Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally retreated again Wednesday as hot labor data raised the prospect of bigger rate hikes, while JPMorgan’s Jamie Dimon warned of an economic “hurricane.” The major indexes pared losses somewhat as the Federal Reserve saw slower growth in much of the U.S.
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Lithium producers Albemarle (ALB) and Livent (LTHM) plunged while agricultural plays such ADM (ADM) and Bunge (BG) fell solidly following bullish moves Tuesday.
On the upside, energy stocks continued to do well, with LNG plays Golar LNG (LNG) and Excelerate Energy (EE), a recent IPO, flashing buy signals. Callon Petroleum (CPE) shot up to near a buy point, continuing to race from the bottom of a V-shaped cup base. All three are volatile, though.
Printer and PC giant HP Inc. (HP) rose 3.9% to 40.34, a record close, following better-than-expected earnings late Tuesday. HP stock cleared a draw-the-line 39.81 early entry that also aligns with the top of a prior base.
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Meanwhile, megacaps aren’t leading the market rally. Microsoft stock is the only one getting close to its 50-day line, though Apple (AAPL) and Google parent Alphabet (GOOGL) are moving near their declining 50-day lines. Tesla (TSLA) fell 2.4% on Wednesday. TSLA stock, after last week’s big bounce, is hitting resistance at its 21-day exponential moving average.
Data storage plays NetApp (NTAP) and Pure Storage (PSTG) reported earnings late Wednesday, along with Hewlett Packard Enterprise (HPE) and software makers MongoDB (MDB) and Veeva Systems (VEEV). NetApp, Pure Storage, MongoDB and Veeva rose in extended trade on strong results, while HPE fell after slightly missing. All are considerably off highs.
Albemarle stock is on IBD Leaderboard. Microsoft (MSFT) and Google stock are IBD Long-Term Leaders. Callon Petroleum and BG stock are on the IBD 50, with CPE selected as Wednesday’s IBD 50 Stock To Watch.
Dow Jones Futures Today
Dow Jones futures lost 0.1% vs. fair value. S&P 500 futures and Nasdaq 100 futures were roughly flat.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Economic Data
The April JOLTS survey showed job openings came in at 11.4 million, in line with views. That’s not quite at a record high, but very close. March job openings were revised up to 11.855 million from 11.549 million. People quit at near-record levels, while layoffs hit new lows. The Federal Reserve clearly wants to see labor markets softening. Perhaps that started to happen in May. But it wasn’t in the April JOLTS report.
The May employment report is due Friday.
Meanwhile, the ISM manufacturing index rose to 56.1 in May from 55.4 defying views for a slim decline to 54.5.
The Fed’s Beige Book report, released at 2 p.m. ET, showed that economic growth cooled in several districts, with customers balking at some high prices.
Atlanta Fed President Raphael Bostic walked back talk of a September “pause.” San Francisco Fed President Mary Daly doesn’t see a pause until the fed funds rate is around 2.5%. With the benchmark rate at 0.75%-1% now, that implies at least three more half-point rate hikes.
Finally, JPMorgan CEO Jamie Dimon warned of an economic “hurricane” coming our way. “You better brace yourself,” he said at a financial conference. “JPMorgan is bracing ourselves.” Dimon said the question is whether it’ll be a minor or major hurricane.
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Stock Market Rally
The stock market rally opened Wednesday with solid gains, but the hot economic data and “Hurricane Dimon” changed the climate quickly, with the major indexes reversing lower. The indexes pared losses in the afternoon, helped by the Fed’s Beige Book, but faded once again.
The Dow Jones Industrial Average fell 0.5% in Wednesday’s stock market trading. The S&P 500 index declined 0.75%, with ALB stock the worst performer. The Nasdaq composite sank 0.7%. The small-cap Russell 2000 gave up 0.6%.
U.S. crude oil prices rose 0.5% to $115.26 a barrel. Gasoline, diesel and natural gas futures showed much bigger gains.
