Overnight Dow futures are down slightly, along with S&P 500 futures and Nasdaq futures. An attempt to rally the stock market made progress on Thursday, especially in the Nasdaq, amid some hints that inflation is peaking.
But those indications of peak inflation included lower prices for copper and other commodities, which also reflect higher recession risks. Commodity-related stocks were hit hard on Thursday.
Vertex Pharmaceuticals (VRTX), United Health (United nations) , Service now (now) and Tesla (TSLA) Competitors BYD (BYDDF) and Lee Otto (LI) It’s worth a watch, albeit for different reasons. VRTX and Li Auto stock liquidated their buying points Thursday, while BYD stock nearly did. The UN stock is close to breaking through. ServiceNow is a far cry from the old highs, but it has taken a positive step.
Vertex and Li Auto stock are at IBD 50. UnitedHealth was IBD stock today Thursday.
after closing, FedEx (FDX) reported fiscal fourth-quarter earnings and revenue that only missed analyst opinions of the shipping giant. But FedEx raised its EPS guidance for the full year.
FDX stock rose modestly in overnight trading. Shares fell 0.4% to 228.13 Thursday, hitting resistance at the 200-day moving average in recent days. FedEx stock pulled away from its early May lows but has been in a long downtrend.
Dow jones futures contracts today
Dow Jones futures are down 0.3% against fair value. S&P 500 futures were down 0.3% and Nasdaq 100 futures were down 0.3%.
Remember that overnight action in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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stock market rise
The stock market’s bullish attempt again fluctuated during the day, but the major indexes eventually closed near session highs.
The Dow Jones Industrial Average rose 0.6% in stock market trading on Thursday. The S&P 500 rose 0.95%. The Nasdaq Composite Index jumped 1.6%. Small cap Russell 2000 rose 1.1%.
US crude oil prices fell 1.8% to $104.27 a barrel, extending a rapid decline.
Copper prices fell more than 5% to a 16-month low. Futures contracts for metals and other crops also fell. This is a sign of slowing economic growth and inflation may have peaked.
The 10-year Treasury yield fell 9 basis points to 3.07% after falling 15 basis points on Wednesday, as recession fears grew. The benchmark yield has fallen sharply since hitting an 11-year high of 3.48% on June 16.
Markets are heading to tighten slightly by the end of the year than they were before Fed Chairman Jerome Powell testified before the Senate Banking Committee on Wednesday, followed by the House Financial Services Committee on Thursday. Investors are still overwhelmingly expecting a 75 basis point rate hike at the Fed’s late July meeting. Those odds were boosted on Thursday as Federal Reserve Governor Michelle Bowman said she favored such a move in July, followed by 50-point increases in subsequent meetings.
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Among the top ETFs, the Innovator IBD 50 ETF (FFTY) is down 2.35%, while the Innovator IBD Breakout Opportunities ETF (BOUT) is down 1.3%. ETF (IGV) iShares Expanded Tech-Software Sector (IGV) jumped 3.6%, with ServiceNow stock notably owning. VanEck Vectors Semiconductor Index (SMH) was down 0.5%.
The SPDR S&P Metals & Mining (XME) index fell 3.7%, continuing a sharp sell-off. The GlobalX US Infrastructure Development Index (PAVE) was down 0.7%. The US Global Jets ETF (JETS) is down nearly 1%. The SPDR S&P Homebuilders ETF (XHB) is up 3.6%. The Energy Select SPDR ETF (XLE) is down 3.7% and the Financial Select SPDR ETF (XLF) is down 0.4%. SPDR Fund (XLV) for the specific healthcare sector increased 2.4%.
Reflecting speculative story stocks, the ARK Innovation ETF (ARKK) jumped 7.1% and the ARK Genomics ETF (ARKG) jumped 8.3%. Tesla stock continues to dominate among Ark Invest ETFs. Ark also owns a small stake in BYD stock.
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stock to watch
Vertex stock rose 4.1% to 283.50, breaking an entry point at 279.23 as well as a downward sloping trendline. But stocks have risen sharply since June 14, particularly in the past four days. Ideally, VRTX stock will pause, creating a new handle and buying opportunity. Vertex stock’s relative strength line is at its highest. The RS line, the blue line in the provided charts, tracks the stock’s performance against the S&P 500 Index.
