Dow Jones futures fall after volatile day; The ‘good’ news from Micron, Tesla’s hot rivals on tap

Dow Jones futures fell slightly overnight, along with S&P 500 and Nasdaq futures, Micron earnings after the close. A slew of automakers reporting sales and a key manufacturing index are tuned in.




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The stock market rally, already under pressure, lost further ground in a volatile session on Thursday. The S&P 500 capped the worst first half in more than 50 years, while the Nasdaq had its worst start ever.

Micron Technology (MU) released its results on Thursday evening, offering a first look at semiconductor trends. The memory chip giant had mixed results and terrible advice. MU stock fell slightly in active trading, but that could be seen as relatively positive.

EV Startups in China Nio (NIO), Xpeng (XPEV) and Li-Auto (LI) will release June sales early Friday morning. The Chinese electric vehicle and battery giant BYD (BYDDF) is expected to follow suit this weekend, with You’re here (TSLA) likely reporting Saturday.

Li Auto is on IBD 50.

Meanwhile, General Motors (GM) will release its second-quarter U.S. sales on Friday. Toyota engine (CM), Honda engine (MHC), Stellantide (STLA) and possibly Ford engine (F) will also disclose US sales.

The Institute for Supply Management’s U.S. manufacturing index is due out at 10 a.m. ET on Friday. Reports from regional factories showed significant slowdowns in growth, with several reporting a drop in activity.

Economic data on Thursday pointed to a slight slowdown in inflation, rising jobless claims and weaker-than-expected consumer spending. Last Monday, the Atlanta Fed lowered its second-quarter GDP estimate to -1% from its earlier outlook for growth of 0.3%.

Dow Jones Futures Today

Dow Jones futures fell 0.3% from fair value. S&P 500 futures fell 0.3% and Nasdaq 100 futures fell 0.4%.

Bitcoin traded below $19,000, heading back towards recent 18-month lows.

Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.


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Stock market rally

The stock market rally tumbled to start Thursday’s trading before rebounding almost to breakeven before fading again for solid losses.

The Dow Jones Industrial Average fell 0.8% in stock trading Thursday. The S&P 500 index lost 0.9%. The Nasdaq composite fell 1.3%. The small-cap Russell 2000 slipped 0.7%.

That capped the S&P 500’s worst first half since 1970, falling 20.6%. The Dow Jones, down 15.3%, had its worst first half since 1962. For the Nasdaq and Russell 2000, down 29.5% and 23.9%, respectively, it was the worst first half of its history.

U.S. crude oil prices fell 3.7% to $105.76 a barrel. One-month oil futures fell 4% in June, but have soared 46% so far this year.

Gasoline futures plunged 6.7% on Thursday, continuing a notable pullback. That should mean more relief at the pump, after retail prices peaked at $5.01 a gallon in mid-June.

The 10-year Treasury yield fell 12 basis points to 2.97%, falling back below the key 3% level. This is the first close below the 50-day line since early March. The 10-year yield fell 11 basis points on Wednesday.

AND F

Among the top ETFs, the Innovator IBD 50 ETF (FFTY) and the Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 1.65%. ETF VanEck Vectors Semiconductor (SMH) lost 1.25%. The MU share is an SMH holding.

The SPDR S&P Metals & Mining ETF (XME) slipped 3% and the Global X US Infrastructure Development ETF (PAVE) edged up 0.1%. The US Global Jets ETF (JETS) fell 1.1%. The SPDR S&P Homebuilders ETF (XHB) edged down 0.4%. The Energy Select SPDR ETF (XLE) fell 2.1% and the Financial Select SPDR ETF (XLF) fell 0.9%. SPDR Health Care (XLV) was down just 0.2%.

Reflecting more speculative stocks, ARK Innovation ETF (ARKK) fell 3.9% and ARK Genomics ETF (ARKG) fell 2.1%. TSLA stock remains one of Ark Invest’s leading ETF stocks. Cathie Wood’s Ark funds also own BYD, Xpeng and Nio stocks.


Five best Chinese stocks to watch now


Micron’s mixed results, “good” forecasts

Micron’s earnings topped fiscal third-quarter views while sales narrowly missed.

The memory chip giant released fiscal targets for the fourth quarter well below consensus.

But MU shares have been volatile overnight, recently trading up more than 2%, near a recent 19-month low. But it’s a relatively muted reaction, suggesting that investors had already braced themselves for gloomy directions.

