Dow Jones futures fell modestly overnight, along with the S&P 500 and Nasdaq futures. The stock market rebound rebounded Monday in the face of key resistance amid concerns about inflation and the recession targeting key economic data, along with renewed concerns from China.
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The Nasdaq, which led last week’s gains in major indices, suffered its biggest losses on Monday. Treasury yields remain reversed, a warning of recession.
China’s shares were big losers as Covid restrictions returned and regulators imposed fines on technology companies, including Alibaba (BABA).
Shares of BABA and Li Auto (LI), which entered the week around the points of purchase, were withdrawn on Monday. Meanwhile, AstraZeneca (AZN) and Hershey (HSY) came out well, reflecting the defensive tilt.
Shares of Tesla (TSLA) and TWTR fell after Tesla CEO Elon Musk moved on Friday afternoon to end Twitter’s $ 44 billion takeover. Twitter (TWTR) has promised to fight in the courts to close the transaction.
The shares of Li Auto, Hershey and AZN are on IBD 50. Hershey was the existence of IBD on Monday. The video embedded in the article highlighted market action and analyzed the actions of BABA, AstraZeneca and Hershey.
Dow Jones futures today
Dow Jones futures lost 0.4% of fair value. Futures on the S&P 500 fell 0.45% and futures on the Nasdaq 100 fell 0.5%.
The price of crude oil sank more than 1%.
The 10-year Treasury yield fell 2 basis points to 2.97%.
Remember that overnight action on Dow futures and elsewhere does not necessarily translate into actual trading at the next normal stock market session.
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Stock market meeting
The stock market bounced back on Monday, with major indices closing near session lows.
The Dow Jones Industrial Average fell 0.5% on the stock market on Monday. The S&P 500 index fell 1.15%. The Nasdaq composite market fell 2.3%. The small Russell 2000 capitalization fell 2%.
US crude oil prices fell 0.7% to $ 104.90 a barrel, well off the morning lows.
The 10-year Treasury yield skated 11 basis points to 2.99%. The two-year return fell 5 basis points to 3.07% once again invested along much of the yield curve. The one-year Treasury yield rose 4 basis points to 2.99%, as did the 10-year rate.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) lost 1.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.7%. The ETF of the iShares expanded technology software (IGV) sector fell 1.7%. The VanEck Vectors Semiconductor ETF (SMH) yielded 2.4%.
The SPDR S&P Metals & Mining ETF (XME) fell 1.65% and the Global X US Infrastructure Development ETF (PAVE) fell 0.4%. US Global Jets ETFs (JETS) were down 2.3%. SPDR S&P Homebuilders ETF (XHB) was down 0.5%. The Energy Select SPDR ETF (XLE) and the Financial Select SPDR ETF (XLF) yielded 0.8%. The SPDR Fund for the Selected Health Sector (XLV) fell 0.25%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) sold 6.9% and ARK Genomics ETF (ARKG) 5%. Tesla shares remain one of the main holdings of Ark Invest’s ETFs.
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Alibaba Stock
Over the weekend, regulators fined Alibaba, Tencent (TCEHY) and several other technology companies for failing to disclose some previous acquisitions. The 500,000 yuan fines were relatively small, but they raised concerns that Beijing’s crackdown on tech giants would not be over.
Macau closed casinos and most businesses for a week, reviving fears about Covid’s restrictions on China.
Alibaba shares fell 9.4% 109.57, closing below their 21-day moving average for the first time since late May. Last Thursday, BABA shares moved above their 200-day line and removed some resistance above level 121, offering an aggressive entry. Shares fell below those key levels on Friday.
While a strong move above last week’s highs could be actionable, ideally BABA shares would consolidate above its 200-day line.
Li Auto Stock
Shares of Li Auto fell 4% to 37.33. just below 37.55 points of purchase. The shares still extend far from their 50-day line. It is possible that LI stocks may form a shallow base at the top of the long, deep consolidation. The last few weeks could be seen as a management of a base that goes back to the end of 2020.
Stock AZN
According to MarketSmith analysis, AstraZeneca shares fell 0.3% to 66.75 after flirting with a double-bottom buy point of 67.50. The relative strength line of AZN shares, the blue line of the provided graphs, is just below a maximum.
Hershey Stock
HSY shares rose 0.4% to 220.65, just below a 222.75-cup buying point with a handle. While the defense actions are in favor right now, that doesn’t mean they’re safe. Many food and beverage games, including Hershey’s actions, collapsed on May 18th. However, the shares have recovered since the end of June.
Musc Vs. Twitter saga
Faced with buyer remorse, Musk said Friday afternoon that he no longer wants to buy Twitter, something he had strongly indicated in recent months. Twitter said a deal is a deal, to force Musk to move forward with the acquisition of $ 44 billion and $ 54 per share. Twitter hired a heavyweight from the merger law to represent it. Legal experts say Musk has a weak case.
Twitter shares fell 11.3% in Monday’s regular session to 32.65, the lowest since mid-March. Shares of TWTR reached a two-year low of 31.30 on 24 February.
After the closure, Twitter, through its lawyers, said Musk’s offer to end the acquisition is “invalid and illegal.”
Shares of Tesla, which rose slightly near the opening, fell 6.55% to 701.99. Some or even most of Monday’s losses are likely to reflect the weakness of the market driven by China’s growth and concerns. TSLA shares fell below the 50-day line again after closing above that level on Friday for the first time in two months. Shares also fell slightly below their 21-day line.
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Analysis of market concentration
Given last week’s market gains to key levels, Monday’s pullback wasn’t surprising, especially with China’s negative news and so many key data within reach.
The Nasdaq fell from the 50-day, 10-week moving averages. which have served as great resistance in 2022. This is not to say that this test has already failed. The index could stop around these levels for several days or weeks before breaking.
The Nasdaq closed slightly below its 21-day moving average. The S&P 500, Dow Jones and Russell 2000 also reduced this level in the short term.
Beyond the news from China, it’s hard to be brave at current levels with key news to touch.
Wednesday’s consumer price index is expected to show that inflation rose slightly from the May 40 high of 8.6%. Underlying inflation should cool slightly. With gasoline prices falling significantly since the June 14 peak and with a sharp drop in commodity prices in recent weeks, headline inflation is expected to decline. Therefore, it is not clear how the markets will react to the June inflation data.
A Fed rate hike of 75 basis points in late July seems blocked, with a small chance of a full percentage point. The real impact will be on the impact of future Fed rate hikes. But policymakers will get two more reports on the CPI and employment ahead of the September meeting, with plenty of other data at the November Fed meeting.
Meanwhile, JPMorgan Chase (JPM), Morgan Stanley (MS) and Delta Air Lines (DAL) reported early Wednesday, with several other banks and UnitedHealth (UNH) touching later in the week.
Orientation will be key amid rapid changes in the economy.
Time to market with IBD’s ETF market strategy
What to do now
With market resistance to big economic and corporate news, investors may not want to add modest exposure in the very short term. Some sectors are working, in particular defensive or defensive growth names like HSY stock and AbbVie. But if the market bounces hard, defensive names can sell out or lag behind. So don’t focus too much on a particular sector or topic.
Investors may want to reap partial benefits from recent winners.
Read The Big Picture every day to keep in sync with market leadership and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.
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