Dow Jones futures fell early Friday, along with S&P 500 futures and especially Nasdaq futures, as China property woes offset retreating Treasury yields.
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Applied Materials (AMAT) and Ross Stores (ROST) headlined overnight earnings, with Deere (DE) and China EV startup XPeng (XPEV) reporting early Friday.
Hong Kong’s Hang Seng fell 2.1% on Friday and is now down more than 20% from January’s highs. China property giant Evergrande filed for bankruptcy in New York on Thursday night. Property woes are a major drag on the struggling Chinese economy.
The stock market continued to bleed on Thursday while Treasury yields kept rising. The major indexes tried to hold their ground, helped by Cisco Systems (CSCO) rallying on earnings. But once again stocks weakened as the session wore on. The Dow Jones fell below its 50-day line, joining the Nasdaq, S&P 500 and Russell 2000.
Leading stocks suffered more damage, looking bad even when the major indexes were flat. Homebuilders Lennar (LEN), KB Home (KBH) and D.R. Horton (DHI) broke lower.
Nvidia (NVDA), the stock of the 2023 market rally, largely held its ground as yet another analyst made bullish comments about NVDA stock heading into earnings next week. However, Nvidia stock fell somewhat early Friday.
But almost all other chip stocks are below their 50-day lines. Meanwhile, more-speculative AI plays Palantir Technologies (PLTR) and C3.ai (AI) broke further.
Dow Jones Futures Today
Dow Jones futures fell 0.4% vs. fair value. S&P 500 futures lost 0.5% and Nasdaq 100 futures declined 0.75%.
The 10-year Treasury yield declined 7 basis points to 4.23%.
Bitcoin tumbled Thursday night on news that SpaceX has sold all its holdings. Cryptocurrencies have traded relatively steady after that sell-off.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Earnings
AMAT stock edged higher before the open after Applied Materials earnings and revenue comfortably beat views Thursday night. The chip equipment giant also guided higher. AMAT stock edged down 0.5% to 137.59 on Thursday, after falling below its 50-day line recently.
ROST stock jumped overnight, signaling a breakout, after Ross Stores topped earnings views and guided slightly higher. Shares fell 1.9% to 113.06 on Thursday. Ross Stores stock has been flirting with a 115.48 cup-with-handle buy point.
DE fell modestly in premarket trade after Deere beat quarterly views, threatening to fall below its 50-day line. DE stock fell slightly Thursday.
XPEV stock tumbled early Friday after reporting a wider-than-expected Q2 loss while revenue fell sharply. XPeng does expect deliveries to jump to roughly 40,000 in Q3 from Q2’s 23,205.
Chinese e-commerce play Vipshop (VIPS) reported stronger than expected earnings, but VIPS stock fell sharply. Shares had recently skidded below their 50-day line, though they bounced Thursday.
XPEV stock and Vipshop are falling in part amid broad China woes.
Meanwhile, Palo Alto Networks (PANW) looms Friday night. Earnings reports after the close are highly unusual, and the cybersecurity giant has given no explanation. PANW stock fell Thursday to its worst level since late May.
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Stock Market Thursday
The stock market closed near session lows yet again.
The Dow Jones Industrial Average fell 0.8% in Thursday’s stock market trading. The S&P 500 index also lost 0.8%. The Nasdaq composite skidded 1.2%. The small-cap Russell 2000 slumped 1.15%.
The 10-year Treasury yield climbed 5 basis points to 4.31%. Intraday, the yield hit 4.328%, a whisker below the 15-year high of 4.331% set last October. It’s already the highest close since November 2007.
U.S. crude oil prices rose 1.3% to $80.39 a barrel, snapping a three-session slide. Copper futures climbed 0.9%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) slumped 2.3%. The iShares Expanded Tech-Software Sector ETF (IGV) gave up 1.5%. The VanEck Vectors Semiconductor ETF (SMH) fell 0.7%. AMAT stock is a notable SMH holding, with Nvidia the No. 1 holding.
Reflecting stocks with more-speculative stories, the ARK Innovation ETF (ARKK) retreated 2.4% and ARK Genomics (ARKG) lost 0.7%.
The SPDR S&P Metals & Mining ETF (XME) edged up 0.2%, while the Global X U.S. Infrastructure Development ETF (PAVE) declined 1.5%. U.S. Global Jets (JETS) descended 1.5%. SPDR S&P Homebuilders (XHB) tumbled 3.6%, with DHI stock and Lennar holdings. The Energy Select SPDR ETF (XLE) rose 1.2%. The Health Care Select Sector SPDR Fund (XLV) dropped 0.8%.
The Industrial Select Sector SPDR Fund (XLI) slipped 0.8%, with DE stock a top-10 holding.
The Financial Select SPDR ETF (XLF) dipped 0.5%. The SPDR S&P Regional Banking ETF (KRE) was flat.
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Market Analysis
The losses keep piling up for the major indexes and leading stocks. Bulls are no longer putting up much of a fight.
The Nasdaq is 3.5% below its 50-day line, with the 21-day about to cross below the 50-day. The S&P 500 is separating from the 50-day while the Russell 2000 is approaching its 200-day.
The Dow Jones, which looked strong Monday, has dipped below its 50-day line.
The Nasdaq advance/decline line has hit long-term lows. The NYSE A/D line has pulled back, but more modestly.
Leading stocks do not look good. Some heretofore resilient areas are cracking, like homebuilders. Lennar, D.R. Horton and KBH stock fell 5% to 6% and are now decisively below their 50-day lines.
Nvidia stock lost a fraction Thursday but is still holding the bulk of Monday’s big rebound. The ultimate AI stock finished pennies below its 50-day line but is essentially finding support. However, Nvidia fell more than 1% Friday.
Nvidia’s relative outperformance hasn’t been enough to prop up the broader market.
Other AI plays are not holding up. PLTR stock plunged 8.5% and AI stock skidded 5.3%. Both broke below fresh levels after diving through their 50-day lines earlier this week.
Energy plays are doing well thanks to rising crude prices. Industrials, infrastructure plays and some steel stocks are showing relative strength, even as many pull back modestly.
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What To Do Now
The stock market has piled losses onto losses. Investors have to take action, paring exposure as recent buys turn into losers and longer holdings slash gains.
The stock market arguably is due for a rebound. But with the Nasdaq well below its 50-day and Nvidia looming, there’s little reason to get excited over one good day.
Investors may want to use a market bounce as a chance to exit positions.
Still, when a strong uptrend resumes, many stocks will offer buying opportunities. So you want to be ready. Keep working on watchlists, emphasizing stocks showing relative strength.
Read The Big Picture every day to stay in sync with the 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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