Dow Jones futures fell sharply early Friday, along with S&P 500 futures and Nasdaq futures, with Treasury yields continuing to surge. Another Snap meltdown and reports of a possible security review of Tesla CEO Elon Musk's Twitter deal also are in focus.
The stock market rally attempt started Thursday strong but shed gains, hitting key resistance as Treasury yields kept running higher on fresh economic data.
Snapchat parent Snap plunged yet again on mixed results and no guidance, weighing on fellow social media firms Meta Platforms and Pinterest.
Twitter was unaffected by Snap's sell-off due to Musk's looming takeover. But early Friday, TWTR stock fell on a report that Biden administration is mulling security reviews of various Musk deals, including the $44 billion takeover.
In Thursday's session, Tesla tumbled to a 16-month low, following mixed earnings and mixed signals late Wednesday.
Tech titans Apple, Microsoft, Google parent Alphabet, Meta Platforms, Amazon.com and Nvidia all hit resistance at their 21-day moving averages, just like the S&P 500 and Nasdaq. All are heavily damaged, with most not far from recent lows.
While the rally attempt continues, this is still a bear market until proven otherwise. Investors should be wary of making any new buys in the current environment.
Snap Stock Crashes Again
Snap topped third-quarter earnings views. But revenue rose less than 6%, a record low and just below consensus. But the Snapchat parent won't provide guidance.
Despite a $500 million buyback announcement, SNAP stock plunged 29% in premarket trading. That's after crashing 43% and 39%, respectively, after the prior two earnings reports.
Meta stock, which reports next Wednesday, fell modestly in extended trade. PINS stock sold off after reversing lower at the 50-day and 200-day lines Thursday. Both report next week.
Earnings
Early Friday, oilfield services giant Schlumberger reported better-than-expected Q3 earnings. Schlumberger stock edged higher before the open. SLB stock is moving quickly up the right side of a 38%-deep cup base, but isn't actionable yet.
Dow Jones component American Express beat EPS views but slightly missed some revenue forecasts. AmEx reaffirmed full-year revenue targets. AXP stock fell solidly before the open, not far from bear market lows.
Fellow Dow stock Verizon Communications topped quarterly EPS and sales views, though wireless subscriber gains fell short. VZ stock fell modestly Friday, not far from lows.
Dow Jones Futures Today
Dow Jones futures retreated 0.8% vs. fair value, with AXP stock and Verizon drags on blue chips. S&P 500 futures fell 0.9%. Nasdaq 100 futures sank 1.4%, with META stock a drag.
The 10-year Treasury yield jumped 9 basis points to 4.32%. The dollar moved past 150 yen, a 32-year high for the greenback.
Crude oil futures were flat while natural gas slumped nearly 6%.
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 ran higher in the first hour of trading, but wilted as Treasury yields marched higher again.
The Dow Jones Industrial Average fell 0.3% in Thursday's stock market trading. The S&P 500 index sank 0.8%. The Nasdaq composite dropped 0.6%. The small-cap Russell 2000 slumped 1.3%.
The 10-year Treasury yield leapt 10 basis points to 4.23%, yet another fresh 14-year high after jumping 13 basis points on Wednesday. The benchmark Treasury yield is on track for a 12th straight weekly gain.
Before the open, the Labor Department reported initial jobless claims fell last week, defying views for a third straight gain. The Philly Fed manufacturing index remained negative in October, slightly worse than views, but the employment subindex signaled strong labor demand. That's not what the Federal Reserve wants to see.
The two-year Treasury yield is around 4.6%, where the Fed recently signaled its fed funds rate might peak. However, markets are currently predicting 4.75%-5% after the February meeting.
The expiring November crude oil futures contract rose 0.5% to $85.98 a barrel, but backed off from morning highs. December crude dipped 1 cent to $84.51. Natural gas prices fell 1.9%, extending sharp losses to its worst close since late March.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF dropped 0.9%. The iShares Expanded Tech-Software Sector ETF rose 0.8%. The VanEck Vectors Semiconductor ETF added 0.8%.
Reflecting more-speculative story stocks, ARK Innovation ETF and ARK Genomics ETF both dipped 0.4%. TSLA stock remains the top holding across Ark Invest's ETFs.
