The Dow Jones and S&P 500 fell Thursday morning, while Nasdaq futures were little changed as tech titan Microsoft cut guidance for the current quarter.
The stock market rally suffered a second straight modest decline Wednesday as hot labor data raised the prospect of bigger rate hikes, while JPMorgan's Jamie Dimon warned of an economic "hurricane." The major indexes pared losses somewhat as the Federal Reserve saw slower growth in much of the U.S.
Lithium producers Albemarle and Livent plunged Wednesday while agricultural plays such ADM and Bunge fell solidly following bullish moves Tuesday. ALB and LTHM rose Thursday morning.
On the upside, energy stocks continued to do well, with LNG plays Golar LNG and Excelerate Energy, a recent IPO, flashing buy signals. Callon Petroleum shot up to near a buy point, continuing to race from the bottom of a V-shaped cup base. All three are volatile, though. CPE stock fell sharply Thursday morning amid a block share sale.
Printer and PC giant HP Inc. rose 3.9% to 40.34, a record close, following better-than-expected earnings late Tuesday. HPQ stock cleared a draw-the-line 39.81 early entry that also aligns with the top of a prior base.
Meanwhile, megacaps aren't leading the market rally. Microsoft stock is the only one getting close to its 50-day line, though Apple and Google parent Alphabet are moving near their declining 50-day lines. Tesla fell 2.4% on Wednesday. TSLA stock, after last week's big bounce, is hitting resistance at its 21-day exponential moving average.
Key Earnings, News
Microsoft now sees revenue for the current fiscal fourth quarter at $51.94 billion-$52.74 billion vs. its prior target of $52.4 billion-$53.2 billion. It also slightly cut earnings guidance. The tech titan blamed additional currency impacts. Shares fell 2% Thursday morning.
Data storage plays NetApp and Pure Storage reported earnings late Wednesday, along with Hewlett Packard Enterprise and software makers MongoDB and Veeva Systems. NetApp, Pure Storage, MongoDB and Veeva rose in early Thursday on strong results, while HPE fell after slightly missing. All are considerably off highs.
Meanwhile, China EV and battery giant BYD on Thursday reported May sales of 114,943 EVs and plug-in hybrids, yet another record and the third straight month above 100,000. Sales surged 250% vs. a year earlier and 8% vs. April's 106,042.
BYD stock rose 1% to 36.15. That was still in range from a 34.60 early entry. BYDDF is in a 48%-deep cup base with an official 41.34 buy point.
Albemarle stock is on IBD Leaderboard. Microsoft and Google stock are IBD Long-Term Leaders. Callon Petroleum and BG stock are on the IBD 50, with CPE selected as Wednesday's IBD 50 Stock To Watch.
Dow Jones Today
Dow Jones fell 0.5%. The S&P 500 lost 0.3% and the Nasdaq composite rose 1%. Microsoft stock is a member of the Dow Jones, S&P 500 and Nasdaq composite.
The ADP Employment Report showed private payrolls rose by just 128,000 in May, well below views for 240,000. Small businesses showed a decline of 91,000 jobs. April private job growth was revised down.
Jobless claims fell 11,000 to 200,000 in the latest week vs. views for 210,000.
The Labor Department will release the May employment report on Friday morning.
Crude oil prices rose slightly after being down about 3% for much of the morning. Oil pared losses after reports that OPEC+ is likely to increase July production quotas by 600,000 barrels per day, slightly more than in recent months. But there are no signs that Saudi Arabia will ramp up output sharply.
Copper futures jumped 3%.
The 10-year Treasury yield rose 1 basis point to 2.94%.
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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Economic Data
The April JOLTS survey showed job openings came in at 11.4 million, in line with views. That's not quite at a record high, but very close. March job openings were revised up to 11.855 million from 11.549 million. People quit at near-record levels, while layoffs hit new lows. The Federal Reserve clearly wants to see labor markets softening. Perhaps that started to happen in May. But it wasn't in the April JOLTS report.
The May employment report is due Friday.
Meanwhile, the ISM manufacturing index rose to 56.1 in May from 55.4 defying views for a slim decline to 54.5.
The Fed's Beige Book report, released at 2 p.m. ET, showed that economic growth cooled in several districts, with customers balking at some high prices.
Atlanta Fed President Raphael Bostic walked back talk of a September "pause." San Francisco Fed President Mary Daly doesn't see a pause until the fed funds rate is around 2.5%. With the benchmark rate at 0.75%-1% now, that implies at least three more half-point rate hikes.
Finally, JPMorgan CEO Jamie Dimon warned of an economic "hurricane" coming our way. "You better brace yourself," he said at a financial conference. "JPMorgan is bracing ourselves." Dimon said the question is whether it'll be a minor or major hurricane.