The 10-year Treasury yield jumped nine basis points to 2.93% in the wake of the JOLTS report and Fed comments. That’s after a 10-basis-point pop on Tuesday. Investors who have been betting on half-point rate hikes this month and in July are now pricing in a 50-basis-point move in September as well.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.15%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.6%.
The iShares Expanded Tech-Software Sector ETF (IGV) advanced 0.6% as Salesforce.com (CRM) reported strong earnings and ServiceNow (NOW) raised guidance. MSFT stock also is a huge IGV holding.
The VanEck Vectors Semiconductor ETF (SMH) sank 1.6%.
The SPDR S&P Metals & Mining ETF (XME) and the Global X U.S. Infrastructure Development ETF (PAVE) both dipped 0.2%. U.S. Global Jets (JETS) descended 3.1%. SPDR S&P Homebuilders (XHB) sank 1%. The Energy Select SPDR ETF (XLE) rose 1.6%, and the Financial Select SPDR ETF (XLF) slumped 1.6%.
Reflecting stocks with more speculative stories, the ARK Innovation ETF (ARKK) declined 3.6% and ARK Genomics (ARKG) shed 3.4%. Tesla stock remains the No. 1 holding across Ark Invest’s ETFs.
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Lithium Stocks Chilled
Albemarle stock plunged 7.8% while Livent stock dived 14%, knifing below early buy points after solid losses Tuesday. Early this week, Goldman Sachs called a top in battery metals, predicting a big drop in white-hot lithium prices in 2023.
ALB stock and Livent surged late last week past key resistance levels as the Nasdaq followed through. The moves also were a belated reaction to Albemarle’s second upward guidance hike in a month.
ALB stock, at least, found support at its 21-day moving average. On a monthly chart, Albemarle and LTHM stock don’t look too bad, given their huge May gains. Perhaps these stocks will form handles, but perhaps not.
Anyone who bought these stocks on Thursday-Friday, even close to the entry points, are sitting on modest to painful losses.
Agriculture Stocks Wilt
ADM stock fell 4.6% to 86.67, tumbling below the 50-day line and wiping out several days of gains. On Tuesday, ADM stock rose 2.1%, moving above the 50-day line and flashing an early entry. Bunge stock showed similar action Tuesday with a 3.1% gain. But it sank 3.6% to 114.10 on Wednesday, back below the 50-day line.
Fertilizer stocks such as Mosaic (MOS), which had strong gains Tuesday, sold off Wednesday.
Market Rally Analysis
The stock market rally suffered modest losses for a second straight session, off intraday lows but fading again at the close. The Nasdaq continued to find support at its 21-day moving average.
One concern with the current market rally is that there haven’t been many stocks to buy. That situation hasn’t improved, with some promising moves reversing hard, including LTHM stock, ADM stock and more. Drugmakers haven’t broken down, but aren’t having a good time this week.
Meanwhile, a number of stocks that were setting up are struggling again, including travel plays such as Delta Air Lines (DAL).
Could many of these names recover if the market rally steadies? Sure. In a positive scenario, the current market pullback could allow new handles and pullbacks to form. But right now, stocks are falling.
The one exception is oil and gas. This sector continues to do well overall, with some stocks in or near buy points. But these names are prone to volatile action.
Growth names remain heavily damaged, with rebounding Treasury yields once again a concern. Even if the market rally shows lasting power and Microsoft, Google and Apple stock get into shape, it’s unclear if these megacaps will outperform in the foreseeable future.
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What To Do Now
If you took on limited exposure on Thursday or Friday, you may not have been hurt too badly and could still be up. But if you stepped in more aggressively and continued to add to holdings on Tuesday, you could have taken some unpleasant losses. That’s especially true if you bought more-volatile names.
Remember, if you’re going to be aggressive getting in, you need to be aggressive in scaling back out.
Yes, it’s possible that you’ll sell positions and then the stocks and market will quickly rebound. But if that’s the case you can buy back those stakes — or something better. That’s a minor cost for protection against a much-steeper sell-off.
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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