Micron stock fell 1% on Thursday to 55.28. MU stock closed 44% off its January high.

Sales of electric vehicles in China

Deliveries from Li Auto, Xpeng and Nio on Friday are expected to show further recovery from China’s Covid restrictions, with Shanghai’s lockdown ending on June 1. Electric vehicle startups could show June production and sales approached pre-lockdown levels. As all three begin deliveries of new models later this year, the chip crisis eases and local governments increase subsidies for electric vehicles, sales are expected to continue to rise in the second half of 2022.

LI stock edged up 0.6% to 38.31 on Thursday. The stock is holding within the range of a buy point of 37.55, but is 44% above its 50-day line. A new shallow base above the deep consolidation could provide a safer entry for Li Auto’s stock.

Nio shares fell 0.6% to 21.72 on Thursday. It trades between its 200 and 50 day lines.

XPEV stock fell 1.1% to 31.74. Shares retreated for a few days after hitting the 200-day line.


Tesla vs. BYD: EV Giant breaks out and grabs crown from Tesla


BYD and Tesla

Meanwhile, China EV and battery giant BYD will likely follow on Saturday or Sunday. Its sales of electric and plug-in vehicles have exceeded 100,000 vehicles for three consecutive months. BYD’s in-house production of chips and batteries protects it from shortages and blockages. Some data suggests that BYD will announce new record sales in June. New factories, new models and new markets are expected to fuel BYD’s continued booming growth throughout the year.

BYD stock edged down 0.6% to 40.28. It is holding above a buy point of 39.81 cups with a handle, according to MarketSmith analysis. Although not as wide off the 50-day line as Li Auto, it is still 19% above this key level.

BYD’s second-quarter electric vehicle and plug-in hybrid vehicle sales set a lock to overtake Tesla’s all-electric sales for the first time in years.

Tesla will likely announce second-quarter deliveries on Saturday morning. Deliveries likely fell to around 260,000 due to the Shanghai plant being closed for much of April, with full production not returning until early June. The Shanghai plant could again be closed for much of July, possibly in stages, to upgrade equipment to significantly increase capacity.

Tesla fell 1.8% to 673.42 on Thursday. TSLA stock avoided undercutting its May low of 620.57, but is not far from that level and is stuck below a 50-day descending line.

United States auto sales

Although the chip crisis may begin to ease later this year, ongoing shortages likely weighed heavily on US auto sales in June and the second quarter. GM, the parent company of Chrysler, Stellantis, Toyota and especially Honda are expected to register sharp declines compared to a year earlier. Ford is expected to post a slight gain, although its results may not arrive on Friday.

Shares of GM, Ford and other mainstream automakers are all trading at or near 52-week lows.

Market rally analysis

The major indexes rebounded from heavy morning losses but still closed solidly lower.

The Dow Jones closed below its June 24 tracking day low on Thursday, two days behind the Nasdaq and the S&P 500. This is a very bearish signal, with a 90% chance the market will rally ultimately fails, undermining recent lows.

Yes, it was good to see the major indices rebound from the morning lows. But if the major indices sell off in the coming days, no one will remember the two-hour intraday bull run.

Over the next few weeks, expect a slew of companies warning or missing out on earnings or guiding the bottom. At some point, markets will price in bad economic and corporate news, but it could be a long process.

Medical stocks remain the leading sector, with makers of drugs, health insurance and products such as centene (CNC), Astra Zeneca (AZN) and medical shock wave (SWAV) among those showing bullish action.

Some Chinese EV makers such as Li Auto and BYD stock defense plays like Northrop Grumman (NOC) and solar stocks such as Enphase Energy (ENPH) are doing relatively well.


Time the Market with IBD’s ETF Market Strategy


What to do now

It’s not a good time to be on the stock market for long. You can choose to hold, say, a working medical stock, but be prepared to quickly take partial profits and pull the trigger if conditions deteriorate.

It’s also not a good time to be short either. Short selling is always tricky given the risk of sudden and fierce rallies, Thursday’s bounce was just a mild version of that. Stocks and major indices have already pulled back significantly this week, not to mention the steep losses of 2022.

Now is a good time to study past bear markets, review the investing books, and prepare for the next sustained uptrend. Stay engaged and build your watchlists.

Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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