Dow Jones futures tilted higher after hours, along with S&P 500 futures and Nasdaq futures. Micron Technology (MU) reported after the close, while Peloton Interactive (PTON) leapt overnight on a Lululemon Alliance.
The stock market struggled Wednesday as Treasury yields rebounded to fresh long-term peaks, with the Nasdaq briefly undercutting the 13,000 level. But the major indexes reversed to close mixed.
Meta Platforms (META) appeared to be a catalyst for Wednesday’s turnaround. Meta stock initially fell solidly on announcements from its Meta Connect events, but slashed losses, still close to key levels.
Tesla (TSLA) fell on a Deutsche Bank warning that goes beyond the EV giant’s deliveries. However, TSLA stock closed off lows.
Meanwhile Peloton surged after hours on a partnership with Lululemon Athletica (LULU). Peloton will provide digital fitness content for Lululemon in the five-year deal. PTON stock, which is near record lows, leapt more than 15%. LULU stock, just below the 50-day line and a buy point, edged higher overnight.
While technically Wednesday marks day one of a rally attempt, the market is in a correction. The risks are very high for any buys. The one exception may be energy stocks, which have been rising with crude oil prices.
Several energy names showed bullish action Wednesday as crude oil prices surged to a 52-week high. Stocks flashing buy signals included machinery play Nov (NOV), oil services giant SLB (SLB) and oil majors Chevron (CVX) and Exxon Mobil (XOM).
Dow Jones Futures Today
Dow Jones futures were just above fair value. S&P 500 futures rose 0.1% and Nasdaq 100 futures climbed 0.15%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
MU stock fell solidly in late trading, signaling a move below the 50-day line. Micron reported a big loss and 40% revenue decline, though both beat fiscal Q4 views. The memory-chip giant guided slightly higher on Q1 revenue but sees a wider-than-expected loss. Shares rose 0.4% to 68.21 in Wednesday’s regular session. Technically, a 71.16 buy point is still valid from a tiny handle in short cup base or a consolidation going back four months. But investors may want to use the Sept. 20 high of 72.31 as a better handle entry.
Stock Market Correction
For a second straight day, the major indexes opened higher but soon reversed lower. But this time, the indexes battled back to close narrowly mixed.
The Dow Jones Industrial Average fell 0.2% in Wednesday’s stock market trading. The S&P 500 index closed up 1 point. The Nasdaq composite climbed 0.2%, breaking below the 13,000 level.
The tiny gains mean the S&P 500 and Nasdaq are on day 1 of a market rally attempt. By itself, that doesn’t mean much, as Monday’s one-day uptick showed. But if the rally attempt can show more strength, investors could look for a follow-through day starting early next week to confirm the new uptrend.
Market breadth was modestly positive.
The small-cap Russell 2000 popped 1%.
The Invesco S&P 500 Equal Weight ETF (RSP) edged higher, outperforming the S&P 500 slightly. But RSP isn’t far from its May 31 low and even its 2023 low back in March.
Aside from energy, most sectors look weak.
U.S. crude oil prices leapt 3.6% to $93.68 a barrel, the highest close in 13 months.
The 10-year Treasury yield rose nearly 7 basis points to 4.625% after slipping to 4.49% early on. That’s the highest yield since October 2007. Fears of a government shutdown, which could happen on Oct. 1, may be spooking bond traders.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) bounced 1.8%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 0.65%. The VanEck Vectors Semiconductor ETF (SMH) advanced 0.9%. MU stock is a notable SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) gained 0.65% and ARK Genomics ETF (ARKG) bounced 1.2%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs. Cathie Wood’s Ark has shed a small but notice share of its TSLA stake in recent weeks.
SPDR S&P Metals & Mining ETF (XME) climbed 1.2%. U.S. Global Jets ETF (JETS) edged up 0.3%. SPDR S&P Homebuilders ETF (XHB) rose 0.7%. The Energy Select SPDR ETF (XLE) popped 2.5%, with XOM stock, Chevron and SLB all major XLE components.
