Dow Jones futures fell slightly early Thursday, along with S&P 500 futures and Nasdaq futures, as Treasury yields kept rising. Cathie Wood stocks Shopify and Robinhood Markets headlined yet another busy earnings night with Apple, Amazon.com on tap Thursday.
The Nasdaq led Wednesday's stock market rally retreat, undercutting key short-term levels Wednesday amid a U.S. debt downgrade, Treasury yields hitting 2023 highs and negative earnings reactions, even on some seemingly strong reports.
Many growth stocks fell sharply without any direct news. Nvidia, the poster child for the AI-led market rally broke some short-term levels. Tesla, which had been consolidating after a post-earnings tumble, tested key support.
In addition to Shopify and HOOD stock, Qualcomm, Axcelis Technologies, MercadoLibre, HubSpot and PayPal were among the many notable reports after hours.
MELI stock rose solidly late, while ACLS stock climbed modestly. PYPL stock, Qualcomm, Robinhood and HubSpot were notable losers. Shopify fell slightly.
Apple and Amazon will report Thursday night, capping off peak earnings season and more.
Shopify and HUBS stock are on IBD Leaderboard. FICO stock is on IBD Long-Term Leaders. ACLS stock is on the IBD 50. HUBS stock is on the IBD Big Cap 20.
Dow Jones Futures Today
Dow Jones futures slipped 0.1% vs. fair value. S&P 500 futures fell 0.3% and Nasdaq 100 futures sank 0.4%.
The 10-year Treasury yield rose 6 basis points to 4.14%.
The Bank of England raised rates by a quarter-point to 5.25%, as expected.
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
Stock Market Rally
The stock market rally suffered sharp losses in higher volume.
The Dow Jones Industrial Average sank 1% in Wednesday's stock market trading, retreating from a 15-month high. The S&P 500 index fell 1.4%. The Nasdaq composite tumbled 2.2%, its worst one-day decline since February. The small-cap Russell 2000 gave 1.4%.
Market breadth, not surprisingly, was decisively weak.
Late Tuesday, Fitch Ratings downgraded U.S. sovereign debt to AA+ from AAA. The 10-year Treasury yield rose to fresh 2023 high of 4.13% intraday, in part due to strong U.S. economic data. The 10-year Treasury yield closed up 3 basis points to 4.08%.
Earnings also slammed stocks such as Advanced Micro Devices, Generac, Paycom Software and Dynatrace.
The Nasdaq fell below the 21-day moving average for the first time in nearly three months. It also undercut the 14,000 level and hit the lowest level in three weeks. It's now just 2.6% above the 50-day line, no longer extended.
The S&P 500 tested its 21-day line, closing just above that level.
With those key indexes wiping out weeks of gains, it's no surprise that many leading stocks are doing the same, especially in tech.
Nvidia stock fell 4.8% on Wednesday, closing below its 21-day line for the first time in months and setting a three-week low. NVDA remains above its 50-day line. Beyond the broader market slide, the AI chip leader fell as rival AMD plunged 7% in an ugly, chart-damaging reversal.
Tesla stock slumped 2.7% to 254.11, the lowest since late June but finding support a whisker above the 50-day line. Shares did drop below their 10-week line.
U.S. crude oil prices fell 2.3% to $79.49 a barrel.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF slumped 2.9%. The iShares Expanded Tech-Software Sector ETF retreated 3.2%. HUBS stock is an IGV holding. The VanEck Vectors Semiconductor ETF tumbled 3.7%. Nvidia stock is the No. 1 holding in SMH, with AMD and QCOM stock also notable components.
Reflecting more-speculative story stocks, ARK Innovation ETF skidded 5.6% and ARK Genomics ETF 4.9%. TSLA stock is the No. 1 holding across Ark Invest's ETF. SHOP stock is a top-10 Cathie Wood stock. HOOD stock is also a notable investment for Cathie Wood's Ark. Wood also owns some MELI stock.
SPDR S&P Metals & Mining ETF sank 2.9%. U.S. Global Jets ETF descended 1.1%. SPDR S&P Homebuilders ETF fell 0.9%. The Energy Select SPDR ETF retreated 0.85% and the Health Care Select Sector SPDR Fund edged up 0.1%.
The Industrial Select Sector SPDR Fund lost 1.05% The Financial Select SPDR ETF declined 0.85%.
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Key Earnings
SHOP stock fell modestly early Thursday after Shopify reported strong earnings and sales that slightly topped views. The e-commerce software giant also sees slower revenue growth in Q3 Cathie Wood stock Shopify tumbled 7.4% to 62.43 on Wednesday, undercutting the 50-day line for the first time since April.
HOOD stock tumbled in extended action after Robinhood Markets reported a smaller-than-expected loss and topped revenue views, but monthly active users continues to weaken for the free-trading stock and crypto app. Robinhood stock sank slid 3.3% to 12.44 on Wednesday, back below a 12.76 buy point but above the 21-day line.
QCOM stock sold off in overnight trade as the wireless chip giant beat on fiscal Q3 EPS but slightly missed on sales. The Apple chipmaker gave weak Q4 revenue guidance. Qualcomm stock fell 2.1% on Wednesday to 129.27. Shares are working toward a 139.94 cup-base buy point, according to MarketSmith analysis.
ACLS stock rose solidly after the EV-exposed chip-equipment maker reported strong earnings and guidance. Axcelis stock fell 3.7% to 189.02 on Wednesday but closed off lows and never touched even its 10-day or 21-day lines.
MELI stock climbed solidly Thursday morning, signaling a move back above the 50-day line, after the Latin American e-commerce and payments giant beat on EPS and sales. MercadoLibre stock declined 3.8% to 1,164.81 on Wednesday. MELI stock has a 1,365.64 buy point, but investors could use Monday's high of 1,257.66 as an early entry.
HUBS stock retreated solidly even though the cloud marketing software maker comfortably beat Q2 views and offered bullish guidance. HubSpot stock retreated 4% to 553.22 on Wednesday, but found support at the 21-day line and above the top of a short consolidation.
PYPL stock tumbled overnight after the digital payments leader reported EPS and sales that edged past views. PayPal stock fell 3.1% to 73.20 on Wednesday, back below the 200-day line.
Market Analysis
A stock market rally is going to test or undercut the 21-day moving average at the some point. So that's not a death knell.
The number of distribution days has picked up in the past couple of weeks. That institutional selling is a negative signal for the market rally.
Meanwhile, market sentiment had been getting highly bullish on a variety of indicators, another bearish sign.
The heavy selling in leading stocks also was notable, especially in tech. Some charts still look solid, others look damaged, though potentially constructive down the road.
The market retreat is letting stocks work on new buying opportunities — including Nvidia and Tesla — and perhaps giving them room to go on another steady uptrend for weeks. But the pullback could continue, perhaps to the 50-day or even beyond.
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What To Do Now
Wednesday's market losses pushed many recent buys, especially tech names, underwater. For positions with solid cushions, Wednesday didn't trigger many red-flashing sell signals. It's just a question of how much pain investors are willing to risk.
The potential for a pullback, especially in the middle of earnings season, was why IBD had been suggesting caution in recent days.
Investors should remain wary about making new buys in the very short term. Instead, they want to be taking partial profits, especially if recent gains are in danger of turning into losses.
Apple and Amazon earnings, along with Friday's jobs report, mean heightened uncertainty continues through the week.
The market pullback is letting some stocks step back bullishly or finish off handles or bases. So you want to pay close attention for a possible flurry of buying opportunities in the days ahead.
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.
