S & P 500 falls below key levels in the election, Tesla, Bitcoin; CPI Inflation Report Looms

Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, after a difficult day for the S&P 500 and the stock market rally. All eyes will turn to the October CPI inflation report.




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The stock market rally lost ground on Wednesday, and the S&P 500 returned below its 50-day moving average. Mixed election results, Bitcoin’s continued woesrenewed Chinese lockdowns – and the looming consumer price index – were possible contributors.

Bitcoin plunged to fresh two-year lows as Binance, the world’s largest cryptocurrency exchange, said Wednesday afternoon that it will not buy rival FTX.

Megacaps don’t help. Tesla (salad) plunged below the key level to a two-year low. Amazon.com (AMZN) also set fresh bear market lows. apples (AAPL) had closed its worst since June, while Microsoft (MSFT) and its parent Google Sundanese script (Google) slightly fell.

His mother’s Facebook Platform Meta (map) was the exception, rebounding after announcing jobs and cutting spending. But key suppliers fell.

Key income

Pharmaceutical Catalysts (CPRX), Excelerate Energy (EE), Celsius Holdings (CEL), Riviere (Bohuslav) and Wynn Resorts (WYNN) reported late Wednesday.

CPRX stock rose solidly in after-hours action as Catalyst Pharma beats EPS and income view. Biotech also showed Q4 sales in line with consensus. Catalyst shares fell 5.35% on Wednesday, returning to the initial entry.

CELH shares jumped overnight on strong Celsius revenue growth after the energy drink maker fell on Wednesday to its lowest level since July. Rivian stock rebounded on Q3 results are mixed after tumbling to a low of four months on Lucid (LCD) the results. EE shares fell modestly in limited trading after Excelerate earnings topped the show. Excelerate shares skidded on Wednesday, testing the 50-day line.

Meanwhile, network companies Digi International (DGII) and rival Tesla’s Chinese EV Neo (NIO) is on tap starting Thursday. DGII stock pulled back on Wednesday towards its 50-day line as it worked on one base rises buy points. Nio shares fell to a two-year low as southern manufacturing hub Guangzhou announced Covid lockdowns, slamming many Chinese stocks.

CPI Inflation Report

The October consumer price index will be released at 8:30 am ET on Thursday. Economists expect the CPI inflation report to show a 0.7% rise in prices compared to September. Core CPI, which excludes food and energy, should rise 0.5%.

The annual CPI inflation rate should dip to 8% from September’s 8.2%. Core inflation is seen holding steady at 6.6%.

The Federal Reserve wants to see clear-and-convincing evidence of slowing inflation before the end of rate hikes. Markets are slightly leaning toward a 50-basis-point Fed rate hike in December, but there’s still a strong chance for a fifth straight 75-basis-point move. November employment data and CPI report will be released before the December Fed meeting and announcement.

Dow Jones Futures Today

Dow Jones futures advanced 0.1% vs. fair value. S&P 500 futures rose 0.12% and Nasdaq 100 futures rose 0.3%.

The 10-year Treasury yield fell 6 basis points to 4.09%.

Bitcoin traded just above $16,000, still near Wednesday afternoon’s two-year lows.

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


Join IBD’s experts as they analyze the stocks that could be in action in the stock market rally on IBD Live


Stock Market Rally

The stock market rally opened mixed 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 market trading. The S&P 500 index fell 2.1%. The Nasdaq composite skidded 2.5%. The small-cap Russell 2000 slumped 2.7%.

The 10-year Treasury yield rose 2 basis points to 4.15%.

The dollar had a strong session, following a three-day slide.

US crude oil prices slumped 3.5% to $85.83 per barrel. U.S. weekly crude inventories rose the most in a month. Meanwhile, China’s lockdown has raised concerns about oil demand there. US natural gas futures retreated 4.5%.

Bitcoin

Bitcoin plunged again as Tuesday’s Binance tentative deal to buy FTX fell apart, with Binance walking away after looking at its rival’s books. “We hope to be able to support FTX customers to provide liquidity, but the issue is beyond our control or ability to help,” Binance said in a statement Wednesday evening.

FTX, which earlier this year seemed to be a potential savior for ailing crypto firms, is now in danger of collapsing.

Bitcoin plunged to below $15,554.48, the worst in two years. The pioneer cryptocurrency broke below $20,000 only on Monday. Other major cryptos such as Ethereum also continue to sell off, along with crypto-related stocks.

