S&P 500 Falls Below Key Election Level, Tesla, Bitcoin; The CPI inflation report is looming
Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures, after a rough day for the S&P 500 and the stock market rally. All eyes will turn to October’s CPI inflation report.
Stock market gains faltered on Wednesday, with the S&P 500 falling back below its 50-day moving average. Mixed election results, Bitcoin’s Ongoing Troublesthe renewed blockade in China – and the upcoming consumer price index – were possible causes.
Bitcoin fell to new two-year lows as Binance, the world’s largest cryptocurrency exchange, said on Wednesday afternoon that it would not buy rival FTX.
Megacaps didn’t help. Tesla (TSLA) fell below key levels to a two-year low. Amazon.com (AMZN) also set new bear market lows. Apple (AAPL) had the worst closing since June, while Microsoft (MSFT) and Google Parent Alphabet (GOOGLE) fell slightly.
Shares of CPRX rose strongly in after-hours action Catalyst Pharma beat EPS and income statements. The biotech also implied fourth-quarter sales in line with consensus. Catalyst stock fell 5.35% on Wednesday, roughly the early entry.
Shares in CELH jumped overnight on strong revenue growth from Celsius after the energy drink maker fell to its lowest level since July on Wednesday. Rivian shares rebounded mixed Q3 results after falling to a four-month low Lucid (LCID) results. EE shares fell modestly after Excelerate’s earnings beat views. Excelerate stock slipped on Wednesday, testing the 50-day line.
Meanwhile, a networking firm Digi International (DGII) and Tesla China EV rival No (NIO) are available early Thursday. DGII shares pulled back toward their 50-day line on Wednesday as they work at ascending base buy point. Nio shares fell to a two-year low as the southern manufacturing hub of Guangzhou announced a Covid lockdown, knocking many Chinese shares.
CPI Inflation Report
The October CPI will be released at 8:30 a.m. ET on Thursday. Economists expect the CPI inflation report to show that prices rose 0.7% from September. Core CPI, which excludes food and energy, is expected to rise by 0.5%.
The annual CPI inflation rate should fall to 8% from September’s 8.2%. Core inflation is maintained at a stable level of 6.6%.
The Federal Reserve wants to see clear and convincing evidence of slowing inflation before it stops raising interest rates. Markets are leaning slightly toward a Fed rate hike of 50 basis points in December, but there is still a strong chance of a fifth consecutive 75 basis point hike. November’s employment data and CPI report will be released before the Fed’s December meeting and announcement.
Dow Jones Futures today
Dow Jones futures advanced 0.15% against fair value. Futures on the S&P 500 rose by 0.2%, and on the Nasdaq 100 by 0.3%.
The 10-year Treasury yield sank 6 basis points to 4.08%.
Bitcoin was trading around $16,000, near a two-year low on Wednesday afternoon.
Stock Market Rally
The stock market got off to a mixed start on Wednesday, but then lost ground, especially in the afternoon, closing at session lows.
The Dow Jones Industrial Average fell nearly 2% on Wednesday stock trading. The S&P 500 index fell 2.1%. The Nasdaq composite fell 2.5%. The small-cap Russell 2000 fell 2.7%.
The 10-year Treasury yield rose 2 basis points to 4.15%.
The dollar had a strong session, after a big drop over three days.
US crude oil prices fell 3.5% to $85.83 per barrel. Weekly crude oil inventories in the US rose the most in a month. Meanwhile, blockades in China have raised concerns about the country’s demand for crude oil. US natural gas futures retreated 4.5%.
Bitcoin fell again when Binance’s tentative deal to buy FTX fell apart on Tuesday, with Binance walking away after looking at its rival’s books. “We had hoped to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to assist,” Binance said in a statement Wednesday afternoon.
FTX, which earlier this year looked like a potential savior for ailing crypto firms, is now in danger of collapsing.
Bitcoin fell as low as $15,554.48, the worst in two years. The pioneering cryptocurrency fell below $20,000 just on Monday. Other major cryptocurrencies such as Ethereum also continue to sell off, along with crypto-related stocks.
Among the best ETFsInnovator IBD 50 ETF (FFTY) fell 4.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) yielded 1.8%. iShares Broadened Tech & Software Sector ETF (VAT) sank 2.2%, with Microsoft shares the main components. VanEck Vectors Semiconductor ETF (SMH) withdrew 2.7%.