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Stock Market Rally
The stock market rally opened Wednesday with solid gains, but the hot economic data and "Hurricane Dimon" changed the climate quickly, with the major indexes reversing lower. The indexes pared losses in the afternoon, helped by the Fed's Beige Book, but faded once again.
The Dow Jones Industrial Average fell 0.5% in Wednesday's stock market trading. The S&P 500 index declined 0.75%, with ALB stock the worst performer. The Nasdaq composite sank 0.7%. The small-cap Russell 2000 gave up 0.6%.
U.S. crude oil prices rose 0.5% to $115.26 a barrel. Gasoline, diesel and natural gas futures showed much bigger gains.
The 10-year Treasury yield jumped nine basis points to 2.93% in the wake of the JOLTS report and Fed comments. That's after a 10-basis-point pop on Tuesday. Investors who have been betting on half-point rate hikes this month and in July are now pricing in a 50-basis-point move in September as well.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF rose 1.15%, while the Innovator IBD Breakout Opportunities ETF edged up 0.6%.
The iShares Expanded Tech-Software Sector ETF advanced 0.6% as Salesforce.com reported strong earnings and ServiceNow raised guidance. MSFT stock also is a huge IGV holding.
The VanEck Vectors Semiconductor ETF sank 1.6%.
The SPDR S&P Metals & Mining ETF and the Global X U.S. Infrastructure Development ETF both dipped 0.2%. U.S. Global Jets descended 3.1%. SPDR S&P Homebuilders sank 1%. The Energy Select SPDR ETF rose 1.6%, and the Financial Select SPDR ETF slumped 1.6%.
Reflecting stocks with more speculative stories, the ARK Innovation ETF declined 3.6% and ARK Genomics shed 3.4%. Tesla stock remains the No. 1 holding across Ark Invest's ETFs. ARK also owns some BYD stock.
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Lithium Stocks Chilled
Albemarle stock plunged 7.8% while Livent stock dived 14%, knifing below early buy points after solid losses Tuesday. Early this week, Goldman Sachs called a top in battery metals, predicting a big drop in white-hot lithium prices in 2023.
ALB stock and Livent surged late last week past key resistance levels as the Nasdaq followed through. The moves also were a belated reaction to Albemarle's second upward guidance hike in a month.
ALB stock, at least, found support at its 21-day moving average. On a monthly chart, Albemarle and LTHM stock don't look too bad, given their huge May gains. Perhaps these stocks will form handles, but perhaps not.
Anyone who bought these stocks on Thursday-Friday, even close to the entry points, are sitting on modest to painful losses.
UBS downgraded Albemarle stock to neutral on Thursday. Shares fell modestly.
Agriculture Stocks Wilt
ADM stock fell 4.6% to 86.67, tumbling below the 50-day line and wiping out several days of gains. On Tuesday, ADM stock rose 2.1%, moving above the 50-day line and flashing an early entry. Bunge stock showed similar action Tuesday with a 3.1% gain. But it sank 3.6% to 114.10 on Wednesday, back below the 50-day line.
Fertilizer stocks such as Mosaic, which had strong gains Tuesday, sold off Wednesday.
Market Rally Analysis
The stock market rally suffered modest losses for a second straight session, off intraday lows but fading again at the close. The Nasdaq continued to find support at its 21-day moving average.
One concern with the current market rally is that there haven't been many stocks to buy. That situation hasn't improved, with some promising moves reversing hard, including LTHM stock, ADM stock and more. Drugmakers haven't broken down, but aren't having a good time this week.
Meanwhile, a number of stocks that were setting up are struggling again, including travel plays such as Delta Air Lines.
Could many of these names recover if the market rally steadies? Sure. In a positive scenario, the current market pullback could allow new handles and pullbacks to form. But right now, stocks are falling.
The one exception is oil and gas. This sector continues to do well overall, with some stocks in or near buy points. But these names are prone to volatile action.
Growth names remain heavily damaged, with rebounding Treasury yields once again a concern. Even if the market rally shows lasting power and Microsoft, Google and Apple stock get into shape, it's unclear if these megacaps will outperform in the foreseeable future.
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What To Do Now
If you took on limited exposure on Thursday or Friday, you may not have been hurt too badly and could still be up. But if you stepped in more aggressively and continued to add to holdings on Tuesday, you could have taken some unpleasant losses. That's especially true if you bought more-volatile names.
Remember, if you're going to be aggressive getting in, you need to be aggressive in scaling back out.
Yes, it's possible that you'll sell positions and then the stocks and market will quickly rebound. But if that's the case you can buy back those stakes — or something better. That's a minor cost for protection against a much-steeper sell-off.
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.
