Dow Jones futures rose Thursday morning, along with S&P 500 futures and Nasdaq futures, with Congress likely to keep the government open. A stock market rally rebound fizzled Wednesday, with the major indexes giving up early gains and the Nasdaq undercutting a recent low. A few leaders, such as Tesla stock, held up, but chip stocks and many other growth leaders continued to struggle.
Treasury yields erased morning losses to close slightly higher Wednesday. The dollar continues to climb to its best levels in a year.
Congress looks set to extend government funding today to avoid a government shutdown. House Speaker Nancy Pelosi hinted she may delay today’s vote on the bipartisan infrastructure deal, as she struggles to satisfy different wings of the Democratic party.
Growth Stocks Struggle
Growth stocks continued to struggle, with ASML (ASML), Snap (SNAP), Generac (GNRC), Advanced Micro Devices (AMD), Palantir Technologies (PLTR), Digital Turbine (APPS) and Nvidia (NVDA) all showing disappointing action.
ASML stock sank 3.8%, a day after gapping down 6.6% to below its 50-day line. AMD stock briefly tried to rally after Tuesday’s big loss, but faded for its worst close since the July 28 breakout day. Nvidia stock hit resistance at its 50-day and retreated slightly.
SNAP stock tried to rebound from its 50-day line, but reversed to close below that level, down 3.7%. PLTR stock sank 3.2%, below its 50-day and 200-day lines, after tumbling 7.75% Tuesday to undercut a buy point. APPS stock fell 3.4% after Tuesday’s 6.9% loss, just above its 200-day line, which served as an aggressive entry a week earlier.
GNRC stock fell 4.4%, one of the biggest S&P 500 losers Wednesday and closing decisively below the 50-day line. Generac forecast full-year sales slightly below analyst estimates. The generator and energy storage leader also guided low on fiscal 2024 revenue.
Tesla Stock Holds Up
On the upside, Tesla (TSLA) edged up 0.5% to 781.31, holding above a 764.55 buy point. Several less-flashy auto plays also did well. Auto parts retailers AutoZone (AZO) and O’Reilly Auto (ORLY) are in buy range.
Tesla stock, Snap, Nvidia, Generac and AMD are on IBD Leaderboard, though Snap’s position was trimmed Wednesday. AutoNation stock was added to SwingTrader on Wednesday. Snap and AutoNation are on the IBD 50. AZO stock was IBD Stock Of The Day.
Pelosi To Delay Infrastructure Vote?
The Senate is planning to vote on a stop-gap government funding bill, without a debt limit extension, on Thursday, Sept. 30. Senate Republicans on Monday night rejected a funding bill that included a debt limit increase. But they’ve signaled they would go along with a “clean” funding bill, avoiding a partial government shutdown after Thursday. The House is likely to quickly OK the Senate legislation.
Congress still would need to raise the debt limit to avoid a government default — by Oct. 18, according to Treasury Secretary Janet Yellen. The House Wednesday evening voted to suspend the debt limit, a measure doomed to Senate defeat.
House Speaker Pelosi hinted that she may delay a vote on a $1 trillion infrastructure bill, though she said Wednesday night the “plan” was to stick to Thursday. The vote, originally set for Monday, was pushed back recently. Progressives are threatening to vote down the bipartisan infrastructure deal without substantial progress on a partisan, reconciliation bill. Centrist Democrats are balking at the size of that tax-and-spending package. Even when a price tag for the reconciliation package is agreed upon, it could take weeks to craft legislation.
Ultimately, Congress will likely pass the infrastructure bill and a sizeable reconciliation package. But there is a less-than-zero chance that neither will get through.
Dow Jones Futures Today
Dow Jones futures rose 0.4% vs. fair value. S&P 500 futures advanced 0.4% and Nasdaq 100 futures climbed 0.4%.
The 10-year Treasury yield fell 1 basis point to 1.53%.
Dow Jones component Merck (MRK) will buy Acceleron (XLRN) for $11.5 billion, or $180 a share, to bolster its rare-disease efforts. That was in line with Tuesday reports and comes after several days of XLRN stock rushing higher on deal buzz.