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Meta unveiled its latest virtual reality headset, the Quest 3 at its Meta Connect event on Wednesday, which runs through Thursday. The $499 Quest 3 will face the upcoming Apple Vision Pro, due out early next year with an expected $3,499 price tag. Meta also unveiled artificial intelligence tools and a generative AI chatbot. The Facebook and Instagram parent said it’s working with Microsoft (MSFT) to bring current real-time information via Microsoft’s Bing browser.
Meta stock fell as low as 286.79, undercutting several weeks of tight trading, but then rebounded to end down just 0.4% at 297.74. CEO Mark Zuckerberg’s keynote address started with VR and metaverse news, then moved to AI.
Wednesday’s action could be a bullish shakeout. Meta stock is just below the 50-day line and close to a 312.87 cup-with-handle buy point, according to MarketSmith analysis.
Apple stock edged down 0.9%, hitting its worst levels since early May.
Tesla stock fell 1.5% to 240.50, but came off a one-month low as the major indexes rallied off lows. Shares are still working on a 278.98 cup-with-handle buy point, but are 4.7% below their 50-day line. The up-down volume ratio, a short-term measure of buying and selling, is a weak 0.6.
On Tuesday night, Deutsche Bank forecast third-quarter deliveries at 440,000. The consensus forecast is now around 460,000, below Q2’s record 466,140.
That overall estimate has come down steadily in recent days, with Tesla likely to report Q3 production and delivery figures on Monday, Oct. 2.
But Deutsche Bank’s bigger Tesla concern is the future. It now sees 2024 deliveries at 2.1 million, well below the consensus for about 2.3 million. It expects 2024 earnings per share of $3.90, well below the Street consensus. That would still be a rebound from a likely profit decline in 2023, but would be below 2022’s $4.07.
Analysts have been slashing 2023 and 2024 earnings targets throughout this year.
Stocks In Buy Areas
NOV stock jumped 4.7% to 21.54, retaking a 20.98 buy point from a cup-with-handle buy point in strong volume. The energy company, with deepwater oil and gas technology along with full-field drilling completion and production services, has rebounded from the 50-day line and broke above a short downtrend.
The relative strength line, the blue line in the chart provided, is at six-month highs. The RS line tracks a stock’s performance vs. the S&P 500.
SLB stock climbed 2.8% to 60.80, bouncing from near the 50-day and retaking a 60.12 handle buy point. The RS line is at an eight-month high for the oil services giant formerly known as Schlumberger.
CVX stock rose 1.9% to 171.04, clearing a 168.96 buy point. That serves as an early entry on a 10-month consolidation or an official buy point if you start the Dow energy giant’s base in April. On a weekly chart, it’s also the top of a three-weeks tight for Chevron stock.
XOM stock ran up 3.3% to 120.20, clearing a 118.84 cup-with-handle buy point.
Investors could choose to buy an energy-related ETF, such as XLE, XOP or OIH.
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What To Do Now
The market is in a correction, with a new rally attempt just underway. Don’t get excited by one good day.
Leading stocks, with the exception of energy, are heavily damaged.
The energy sector marches to a different drummer than the broader market, and it’s marching higher now. So investors could add some exposure in this area.
Otherwise, it’s time to wait for strength. Save your financial and mental capital for better days ahead. Build up your watchlists of stocks near buy points and showing relative strength.
Remember, in a correction, relative strength winners can still be absolute losers.
The PCE inflation report could be a catalyst on Friday. A government shutdown looms on Oct. 1, though lawmakers might be able to kick the can for a few weeks.
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Barbara Terrio is a seasoned business journalist, delving into the world of finance, startups, and entrepreneurship. With a knack for demystifying complex economic trends, she helps readers navigate the business landscape. Outside of her reporting, Barbara is an advocate for financial literacy and enjoys mentoring aspiring entrepreneurs.