faces uncertainty over whether the new BoJ governor will further ease ultra-easy monetary policy.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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Stock market correction
A stock market correction worsened, with a rise in Treasury yields weighing on major indices.
The Dow Jones industrial average fell 1.1% in stock market trading Thursday. The S&P 500 index retreated 1.6% and the Nasdaq composite slipped 1.8%, a day after both hit their lowest levels in consecutive days on Aug. 29, a more bleak sign.
The S&P 500 hit its worst levels in nearly three months, paring its August lows. The Nasdaq hit its worst level since early June; The Dow marked its lowest close in two months.
Market breadth, long weak, was the worst Thursday, dominated by losses and fresh lows.
The small-cap Russell 2000 fell 1.6% and the Invesco S&P 500 Equal Weight ETF (RSP) fell 1.7%. Both are at their worst since early June and have missed their 200-day lines.
U.S. crude was down 3 cents at $89.63 a barrel. Copper prices fell by 2.1%.
The 10-year Treasury yield rose 13 basis points to 4.48%, the highest yield since October 2007. The two-year Treasury yield, more closely aligned with the Fed’s rate outlook, rose 3 basis points to 5.15%, a new 17-year high.
With Wall Street and the Fed taking a soft landing thesis, the yield curve becomes less inverted.
ETFs
Among growth ETFs, the innovator IBD 50 ETF (FFTYfell 2.6%. iShares Expanded Technology-Software Sector ETF (VAT) slipped 2.4%. VanEck Vectors Semiconductor ETF (SMH2% retreated. Nvidia is the most heavily weighted stock in SMH.
Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKK) fell 3% and the ARK Genomics ETF (ARKG) 2.65% Tesla shares are the No. 1 holding across ArcInvest. DKNG stock is a top-10 holding. Cathie Wood’s Ark recently reduced its holdings of Tesla and DraftKings.
SPDR S&P Metals & Mining ETF (XME) fell by 2%. US Global Jets ETF (JETS) down 1%. SPDR S&P Homebuilders ETF (XHBdecreased by 2.5%. Energy Select SPDR ETF (XLE) fell 1.4% and the Health Care Select Sector SPDR Fund (XLV) yielded 0.9% with XLV’s VRTX stock portion.
Industrial Select Sector SPDR Fund (XLI) retreated 1.6%, with GE stock a big holding. Fund Selection SPDR ETF (45) lost 1.6%.
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Stocks to watch
Tesla shares fell 2.6% to 255.70, paring all of the previous week’s gains, fueled by bullish analyst calls on the EV maker’s Dojo supercomputer and self-driving prospects. But stocks essentially held the 50-day range. TSLA stock now has a perfect handle, giving it a buy point of 278.98.
Meta stock fell 1.3% to 295.55, slipping a bit further below its 50-day line. But after weeks of wedging at low volume, the Internet giant is getting a bit of a shakeup. It has now gained a handle, giving a low buy point of 312.87.
Meanwhile, GE stock tested its 50-day line, closing below but within a tight flat base. LULU stock and Vertex rebounded intraday from near their 50-day lines. Arch Capital and Costco pulled back from near buy points, according to MarketSmith. LPG stock edged higher towards buy point at cup-with-handle.
Remember, stocks can hold support as long as they don’t, as Adobe, DraftKings, Uber, Visa and Amazon showed on Thursday. The market is in a correction. If the major indexes continue to decline, most of the remaining stocks will fold.
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What to do now
Given the heavy selling in recent days and the past few weeks, investors should be largely or completely in the cash.
At some point, the stock market will boom. But don’t get excited by a strong open or a strong day or two. The best days in market history are in corrections or bear markets.
Instead, wait for evidence that a new market rally has real momentum.
For now, work on your watch lists. A few stocks are in good condition, but many leaders are severely damaged and need time to repair. So focus on stocks that show relative strength.
Read the big picture every day to stay in tune with market direction and leading stocks and sectors.
Follow Ed Carson on X/Twitter @IBD_ECarson and in texts @edcarson1971 For stock market updates and more.
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