The official China manufacturing index fell 0.5 point in September to 49.6, signaling a slight contraction. Economists expected a break-even 50 reading. But the services gauge rebounded to 53.2 from August’s 47.5.
However, the private Caixin factory gauge rose to 0.8 point to 50 in September vs. views for 49.5.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session. That was certainly the case on Wednesday, when Dow futures were solid in the early morning, with Nasdaq 100 futures up more than 1% at one point.
Stock Market Rally Wednesday
The stock market rally struggled to find its footing Wednesday, faltering into the close. The major indexes opened higher, with a series of low-volume advances and retreats. The Nasdaq just undercut its Nov. 20 low. All the major indexes remain below their 50-day moving averages
The Dow Jones Industrial Average rose 0.3% in Wednesday’s stock market trading. The S&P 500 index climbed 0.2%. The Nasdaq composite dipped 0.2%. The small-cap Russell 2000 also retreated 0.2%
The 10-year Treasury yield fell slightly below 1.5% before Wednesday’s stock market open but recovered to close up 1 basis point to 1.54%, the highest close since mid-June.
Meanwhile, the U.S. dollar rose strongly, at its best levels in a year. The recent run in Treasury yields is supporting the dollar, by making dollar-denominated assets more attractive. A stronger dollar makes U.S. exports more expensive and reduces the dollar value of multinationals’ earnings and sales.
Crude oil futures fell slightly amid a rise in U.S. crude inventories and a return of some storm-shut Gulf production. The rising dollar also weighed on commodities.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 0.2%. The VanEck Vectors Semiconductor ETF (SMH) slumped 1.5%, with ASML, AMD and Nvidia all components.
SPDR S&P Metals & Mining ETF (XME) slumped 2.2% and Global X U.S. Infrastructure Development ETF (PAVE) dipped 0.1%. U.S. Global Jets ETF (JETS) gave up 0.5%. The SPDR S&P Homebuilders ETF (XHB) rose 0.5%. The Energy Select SPDR ETF (XLE) was flat while the Financial Select SPDR ETF (XLF) edged up 0.1%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) slumped 2.2% and ARK Genomics ETF (ARKG) gave up 1.8%. ARKK is at its worst levels since early June and ARKG is just above its May lows. Tesla stock remains the top holding across ARK Invest’s ETFs, but Cathie Wood has sold a big chunk of its TSLA stake in the past few weeks.
Market Rally Analysis
The stock market rally tried to get up, but a number of half-hearted attempts faded, with the major indexes closing mixed and near session lows. The Dow Jones and S&P 500 ended with tepid gains.
The Nasdaq composite undercut its Sept. 20 low, with the Aug. 19 low the next logical support area. The Nasdaq 100 already undercut both levels on Aug. 19 and Sept. 20. The Russell 2000 dipped, just between its 50-day and 200-day lines.
Growth stocks didn’t rebound much even at session highs, and ended up near session lows. The FFTY ETF edged below its 50-day moving average. It’s now down 7.8% for the week, which would be the worst weekly loss since the coronavirus crash.
Some growth stocks bounced from their 50-day line, such as Dexcom (DXCM). But with the market rally looking shaky, will those outliers continue to thrive or will they succumb to the general downdraft? Meanwhile, plenty of growth stocks had anemic bounces or simply skidded lower, including Snap, Nvidia and ASML.
Energy stocks held up well, though, with Matador Resources clearing an unofficial buy point. Financials also look healthy.
For now the stock market rally remains “under pressure.”
What To Do Now
Investors may be a little gun-shy after two recent rebound attempts fizzled, with lackluster action uninspiring at best. They probably should be.
If the market rally is going to have another run to new highs and beyond, then you don’t need to rush in at the first sign of strength.
Alternatively, if you were slow to reduce exposure in prior days or weeks, you could use any bounces as a chance to pare back.
Prepare for the next strong market run. Look for stocks with strong relative strength lines, rising or holding near highs. Stocks that outperform in uneven or weak markets are likely to lead in a clear uptrend.
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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