Dow Jones futures await Fed’s favorite inflation report; Tesla is late on Elon Musk’s promise

Dow Jones futures were little changed after hours, along with S&P 500 and Nasdaq futures. The Federal Reserve’s preferred inflation gauge is available Friday morning as Tesla stock lagged higher on comments from Elon Musk.




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The stock market took heavy losses on Thursday, erasing Wednesday’s gains and more amid negative corporate news and economic data, as well as bearish comments from billionaire investor David Tepper. The major indices broke key levels with many major stocks slipping behind. The shares pared losses, but the closing declines were still significant.

Nvidia (NVDA), Search Lam (LRCX) and other chip stocks were big losers, as memory chip makers Micron technology (MU) Missed Views, Driven Low and Announced Staffing, and Further Capital Spending Cuts.

The Tesla (TSLA) the meltdown continued. In addition to company-specific factors, Tesla shares plunged along with other automakers on Thursday AutoMax (KMX) cited vehicle accessibility issues for its large quarterly shortfall. TSLA shares lagged higher after Elon Musk signaled no new stock sales through 2023.

Other megacaps showed weakness, with Apple once again sliding towards bear market lows Amazon.com (AMZN) already there. Microsoft (MSFT) has broken through key support.

Investors should be largely in cash, reducing already modest exposure and largely avoiding new purchases.

Third-quarter GDP growth was revised above forecast, along with the report’s inflation gauge. Initial jobless claims increased, but lower than expected. The index of leading economic indicators fell 1% in November, reinforcing the case for a recession next year.

PCE inflation data

On Friday, the Commerce Department is to release the Personal Consumption Expenditures Price Index for November. Inflation data is part of the monthly income and expenditure report.

The PCE price index is expected to increase by 0.2% compared to October, with core prices rising by 0.2%. The PCE inflation rate is expected to fall to 5.5% from 6% in October. Core PCE inflation is expected to slow to 4.6% from 5%.

The PCE inflation rate has long been the Fed’s preferred price indicator. Recently Fed Chief Jerome Powell said he is keeping a close eye on PCE services prices excluding housing.

Personal incomes are expected to rise 0.3% in November, with consumer spending rising 0.2%. In recent months, Americans have dipped into savings and increased spending on credit.

Dow Jones Futures today

Dow Jones futures have lost a fraction of their fair value. S&P 500 futures were flat and Nasdaq 100 futures rallied higher, with TSLA stocks offering modest momentum.

PCE Inflation Rate data will be released at 8:30 AM ET. November durable goods data will also be released at that time, with November new home sales at 10am ET.

Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session of the stock market.


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Stock market rebound

The stock market rally started off weak and continued to slump into mid-afternoon. Subsequently, the major indexes trimmed losses, but still suffered damaging losses.

The Dow Jones Industrial Average fell just over 1% in the stock market on Thursday. The S&P 500 index fell 1.45%, with Tesla stock and LRCX the worst performers. The Nasdaq Composite fell 2.2%. The small-cap Russell 2000 was down 1.3%.

Apple shares fell 2.4% to 132.23, not far from June’s bear market low of 129.04. Dow Jones giant Microsoft fell 2.55% below its 50-day line after holding that key level since early November. Amazon stock fell 3.4%, nearly undercutting the low of the March 2020 Covid crash.

Nvidia plunged 7% but found support at its 50-day line.

U.S. crude oil prices fell 1% to $77.49.

The yield on the 10-year Treasury fell 1 basis point to 3.67%. The yield on two-year Treasuries, more closely tied to Fed policy, rose modestly. Markets still expect rate hikes of a quarter point in February and March.

ETFs

Among growth ETFs, iShares Expanded Tech-Software Sector (IGV) ETF fell 1.9%, with MSFT stock as the largest constituent. The VanEck Vector Semiconductor (SMH) ETF tumbled 4.15%. Nvidia stock, LRCX, and Micron are major SMH holdings, but weakness in the chips was widespread.

Reflecting the most speculative stocks in history, ARK Innovation ETF (ARKK) dropped 3.4%, falling to a new five-year low. ARK Genomics ETF (ARKG) fell 1.1%. TSLA stock is a major holding in Ark Invest, but more importantly in ARKK.

SPDR S&P Metals & Mining ETF (XME) lost 1.75%. The US Global Jets ETF (JETS) fell 2.1%. SPDR S&P Homebuilders ETF (XHB) fell 0.9%. The Energy Select SPDR ETF (XLE) was down 2.3% and the Financial Select SPDR ETF (XLF) was down 0.9%. The Health Care Select Sector SPDR Fund (XLV) fell 0.1%.


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Tesla shares

Tesla stock fell 8.8% to 125.35 on Thursday, hitting its lowest point since September 2020 as the sell-off in high volume continued. Tesla doubled its year-end shipment discount in the US to $7,500 on Wednesday. This came as CarMax’s accessibility issues hit automakers and dealerships hard. TSLA shares lost nearly 36% in December alone.

However, Tesla Elon Musk, on a Twitter Spaces call Thursday night, said, “I will not sell stock next year under any circumstances… I will not sell stock until 2024-2025.”

Musk has sold nearly $39 billion worth of Tesla stock since the stock peaked in November 2021, including another batch in mid-December. He has repeatedly stated that he has finished selling for the moment, but he has never been so definitive.

TSLA shares are up 3% in overnight trading.

Analysis of market rallies

The stock market rally was in a bearish mood on Thursday, with major indexes falling on economic data and corporate news.

The S&P 500, which just recovered its 50-day line on Wednesday, fell to clear Tuesday’s intraday lows. So did the Nasdaq, but both rallied to finish above Tuesday’s lows.

The Dow Jones just cleared intraday lows on Monday but rebounded to close above the 50-day line.

While Apple, Amazon, Microsoft, and especially Tesla stocks look terrible, this isn’t just a megacap sell-off. The Invesco S&P 500 Equal Weight ETF (RSP) fell 1.1% on Thursday, returning below its 50-day line.

The SMH Chip ETF dipped below its 50-day line, just days after jumping to a multi-month high on Dec. 13, above its 200-day average. Unlike the S&P 500, SMH closed well below Tuesday’s lows.

The major stocks were hit hard on Thursday, aside from a few defensive or defensive growth names. Some metals and mining stocks still look okay on a weekly chart.

The stock market rally is under heavy pressure, it’s holding up.


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what to do now

The market action continues to deteriorate, with trends turning decidedly negative immediately after the December 13th open.

Market exposure should be small, limited only to positions that work. Again, investors may want to take partial profits or simply exit some trades with a gain.

At some point, the market will bounce as it did on Wednesday. Don’t get swept up in a strong opening, or even a strong session.

Investors should work on their watch lists. Focus on stocks with strong relative strength or holding key levels like the 50-day line, and getting fussy if the charts don’t look great right now.

Read The Big Picture daily to stay abreast of market direction and major stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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