Dow Jones futures edged lower early Friday, along with S&P 500 futures and Nasdaq futures, with more inflation data due.
U.S.-listed Chinese stocks fell Friday after China's largest surviving property developer warned of massive first-half losses. Country Garden had missed interest payments earlier in the week. Hong Kong's Hang Seng fell 0.9% and the Shanghai composite tumbled 2%.
The stock market rally started Thursday off strong, with a tame CPI inflation report helping to fuel a much-needed bounce. But the major indexes, hitting resistance, slashed gains, though the Nasdaq did close above its 50-day line.
Treasury yields, which initially fell below 4%, reversed higher, likely putting pressure on stocks.
Nvidia tried to reclaim its 50-day line but closed slightly lower on Thursday. An AI-led market rally needs its AI leader.
Lululemon Athletica, Visa, Mastercard, Costco Wholesale, KB Home, Arista Networks, Carnival, ServiceNow and Miniso are trading near buy points.
Nvidia stock and Costco are on IBD Leaderboard. NOW stock is on SwingTrader. CCL stock and Arista Networks are on the IBD 50. ServiceNow and ANET stock are on the IBD Big Cap 20.
KB Home was Thursday's IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures tilted lower vs. fair value. S&P 500 futures declined less than 0.1%. Nasdaq 100 futures fell 0.2%.
The 10-year Treasury yield climbed 2 basis points to 4.1%.
Copper futures fell more than 1%, likely on the renewed China concerns.
The Labor Department will release the July producer price index at 8:30 a.m. ET. Economists expect a 0.2% gain vs. June for the overall PPI and core PPI. The PPI inflation rate should increase to 0.7% from June's 0.1%, while core wholesale inflation ticks down to 2.3% from 2.4%.
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 strong, but wiped all or nearly all of its initial gains.
The consumer price index showed modest monthly gains, with annual inflation coming in slightly below views.
The 10-year Treasury yield jumped nearly 8 basis points to 4.08%, after falling initially to 3.96%.
The Dow Jones Industrial Average rose 0.15% in Thursday's stock market trading, buoyed a post-earnings Disney jump. The S&P 500 index ended a fraction higher. The Nasdaq composite climbed 0.1%. The small-cap Russell 2000 fell 0.4%.
The Nasdaq rose just over 1.6% some 35 minutes after the open, but hit resistance at the 21-day moving average, finishing below the 50-day line again.
The S&P 500, which jumped above its 21-day line Thursday morning, isn't far from its own 50-day/10-week tests. The Dow Jones is still holding its 21-day. The Russell 2000 reclaimed its 21-day line, but reversed lower, nearing the 50-day.
U.S. crude oil prices fell 1.9% to $82.82 a barrel.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF fell 0.7%. The iShares Expanded Tech-Software Sector ETF rose 0.6%, with NOW stock a notable holding. The VanEck Vectors Semiconductor ETF dipped 0.2%, with NVDA stock the No. 1 holding.
Reflecting more-speculative story stocks, ARK Innovation ETF fell 0.7% and ARK Genomics ETF declined 1.4%.
SPDR S&P Metals & Mining ETF retreated 1.8% and the Global X U.S. Infrastructure Development ETF tilted down 0.3%. U.S. Global Jets ETF nudged 0.15% higher. The SPDR S&P Homebuilders ETF stepped down 0.7%. The Energy Select SPDR ETF finished just below break-even and the Health Care Select Sector SPDR Fund lost less than 0.1%.
The Industrial Select Sector SPDR Fund declined 0.3%.
The Financial Select SPDR ETF climbed 0.1%. The SPDR S&P Regional Banking ETF gave up 0.1%.
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Nvidia Stock
Nvidia briefly retook its 50-day moving average, hitting 435.74 Thursday morning, but reversed lower for a 0.4% dip to 423.88. Shares are now down 5.1% so far this week. NVDA stock is 1.9% below the 10-week. Closing the week more than 2% below the 10-week line is a sell signal.
Nvidia fell a fraction in premarket trade Friday.
Of course, Nvidia could quickly rebound from here, creating a powerful new buying opportunity. But Nvidia could move sideways or lower for some time before building the right side of a new base.
Stocks Near Buy Points
LULU stock edged up 0.6% to 384.55. Shares got as high as 394.64, retaking a 389.06 consolidation buy point briefly before paring gains. Lululemon has been consolidating for the past eight months, tightening up in recent weeks.
Visa stock closed 0.4% higher at 240.16, paring morning gains. The Dow Jones payments giant is holding in range from a 235.57 flat-base buy point. Thursday's intraday move offered an additional entry within a three-weeks-tight pattern formed in the buy range.
MA stock rose 0.9% to 397.14, still in range of a 392.20 flat-base buy point and extending a bounce from the 10-week line.
COST stock finished with a 0.3% gain to 561.49, after getting as high as 569.21 early Thursday. That briefly reclaimed a 564.75 buy point and broke the downtrend in a high handle.
KBH stock slumped 2.4% to 52.73, back below the 21-day line and nearing the 50-day. KB Home has a 55.37 buy point from an ascending base. Its relative strength line is trading near highs.
ANET stock slipped 0.65% to 176.30, just below a 178.36 buy point, according to MarketSmith analysis. Arista Networks blasted into the buy zone on Aug. 1 following earnings, then pulled back to around the entry. Some quiet, tight action is constructive.
CCL stock climbed 0.5% to 17.36, hitting resistance at the 21-day and just above a fast-rising 10-week line. Carnival stock has a 19.55 buy point from a flat base after a huge run. Investors could find some early entries.
NOW stock initially rose to 566.07, retaking the 50-day and 21-day lines and at least flirting with breaking a short downtrend. But that was then. ServiceNow closed up 0.85% to 555. A move above Thursday's high might offer a new buying opportunity.
MNSO stock declined 1.6% to 20.20. Shares are back in range from a 19.49 buy point, but have been trading tightly for the past few weeks. Clearing that shelf could offer a new entry.
Market Rally Analysis
No question, Thursday was disappointing with a strong open and quick fade. The indexes, especially the Nasdaq, are hitting resistance while trading around key support.
Just as indexes can hold support multiple times and then break lower, sometimes they'll hit resistance a few times before breaking through.
Which way will the market go? That could be decided in the next few days, or the indexes could go sideways for several weeks.
A lot of damage has been done among leading stocks, especially in tech, including megacaps, AI plays and the broad chip and software sectors.
It's an exaggeration to say that the market rally depends on Nvidia doing well, but not by much.
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What To Do Now
On the one hand, growth investors have been waiting for pullback in the Nasdaq and leading stocks for some time. That's happened. Now we need to see if the market rally will find support and take off again.
Work on your watchlists, in pencil. A number of names have been pulling back to around their 50-day lines. These might offer buying opportunities with strong rebounds, but further losses could trigger sell signals.
More broadly, look for stocks showing relative strength. These could be the winners in the next leg of the bull mark
If signs do turn positive, don't get too excited by a strong open, as Thursday showed. Rebuild exposure gradually, and be quick to cut them back
If your stocks or overall market conditions show more damage, you'll need to scale out further.
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.
