Dow Jones futures fell modestly in extended trade, along with S&P 500 futures and Nasdaq futures. The stock market rally had a straight-to-down session on Wednesday.
X
Downers like the Nasdaq led the way apple (AAPL), the parent of Google Alphabet ( GOOGL ) and Tesla shares extended big weekly losses. Shares of Apple and Google fell below some support levels Tesla ( TSLA ) is nearing bear market lows.
Over the past few weeks, sideways movement has been difficult to buy with strength. Fluctuating markets are tearing investors apart. Not a good time to add exposure.
This was reported by the Pentagon on Wednesday Amazon.com (AMZN), Google, Microsoft (MSFT) and Oracle (ORCL) has won cloud computing contracts that could reach $9 billion each through 2028. In 2019, the Department of Defense signed a $10 billion cloud computing contract, but canceled it in 2021 amid protests from Amazon.
The four tech giants were little changed in after-hours trading.
Dow Jones Futures today
Dow Jones futures were down 0.2% at fair value. S&P 500 futures fell 0.3%, while Nasdaq 100 futures fell 0.4%.
The 10-year Treasury yield rose 4 basis points to 3.45%.
Crude oil futures rose slightly.
Remember that an overnight move in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD’s experts as they analyze the stocks that made the most of the stock rally on IBD Live
Stock market rally
For most of Wednesday’s session, the stock market traded modestly lower in a rally and generally closed in the red.
The Dow Jones Industrial Average rose less than two points in stock trading on Wednesday. The S&P 500 index fell 0.2%. The Nasdaq fell 0.5%. The small-cap Russell 2000 fell 0.3%.
U.S. crude oil prices continued to fall on fears of global demand, falling 3% to $72.01 a barrel. Gasoline futures fell 3.4% to a one-year low. Natural gas prices rose 4.6% after a sharp five-session session.
The 10-year Treasury yield fell 10 basis points to 3.41%, the lowest in nearly three months.
The inverse relationship between equity and bond yields is declining as Treasury yields now fall more on recession fears, which reduce inflationary pressures. The November CPI report due out on December 13 will still be welcomed. While a half-point rate hike on December 14 looks highly likely, progress on inflation will raise hopes for smaller increases in early 2023 and an earlier end to tightening. This would reduce the risks of a landing, or at least a hard landing.
ETFs
Among rising ETFs, the iShares Expanded Tech-Software Sector ETF ( IGV ) fell 0.5%. The VanEck Vector Semiconductor ETF ( SMH ) closed slightly below par. Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) fell 0.8% and the ARK Genomics ETF ( ARKG ) rose 0.3%. TSLA stock is a core holding among Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF ( XME ) lost 0.3%, while the Global X US Infrastructure Development ETF ( PAVE ) lost some. The US Global Jets ETF (JETS) fell 3.3%. The SPDR S&P Homebuilders ETF ( XHB ) rose 1.8%. The Energy Select SPDR ETF (XLE) was down 0.2%, while the Financial Select SPDR ETF (XLF) was down 0.4%. The Healthcare Select Sector SPDR Fund ( XLV ) rose 0.8%.
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Apple Stock and Google Stock
Apple shares fell 1.4% to 140.94 on Wednesday, the lowest since Nov. 10. So far this week, AAPL shares are down 4.65%, below their 50-day line. The Dow Jones tech titan is closing in on the Oct. 13 high of 134.37, but is still some distance from the bear market high of 129.04 set on June 16.
Google shares fell 2.1% to 94.94, falling below their 50-day line. GOOGL shares are down 5.4% so far this week, erasing gains from the previous three weeks. Shares are still comfortably above the Nov. 3 bear market high of 83.34.
Tesla shares
Tesla shares fell 3.2% to 174.04 on Wednesday, having hit a Nov. 22 bear market low of 166.19. TSLA shares are down 10.7% so far this week.
On Wednesday, Tesla cut the Chinese prices of cars in inventory by 6,000 yuan. Along with insurance subsidies, free toll and other giveaways, Tesla is offering more than 21,000 yuan in rebates for cars on the lot. This follows a price cut in China in late October. And this comes ahead of the government’s EV subsidies, which expire on December 31, which should boost demand. It also comes amid widespread reports denied by Tesla of production cuts in Shanghai.
Meanwhile, Tesla will reportedly reintroduce radar to its cars in early 2023. Elon Musk pulled the radar in 2021, saying that vision alone is better for self-driving than almost all others working on autonomous driving.
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Market rally analysis
The stock rally continued to pull back, although the technical picture remained largely unchanged.
The Nasdaq tested its 50-day line a day after breaking below its 21-day moving average. Shares of Apple, Google and Tesla weighed on the major-cap indexes, but the underlying trend was also slightly lower.
The major indexes, especially the Dow Jones and the S&P 500, have shown a generally upward trend from their Oct. 13 lows. The market rally picked up late last week, with the S&P 500 above its 200-day line and the Dow Jones above 200. a seven-month high.
But with the recent pullback, the major indexes and the Russell 2000 are essentially where they were in early November or late October.
Side markets are among the most dangerous markets for investors, especially when there is high and low volatility. There is just enough power to attract buyers, but then the market goes down for a while. That forces investors to either cut losses when they’re small—there’s a good chance the stock will rebound—or risk a bigger downside.
The current wave market rally has an additional obstacle. Most of the advance was made in sessions of several days, so it is difficult to have even mini-raises to take profits on new positions.
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What to do now
The stock rally has resisted and is testing some key levels, but is still not seriously damaged. If you get modest exposure with working positions, you don’t need to exit. Taking partial profits is never a bad idea in this market, of course.
But anyone who bought stocks or gave early buy signals over the past few weeks is likely to bear down on these holdings. In a sideways, volatile market, stocks may be about to top when they start to look interesting.
Investors should be wary of adding risk until the market clears its recent trading range, with the S&P 500 resolutely above its 200-day line. This may not happen until after the CPI inflation report and the Fed meeting next week.
However, investors should increase their positions slowly in case the major indexes pull back again after reaching short-term highs.
But keep working on those watchlists. Industrial and infrastructure games look good along with various medicals. Some brokers walk around buy points. Chip-hardware names show relative power, a number of semiconductors keep OK.
Read The Big Picture daily to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson for stock updates and more.
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