Dow Jones futures were little changed in afternoon trading, along with S&P 500 futures and Nasdaq futures. Software giant Adobe rises late on earnings beat, but big Cathy Wood catches on Exact sciences (EXAS) skyrocketed in a rival clinical trial.




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The stock market rally suffered a damaging loss on Thursday, with the major indexes falling to a one-month low below key levels.

Second day of reaction to hawkish Fed growth outlook, weak US and Chinese economic data, mixed corporate news Netflix (NFLX) and Nucor (NUE) and bear analyst call Nivea (NVDA)

Major stocks from the industrials, infrastructure, chip and solar sectors fell back modestly and at times sharply.

But the dark cloud has a silver lining: the market is no longer tempting investors to take new positions.

Apple ( AAPL ) suffered its worst one-day loss since late September, this time Amazon.com (AMZN) is nearing the bottom of a bear market. Microsoft (MSFT) pulled back, but to a key support area. In a rough day for chip stocks, Nvidia stock fell back below its 200-day line.

Tesla ( TSLA ) hit a fresh bear market low Thursday, but closed slightly higher. Elon Musk announced another Tesla stock sale late Wednesday.

Earnings, other news

Adobe ( ADBE ) reported better-than-expected Q4 2022 earnings on online revenue growth late Thursday. The business software giant was down slightly on fiscal Q1 revenue, but up on earnings. ADBE stock popped up more than 4% after hours. Shares fell 3.3% to 328.71. Adobe stock has bounced back from late September lows, but is still below its 200-day line.

Guardian health (GH) reported key results of a blood test for colorectal cancer in average-risk adults. When Guardant Health said the results were high enough to beat the Medicare payout, GH stock fell 35 percent. Meanwhile, the EXAS stock increased by more than 20%. Exact Sciences Cologard offers a stool-based DNA test for colorectal cancer.

Global IT and consulting giant Emphasis (ACN) reported early Friday. ACN stock fell 3.4%, but found support at its 50-day line, a day after falling back below its 200-day low.

Darden Restaurants (DRI) earnings are also Friday morning. DRI stock fell 0.7% to 142.95 on Thursday, but rebounded near its 50-day line. Olive Garden Parent has a 149.90 cup-to-handle purchase point.

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Dow Jones futures were flat and fairly priced. S&P 500 futures and Nasdaq 100 futures edged higher.

The 10-year Treasury yield rose 1 basis point to 3.46 percent.

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


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Stock market rally

The stock market rally sold off on Thursday.

Before the opening, November retail sales showed an unexpected 0.6% decline. December regional surveys from the Philly Fed and the New York Fed also suggested contraction. But jobless claims fell sharply, just what the Fed doesn’t want to see.

That all follows weaker-than-expected Chinese industrial production and retail sales figures. A rapid easing of Covid restrictions could lift, but China may be starting a wave of infections that could slow the movement.

The Dow Jones Industrial Average fell 2.3 percent in Thursday’s stock market trading, its worst performance in three months. The S&P 500 index fell 3.2 percent. The Nasdaq composite fell 3.5%. Small Cap Russell 2000 slips 2.5%.

US crude oil prices fell 1.5 percent to $76.11 a barrel. Gasoline futures fell 3.5 percent. Natural gas prices rose 8.4 percent.

The 10-year Treasury yield fell 5 basis points to 3.45%, down from last week’s three-month low of 3.4%. But that may reflect recessionary fears more than easing inflation. The two-year Treasury yield, closely tied to federal policy, was little changed on Thursday. Two-year yields have fallen sharply since early November.


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ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF ( IGV ) fell 3.5%, while MSFT stock was a big holding. VanEck Vectors Semiconductor ETF (SMH) dropped 3.8% below its 200-day line. NVDA stock is a large component of SMH.

Reflecting a more speculative stock trend, the ARK Innovation ETF ( ARKK ) traded up 4.9%, well above November’s five-year low. ARK Genomics ETF (ARKG) is down 3.5% to close six months. Tesla stock is a large holding in Arc Invest ETFS. Cathy Wood added to Ark’s total TSLA stake on Wednesday. EXAS stock is also a top 10 Arc Invest holding.

The SPDR S&P Metals & Mining ETF (XME) gave up nearly 4 percent. US Global Jets ETF (JETS) fell 2.55 percent. The SPDR S&P Homebuilders ETF ( XHB ) fell 0.6%, with some strong performers. The Energy Select SPDR ETF ( XLE ) fell 0.6 percent. The Healthcare Select Sector SPDR Fund ( XLV ) dropped 1.8%


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Megacap stocks

Apple stock fell 4.7% to 136.60, its worst one-day loss since Sept. 29. Stocks are at new lows from October to November, barely above the June bear market low of 129.04.

AMZN stock fell 3.4% to 88.45. That’s getting close to the Nov. 9 bear market low of 85.87.

Microsoft stock retreated 3.2% to 249.01, but found support at its 21-day line. Shares have tested the 200-day line over the past two sessions.

Nvidia stock fell 4.1% to 169.52, falling below its 200-day line after taking the key level on Monday. HSBC initiated Nvidia stock with a reduce rating and a $136 price target. Nvidia’s sell-off, as well Western Digital ( WDC ) decline, helped drive chip sales.

Tesla shares fell to a new two-year low of 153.28 on Thursday morning before rebounding 0.5% at 157.67. Shares are still down 12 percent this week. Late Wednesday, CEO Elon Musk added that he sold 22 million TSLA shares for $3.6 billion on Dec. 12-14, much to the dismay of Tesla investors. But that means Musk’s latest selloff is over.

Meanwhile, Tesla is offering 10,000 free Supercharger miles to anyone who buys a Model 3 or Wynn in the U.S. for $3,750 off a year ago. Instead of waiting for January 1st for new EV tax credits, Tesla is encouraging people to get in on it now by boosting Q4 figures.


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Market Rally Analysis

The stock market rally had a clear bad day. The Nasdaq Composite and Russell 2000 fell below their 50-day moving averages for the first time in more than a month. The S&P 500 gapped below the 21-day line, hitting resistance at the 200-day line. The Dow Jones is also at a 21-day low, heading toward its 50-day and 200-day lines.

All major indexes are at their lowest levels since Nov. 10, when they diverged from the October consumer price index. Here’s where the Nasdaq was on the October 21 tracking date.

Most of the leading stocks came under pressure, some found support while others did not. There were as few winners Lennar (LEN) and Nordson (NDSN) on earnings, but those are different.

Megacap stocks like Apple, Amazon and Tesla are in dire straits. Microsoft’s resistance to the 200-day line is not a good sign. Nvidia stocks and VanEck Semiconductors ETF falling below the 200-day line is certainly disappointing.

From the Oct. 13 low to the Dec. 13 high, is the bear market rally just ending? It’s too soon to tell. Also, the market may come back or trade sideways now.


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What to do now

A bullish market rally is dangerous because it drives investors into stocks that flash buy signals and then immediately reverse to the downside.

But suppose you bought relative weakness in the market over the past few weeks, such as a 21-day line pullback? Well, the indices are all cutting off their recent lows. So unless you take quick profits, even those trades are struggling.

If individual stocks are underperforming, investors should be reducing exposure.

A silver lining? While the market is clearly weakening, a few stocks are flashing buy signals. It’s easy to stay in that area.

But stay engaged. A few good days could revive the market rally and bring stocks back into buy positions. So run your screens and update your watch lists. Look for stocks holding key support levels, such as the 21-day or 50-day lines. Some of the big recent winners are now returning to the 50-day/10-week lines.

Read The Big Picture daily to stay in tune with market direction and leading stocks and sectors.

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

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