Other pharmaceutical and biotechnology stocks that show strength include Eli Lilly (LLY), Bristol-Myers Squibb (BMY) and Harmony in the biological sciences (HRMY).
UN stock rose 2.1% to 499.81, above the 50-day line. UnitedHealth stock is at a double bottom base with 507.35 buying points. Stocks retraced the 50-day line on Tuesday, posting three gains in above-average volume. The RS line for UN stock is at a new high. while, two cents (CNC), humana (HUM) and some other health insurance companies are showing some strength.
Li Auto stock jumped 6.6% to 39.24 Thursday, giving up 37.55 buying points from a very long and deep merger. But LI stock has more than doubled since early May. The stock is 54% above its 50-day moving average. Investors will likely wait for Li Auto stock to pause, and a new compact shelf or base forms to form.
Li Auto unveiled the high-end hybrid L9 SUV on Tuesday, with the automaker anticipating a sales boom after deliveries begin in August. Also, China’s government is giving stronger signals that it will extend some electric vehicle subsidies beyond 2022.
BYD stock is up 3.15% to 39.50, nearly outpacing the 39.81 buy point from a deep cup base of 48% with a handle. Ideally, the EV giant would form a longer handle and the key indicators would catch up. BYD should also benefit from electric vehicle subsidies and will begin delivering several new models in the coming months.
TSLA stock fell 0.4% to 705.21, retreating from its 21-day moving average. Tesla should also get a boost from China’s subsidy for electric vehicles. But CEO Elon Musk said in a May 31 interview published late Wednesday that Tesla’s new plants in Austin and Berlin are losing billions of dollars.
Tesla vs. BYD: Which EV giant is the best one to buy?
ServiceNow, like Tesla, has not lowered its May lows yet in June. On Thursday, NOW stock rose 5.9% to 485.53, moving above the 21-day and 50-day moving averages. ServiceNow is up 9.5% so far this week, but those gains came on below-average volume.
ServiceNow is not even close to being executable. Perhaps it will form a bottom base, although it is well below the 200 day line. However, it is good to see a great growth leader showing some signs of life. NOW’s RS line is at its best since late March.
Market Rise Analysis
Major indexes once again swung up and down during the day, but the major indexes closed on Thursday with good to solid gains.
Thursday marked the fourth day of a stock market rally attempt for the S&P 500 and Nasdaq Composite and the third day for the Dow Jones.
The Nasdaq made solid price gains, while volume rose slightly against the previous session.
However, put what happened Thursday in context. The Nasdaq’s gains have not been evident amid the significant price movements of recent weeks and months. Composite closed above the 10-day moving average – the Maginot resistance line – the tech-heavy indicator remains below the 21-day line, with the 50-day average and the 200-day average well above.
Confusing and downward headwinds
Meanwhile, macroeconomic conditions are bearish and in flux.
In his two-day testimony to Congress, Powell emphasized that policy makers would be aggressive in fighting inflation. While a recession is not “inevitable,” he emphasized that a soft landing would be difficult.
Markets will struggle to rally as the Federal Reserve aggressively raises interest rates. But the Fed won’t relent until inflation is under control, which likely won’t happen until the economy slows significantly or falls into a recession.
Needless to say, aggressive Fed, high inflation and recession risks are not an attractive word for bulls.
The market movement is mixed
While the major averages have moved higher, there are some big losers below the surface, as the sector ETFs showed. Recession fears are hitting oil and other commodity prices, with energy stocks, miners and fertilizer makers selling hard.
A lot of Thursday’s winners were elaborate techs like NOW arrows and Ark-type names. But this is not doable. Once it bounces, it can drop faster if the market returns towards its recent lows.
Drug stocks and some health insurance companies are looking strong, including Vertex and UnitedHealth. Pharmaceuticals are defensive growth names that should do relatively well in tough economic times.
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What are you doing now
The market rally is showing some positive movement, although there are a lot of caveats. If you walk away from margin, start with minimal buying and gradually increase exposure if the market continues to perform well.
While some drug and drug stocks look interesting, or even flashy buy signals, like Vertex, there aren’t many high-quality stocks in place or setup. Buying an ETF in a broad market is one way to gain exposure.
Be prepared to step back quickly should the sale resume.
Build your own watch lists. Look for creating stocks but also names that have strong relative strength but need time to fix their blueprints.
Read the big picture every day to stay in sync with market trend, stocks and leading sectors.
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