SPDR S&P Metals & Mining ETF climbed 0.5%, with STLD stock a notable holding. U.S. Global Jets ETF gave up 0.8%. SPDR S&P Homebuilders ETF slumped 2.5%. The Energy Select SPDR ETF edged up 0.1% and the Financial Select SPDR ETF skidded 1.6%. The Health Care Select Sector SPDR Fund descended 0.8%.
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Musk-Twitter Deal Review?
U.S. government officials are mulling subjecting Musk's Twitter deal and Starlink satellite network to national security reviews, Bloomberg reported late Thursday. That follows Musk's threats to cut off Starlink access to Ukraine and his Russia-friendly peace proposals.
Musk's foreign investors also are being scrutinized, according to the report. Officials are said to be looking at ways to review the deals, including using the Committee on Foreign Investment in the United States (CIFUS), Bloomberg said.
However, the White House said it's not aware of any national security reviews for Musk deals.
Twitter stock down more than 8% at one point, pared losses to nearly 5% following the White House statement.
If there were a security review, it might not come until after Musk's Twitter takeover closes. Even if the review delayed or blocked a takeover, Musk might have to pay significant penalties to exit the deal.
TWTR stock rose 1.2% to 52.44 on Thursday, just below the $54.20 takeover price.
Musk had wanted to exit the deal, but last month had a change of heart as his prospects of winning in court seemed dim.
Musk and Twitter have appeared to be moving toward closing the deal by a court-appointed deadline of Oct. 28. Musk reportedly is seeking new equity partners to finance his Twitter takeover to avoid fresh TSLA stock sales.
Tesla Stock
Tesla stock sold off 6.65% to 207.28 on Thursday, breaking to a fresh 16-month low. Shares fell slightly early Friday.
Late Wednesday, Tesla earnings narrowly topped Q3 views while revenue came up short. While Elon Musk promised an "epic" fourth quarter and said demand remains strong, he did concede that China and Europe are showing some weakness.
Tesla plans to produce significantly more vehicles than it delivers in Q4, after output topped sales by 22,000 in Q3. The EV giant says it's doing this to smooth out deliveries vs. its typical end-of-quarter frenzy. But, the move comes as production capacity surges and China backlogs are gone.
New EV credits should support Tesla's U.S. sales in 2023.
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Market Rally Analysis
The stock market rally attempt got off to a strong start Thursday, with the Nasdaq up nearly 1.5% in the first hour. But the Nasdaq, S&P 500 and Russell 2000 hit resistance at the 21-day moving average once again. The Dow Jones continues to hold above its 21-day.
The technical resistance coincided with Treasury yields moving higher yet again.
The major indexes are still up solidly this week, despite trading near weekly lows. If yields had a sustained decline or pause, the market rally might take off. But if yields keep climbing, it's easy to envision the indexes tumbling back toward bear market lows.
The market rally attempt still needs a follow-through day to confirm the uptrend.
Many of Thursday's winners were stocks with terrible charts, including earnings-fueled Lam Research and AT&T.
Energy stocks remain the clear leader. But many are extended from their 50-day lines. Energy stocks are prone to big swings with underlying oil and natural gas prices.
Some steel stocks are showing their mettle. Medical names such as Humana, Cardinal Health and Vertex Pharmaceuticals were mixed. Despite rising relative strength lines, many medicals aren't making a lot of headway.
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What To Do Now
The market volatility adds to investor risk. Stocks can look promising, but see strong gains vanish in a few minutes or hours. And that's with the indexes solidly higher for the week. If they were flat or down, the negative reversals could be far more painful.
Set aside the volatility and there still aren't good reasons to be significantly invested now. The market rally hasn't had a follow-through day. The S&P 500 and Nasdaq are struggling at the 21-day line.
Next week, Dow Jones stock Apple, Microsoft, Google, Meta Platforms, Amazon, Boeing, Intel and hundreds of other companies will report. Those earnings could be a catalyst for big market gains, sharp losses or more whipsaw action.
The market could take a bull turn at any moment. A number of stocks could be actionable quickly if a confirmed rally gets underway. So stay engaged and keep your watchlists fresh.
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