ETFs

including The best ETFsInnovator IBD 50 ETF (FFTY) fell 4.2%, while the Innovator IBD Breakout Opportunities ETF (out) yielded 1.8%. iShares Expanded Tech-Software Sector ETFVAT) sank 2.2%, with Microsoft shares being the main component. VanEck Vectors Semiconductor ETFSMH) retreated 2.7%.

Showcasing a more speculative story stock, the ARK Innovation ETF (RKK) plunged 6.5% and the ARK Genomics ETF (ARKG) 4.3%. Tesla stock is a major holding in the Ark Invest ETFs.

SPDR S&P Metals & Mining ETFXME) down 5.4% and the Global X US Infrastructure Development ETF (Save) lost 2.1%. US Global Jets ETFJETS) down about 1%. SPDR S&P Homebuilders ETFXHBdown 1.75%. The Energy Select SPDR ETFAxle) sold out 4.9% and Financial Select SPDR ETF (45) down 1.7%. The Health Care Select Sector SPDR Fund (XIV) down 1.1%.


The Five Best Chinese Stocks to Watch Now


Tesla stock

Tesla shares plunged 7.2% to 177.59, hitting their lowest in 2021. Late Tuesday, Elon Musk revealed that he sold nearly $4 billion in TSLA stock on November 4, 7 and 8, presumably to help fund his Twitter acquisition. The disclosure could lift the overhang from TSLA stock, although Musk has not yet said he has completed his latest share sale.

Elon Musk’s takeover of Twitter has a wider impact. It’s taking a while and there are concerns that his Twitter moves and tweets will damage Elon Musk’s brand, and perhaps Tesla as well. At the Spaces Twitter event on Wednesday, Musk talked about subscriptions and adding a savings-and-pay feature, but didn’t do much to get advertisers wary.

Also, Tesla could fall with other Chinese-exposed stocks after the steps taken there. Further, many US and Chinese EV stocks suffered double-digit losses on Wednesday, including shares of Nio, Lucid and RIVN.

Finally, Tesla still owns some Bitcoin.

TSLA stock remained active overnight. Late Wednesday, President Biden, responding to a question about whether Musk is a national security risk, said, “It’s worth looking at,” adding that there are “many ways” to do that.


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Other Megacap stocks

Meta Platforms will cut 11,000 jobs, or 13% of its workforce. Parent Facebook will also curb infrastructure spending as investors balk at the huge metaverse costs. META stock popped 5.2%, but spending curbs hit Arista Network (SIDE), Nvidia (NVDA) and other suppliers benefiting from the splurge metaverse.

Apple shares sank 3.3% to 134.87. Although the iPhone maker did not break its October intraday lows or June 16 bear market lows, AAPL stock closed at its worst level since June 17. Earlier this week, Apple warned that China’s Covid restrictions would hurt iPhone 14 Pro production.

Amazon shares gave up 4.3%, falling to their lowest point since March 2020. MSFT shares fell 1.9%. Google shares retreated 1.8%. But both are still up for a week.

Market Rally Analysis

Just when the stock market rally appears to be regaining momentum, sell back on Wednesday. The Dow Jones retreated below its 200-day line. The S&P 500 fell back below its 50-day moving average. The Russell 2000 also broke below the 50-day line.

The laggard Nasdaq retreated after hitting resistance at the 21-day line on Tuesday.

Treasury yields rose, but not by much. The dollar rebounded, but is in a recent downtrend. Inconclusive election results, showing less of a GOP wave than expected, may have played a role. Bitcoin’s decline, China’s lockdown and the often-negative earnings reaction all contributed.

Finally, the market rally has been under pressure for the past week. The S&P 500 above its 50-day line is the minimum level for market strength. The Nasdaq moving above that key level will be an even-stronger signal.

The October CPI report could set the tone on Fed rate hike expectations, and perhaps market direction, for at least several weeks.


Market Timing And IBD ETF Market Strategy


What To Do Now

The market rally is rangebound, even with the Dow near recent highs and the Nasdaq near bear market lows. A volatile, very dangerous side market for investors.

A strong bull market generally lifts all ships. A bear market sinks them, driving everyone to dry land. But the water market wave will do just enough to tempt investors and mini-run for indexes and strong gains for individual stocks. But after buying near the top of the short term, investors are caught in the undertow as the stock tumbler again. This can go on and on, with investors taking a small number of losses or a few very large ones.

It’s okay to do some test buy and hold positions if they’re working, though you might be able to take some quick profits in this environment. But investors should wait for the market rally to show sustained strength before having a large exposure.

But it’s important to stay engaged. Investors must have a game plan and execute when the market or individual holdings break down or up. Update your watch list so you’re ready to take advantage of the next true bull market rally.

read The Big Picture every day to stay in sync with 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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