Dow Jones futures were little changed early Friday, along with S&P 500 futures and Nasdaq futures, with the August jobs report on tap. The stock market rally sold off again intraday Thursday, but rebounded to close mixed.
Despite the so-so close, there was more damage among key sectors and stocks amid a slew of negative news.
A U.S. ban on sales to China of certain advanced chips from Nvidia and AMD slammed the semiconductor sector. And several huge sell-offs from struggling software makers pummeled the other big tech space. A China lockdown of 21 million people over Covid cases also weighed on stocks and fueled a sell-off in crude oil, copper and base metals. Meanwhile, Treasury yields and the U.S. dollar soared on strong labor market data heading into the August jobs report.
More leading stocks — such as Celsius Holdings and Enphase Energy — are under pressure, though they haven't cracked yet. Some stocks setting up in the past few weeks have broken through key support, such as Apple, Arista Networks and, to some extent, Tesla.
Investors should have minimal exposure in the current market environment.
Jobs Report
Economists expect Friday's August jobs report to show nonfarm payrolls rose by a solid 293,000 after July's hot 528,000. Economists see unemployment holding at a half-century low of 3.5%.
Labor force participation will be key. A sustained rebound in the labor force would be a near-magic elixir for the economy, easing pressure on the Federal Reserve to be so aggressive with rate hikes.
But participation has trended lower in recent months, leaving no slack in the job market.
The jobs report follows data this week showing initial jobless claims falling to a two-month low and July job openings jumping far above expectations.
Key News
Late Thursday, Broadcom and Lululemon Athletica reported strong earnings and raised guidance. AVGO stock rose slightly in premarket trade while Lululemon jumped. Neither is close to being actionable, but it's positive action for the market.
Warren Buffett sold 1.72 million H-shares of BYD in Hong Kong on Sept. 1, according to new disclosures. That follows a sale of 1.33 million shares on Aug. 24. News of that initial sale, and fears of further sales, has sent BYD stock plunging this week.
BYD sold a record 174,915 new energy vehicles in August, up 185% vs. a year earlier and 7.6% above July's 162,530.
Why You Can't Trust Friday's Jobs Report
Dow Jones Futures Today
Dow Jones futures rose slightly vs. fair value. S&P 500 futures edged higher and Nasdaq 100 futures lost a fraction. Futures are shifting between slim gains or losses awaiting August employment data.
The jobs report will be out at 8:30 a.m. ET, certainly spurring big moves in Dow futures, Treasury yields and more.
Crude oil futures climbed nearly 2%. U.S. natural gas futures fell almost 3%. Russia's Gazprom is expect to restart the Nord Stream 1 pipeline to Europe on Saturday after a three-day halt. European electricity prices have tumbled this week even during the temporary shutdown.
There are concerns that China's huge Shenzhen province will return to a full lockdown as Covid cases increase. China put Chengdu, the capital of Sichuan province with 21 million people, on lockdown earlier this week. Many big manufacturing operations are running on a "closed-loop" basis with workers living on site.
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 started off lower Thursday and continued to weaken before rebounding late in the session to close modestly mixed.
The Dow Jones Industrial Average rose 0.5% in Thursday's stock market trading. The S&P 500 index climbed 0.3%. The Nasdaq composite dipped 0.3%. The small-cap Russell 2000 sank 1.1%.
U.S. crude oil prices fell 3.3% to $86.61 a barrel.
The 10-year Treasury yield leapt 13 basis points to 3.265%, the highest since late June. The benchmark yield, which has soared from just below 2.53% on Aug. 2, is starting to approach the 11-year high of 3.48% on June 14.
ETFs
The VanEck Vectors Semiconductor ETF gave up 2.2%. Nvidia and AMD stock are major SMH holdings. NVDA stock slumped 7.7%, hitting a two-year low. AMD, less exposed to the China curbs than Nvidia, fell 3%, still above its June lows.
The SPDR S&P Metals & Mining ETF tumbled 3.8%. U.S. Global Jets descended 0.6%. The Energy Select SPDR ETF lost 2.5%, and the Financial Select SPDR ETF advanced 0.3%. The Health Care Select Sector SPDR Fund rallied 1.6%.
Reflecting stocks with more speculative stories, the ARK Innovation ETF fell 0.4% and ARK Genomics rose 0.65%. Tesla stock is a major holding across Ark Invest's ETFs.
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Market Rally Analysis
Well, the stock market rally arguably was due for a bounce. Whether Thursday's rebound from intraday lows to mixed has legs will likely depend on Friday's jobs report.
Intraday, the major indexes suffered more damage.
The Nasdaq and S&P 500 didn't quite undercut their July 26 lows, which would have marked an end to the "higher lows" trend and possibly triggered a shift to "market in correction." But they are clearly below their 50-day moving averages, along with the Dow Jones.
The small-cap Russell 2000 and S&P MidCap 400 gapped below their 50-day lines on Thursday.
It was encouraging to see the market battle back Thursday afternoon in the face of so many headwinds and headlines. But a market rally is measured in weeks, months or years, not two-hour increments.
Broad Weakness
Steel stocks, which a week ago were flashing buy signals, have melted down. Chip names that looked so strong last week have crashed. Oil stocks are struggling.
Meanwhile, the bottom-fishing rally for the likes of Nvidia stock, Datadog and ARKK ended weeks ago.
Solar, natural gas and pollution-control stocks are still holding up relatively well, though most of these names aren't making progress and starting to slide. Did Enphase stock, Cheniere Energy and Celsius stage shakeouts Thursday or will they be the next to crumble?
Albemarle round-tripped recent gains as lithium plays sell off.
A lot of stocks that had been setting up may need considerable repair work even if the overall market quickly revives. Apple stock and Tesla closed higher after undercutting their 50-day lines intraday. But both are looking up at their 200-day lines.
Vertex Pharmaceuticals is showing positive action, while UnitedHealth and Centene are fighting for key support in old buy zones.
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What To Do Now
This is not a time to be buying stocks. If you have a few stocks with solid gains that are holding up well, you can stick with them, though partial profits are not a bad idea.
Investors can differ on when to sell a winning stock, but you have to draw a line in the sand somewhere.
This is not a good time to be shorting. The ideal time was when the market hit resistance at the 200-day line a few weeks ago. Short-covering rallies can be fierce, if often short-lived. However, if the indexes rise up to their 50-day line and stall out, there could be new shorting opportunities, perhaps even in the likes of Arista, Apple or Tesla stock.
Work on your watchlists, long and short. Even if you don't intend to short, the exercise can help your overall market analysis and keep you from being overly bullish.
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.
