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    Dow Jones Futures Await Fed’s Favorite Inflation Report; Tesla Rises Late On Elon Musk Pledge

    Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures. The Federal Reserve’s favorite inflation gauge is on tap Friday morning, while Tesla stock rose late on Elon Musk comments.




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    The stock market suffered heavy losses Thursday, wiping out Wednesday’s gains and more amid negative corporate news and economic data as well as bearish comments from billionaire investor David Tepper. The major indexes broke key levels with many leading stocks skidding back. Stocks did pare losses, but the closing declines were still significant.

    Nvidia (NVDA), Lam Research (LRCX) and other chip stocks were big losers, as memory-chip maker Micron Technology (MU) missed views, guided low, and announced staff and additional capital spending cuts.

    The Tesla (TSLA) meltdown continued. In addition to company-specific factors, Tesla stock tumbled Thursday with other automakers as CarMax (KMX) cited vehicle affordability issues for its big quarterly miss. TSLA stock rose slightly late after Elon Musk signaled no new share sales through 2023.

    Other megacaps showed weakness, with Apple skidding toward bear market lows once again with Amazon.com (AMZN) already there. Microsoft (MSFT) broke through key support.

    Investors should largely be in cash, reducing already-modest exposure and largely eschewing new buys.

    Third-quarter GDP growth was revised higher than forecast, along with the report’s inflation gauge. Initial jobless claims nudged higher, but less than expected. The November index of Leading Economic Indicators fell solidly, bolstering arguments for a recession next year.

    PCE Inflation Data

    On Friday, the Commerce Department will release the Personal Consumption Expenditures price index for November. The inflation data is part of the monthly income and spending report.

    The PCE price index should rise 0.2% vs. October, with core prices also up 0.2%. The PCE inflation rate should cool to 5.5% from October’s 6%. Core PCE inflation is expected to slow to 4.6% from 5%.

    The PCE inflation rate has been the Fed’s favorite price gauge for some time. Recently Fed chief Jerome Powell has said he’s keeping a close eye on PCE services prices excluding housing.

    Personal incomes should climb 0.3% in November, with consumer spending up 0.2%. Americans have been dipping into savings and ramping up credit charges in recent months.

    Dow Jones Futures Today

    Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures climbed 0.1% and Nasdaq 100 futures edged higher with TSLA stock offering a slim boost.

    The 10-year Treasury yield rose 2 basis points to 3.69%.

    Crude oil futures rose 1%.

    PCE inflation rate figures will be released at 8:30 a.m. ET. November durable goods data also will be released at that time, with November new-home sales out at 10 a.m. ET.

    Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.


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    Stock Market Rally

    The stock market rally started off weak and kept tumbling through midafternoon. The major indexes pared losses after that but still suffered damaging losses.

    The Dow Jones Industrial Average fell just over 1% in Thursday’s stock market trading. The S&P 500 index sank 1.45%, with Tesla stock and LRCX the worst performers. The Nasdaq composite retreated 2.2%. The small-cap Russell 2000 gave up 1.3%.

    Apple stock retreated 2.4% to 132.23, not far from its June bear market low 129.04. Fellow Dow Jones titan Microsoft gave up 2.55%, below its 50-day line after holding that key level since early November. Amazon stock slid 3.4%, nearly undercutting its March 2020 Covid crash low.

    Nvidia tumbled 7%, but did find support at its 50-day line.

    U.S. crude oil prices fell 1% to $77.49.

    The 10-year Treasury yield dipped 1 basis point to 3.67%. The two-year Treasury yield, more closely tied to Fed policy, rose modestly. Markets still expect quarter-point rate hikes in February and March.

    ETFs

    Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) fell 1.9%, with MSFT stock a major component. The VanEck Vectors Semiconductor ETF (SMH) plunged 4.15%. Nvidia stock, LRCX and Micron are notable SMH holdings, but chip weakness was widespread.

    Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) gave up 3.4%, falling to a fresh five-year low. ARK Genomics ETF (ARKG) fell back 1.1%. TSLA stock is a major holding across Ark Invest, but especially ARKK.

    SPDR S&P Metals & Mining ETF (XME) lost 1.75%. U.S. Global Jets ETF (JETS) retreated 2.1%. SPDR S&P Homebuilders ETF (XHB) declined 0.9%. The Energy Select SPDR ETF (XLE) cooled off 2.3% and the Financial Select SPDR ETF (XLF) ceded 0.9%. The Health Care Select Sector SPDR Fund (XLV) dipped 0.1%.


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    Tesla Stock

    Tesla stock dived 8.8% to 125.35 on Thursday, hitting its lowest point since September 2020 as the heavy-volume sell-off continued. Tesla doubled its year-end delivery discount in the U.S. to $7,500 late Wednesday. That came as CarMax’s affordability concerns hit automakers and dealers broadly. TSLA stock has lost nearly 36% in December alone.

    However, Tesla Elon Musk, in a Twitter Spaces call Thursday night, said, “I won’t sell stock next year under any circumstances…not selling stock until 2024-2025.”

     

    Musk has sold nearly $39 billion worth of Tesla stock since shares peaked in November 2021, including yet another batch in mid-December. Musk has stated several times that he was finished selling before divesting more shares.

    However, Musk made it clear that he won’t tone down his politically charged tweets. “I’m not gonna suppress my views just to boost the stock price.”

    TSLA stock rose 1% in overnight trade.

    Market Rally Analysis

    The stock market rally was in a bearish mood Thursday, with the major indexes plunging on economic data and corporate news.

    The S&P 500 index, which just reclaimed its 50-day line on Wednesday, sold off to undercut Tuesday’s lows intraday. So did the Nasdaq, but both rallied to finish above Tuesday’s lows.

    The Dow Jones just undercut Monday’s lows intraday, but rebounded to close above the 50-day line.

    While Apple, Amazon, Microsoft and especially Tesla stock look terrible, this isn’t just a megacap sell-off. The Invesco S&P 500 Equal Weight ETF (RSP) fell 1.1% on Thursday, back below its 50-day line.

    The SMH chip ETF dived below its 50-day line, just a few days after jumping to a multi-month best on Dec. 13, above the 200-day average. Unlike the S&P 500, SMH closed well below Tuesday’s lows.

    Leading stocks were hard hit again Thursday, aside from some defensive or defensive growth names. Some metals and mining stocks still look OK on a weekly chart.

    The stock market rally is under heavy pressure, just hanging on.


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    What To Do Now

    The market action continues to deteriorate, with trends turning decisively negative since just after the open on Dec. 13.

    Market exposure should be slim, limited only to positions that are working. Even then, investors may want to take partial profits or simply exit some trades with a gain.

    At some point, the market will bounce as it did on Wednesday. Do not get swept up in a strong open, or even a strong session.

    Investors should be working on their watchlists. Focus on stocks with strong relative strength or holding key levels such as the 50-day line, and that get fussy if the charts don’t look great right now.

    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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