SPDR S&P Metals & Mining ETF (XME) fell 5.4% and the Global X US Infrastructure Development ETF (PAVE) lost 2.1%. US Global Jets ETF (JETS) fell by about 1%. SPDR S&P Homebuilders ETF (XHB) fell by 1.75%. The Energy Select SPDR ETF (XLE) sold off 4.9% and the Financial Select SPDR ETF (45) fell by 1.7%. SPDR fund for the selected health care sector (XLV) fell by 1.1%.
Tesla shares fell 7.2% to 177.59, undermining 2021 lows.Late Tuesday, Elon Musk disclosed that he sold nearly $4 billion worth of TSLA stock on Nov. 4, 7 and 8, likely to help fund its takeover of Twitter. The announcement could end the bullishness on TSLA shares, although Musk has not yet said he is done with the latest round of stock sales.
Elon Musk’s Twitter takeover has a wider impact. It’s taking up a lot of his time, and there are concerns that his Twitter moves and tweets will damage Elon Musk’s brand, and perhaps Tesla’s. At the Twitter Spaces event on Wednesday, Musk talked about subscriptions and adding savings and payment features, but didn’t do much to win over wary advertisers.
Also, Tesla could fall along with other stocks exposed in China after the tightening measures of the blockade. Furthermore, many US and Chinese EV stocks suffered double-digit losses on Wednesday, including shares of Nio, Lucid and RIVN.
Finally, Tesla still owns bitcoin.
TSLA shares remained active overnight. Late Wednesday, President Biden, when asked if Musk posed a national security risk, said, “It’s worth considering,” adding that there are “many ways” to do so.
Other Megacap stocks
Meta Platforms will cut 11,000 jobs or 13% of its workforce. The Facebook parent will also limit infrastructure spending as investors have shied away from huge metaversal costs. META shares rose 5.2%, but spending caps took a hit Arista Networks (sides), Nvidia (NVDA) and other vendors that benefit from the Scatter Metaverse.
Apple shares sank 3.3% to 134.87. Although the iPhone maker did not come off its October lows or the bottom of the June 16 bear market, AAPL shares closed at their worst level since June 17. Earlier this week, Apple warned that China’s Covid restrictions would hurt iPhone 14 Pro production.
Amazon shares fell 4.3%, their lowest point since March 2020. MSFT shares fell 1.9%. Google shares retreated by 1.8%. But both are still up slightly for the week.
Just when the stock market rally seemed to be regaining momentum, selling returned on Wednesday. The Dow Jones retreated slightly below its 200-day line. The S&P 500 is back below its 50-day moving average. The Russell 2000 also broke below the 50-day mark.
Lagging Nasdaq retreated after hitting resistance at the 21-day line on Tuesday.
Treasury yields rose, but not by much. The dollar has recovered, but has recently been on the decline. The still-uncertain election results, which suggest a smaller-than-expected GOP wave, may have played a role. The fall of Bitcoin, blockades in China and often negative reactions to earnings contributed.
Finally, the market rally came under pressure last week. The S&P 500 above the 50-day line is the minimum level for market strength. A Nasdaq moving above that key level would be an even stronger signal.
October’s CPI report could set the tone for Fed rate hike expectations, and perhaps the market’s direction, at least for a few weeks.
What to do now
Market growth is in the range, although the Dow is near recent highs and the Nasdaq near bear market lows. A volatile, sideways market is extremely dangerous for investors.
A strong bull market generally lifts all boats. A bear market is drowning them, forcing everyone to dry up. But choppy market waters will do enough to entice investors with small rallies for indexes and strong gains for individual stocks. But after buying near a near-term top, investors are caught in the underground as the stock falls back. This can go on and on, with investors taking a bunch of small losses or some very large ones.
It’s okay to make some test buys and hold positions if they work, although you might want to consider taking at least partial profits quickly in this environment. But investors should wait for the market to show sustained strength before taking significant exposure.
But it’s important to stay engaged. Investors should have a game plan and execute it if the market or individual shares go lower or higher. Update your watchlists so you’re ready to take advantage of the next real growth in the market.
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