Futures Drop as FedEx Dives; Bull Case turns bearish

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Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures, with FedEx (FDX) tumbles overnight due to weak gains and guidance. The stock market rally continued to weaken, with major indices canceling out Wednesday’s small to modest rally, while government bond yields are close to long-term highs.




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The market is still coming to grips with Tuesday’s hot CPI inflation report, which turned on its head the Federal Reserve’s bull case that would soon slow rate hikes.

Adobe (ADBE) crashed on mixed results and a $20 billion acquisition. Oil and natural gas stocks fell with energy prices, but solar and lithium stocks also suffered significant losses.

Neurocrine Life Sciences (NBIX) and Vertex Pharmaceuticals (VRTX) continue to do well, although they were also not easy to trade.

Meanwhile, mega cap technologies continue to weaken. Apple (AAPL), which flashed an early buy signal on Monday, undercut short-term lows on Thursday. Microsoft (MSFT) nears its trough in June as Google parent Alphabet (GOOGL) set a 19-month closing low.

NBIX shares are listed on IBD Leaderboard. Microsoft and Google shares are on IBD Long-Term Leaders. VRTX shares are on the IBD Big Cap 20.

FedEx Revenue

After the close, FedEx reported that its first quarter profit fell 21% from a year earlier versus the number of views for a gain of 18%. Turnover increased slightly, but lagged somewhat behind forecasts. The shipping giant also withdrew its fiscal 2023 guidelines and announced sweeping cost-cutting measures as it faces declining shipping volumes. FedEx was scheduled to release Q1 results on September 22.

FDX shares plunged 17% in overnight trading. arch rival UPS (UPS) sank 6%. Amazon.com (AMZN) fell 2%. Amazon has cut its ties to FedEx, but the warning could be bad news for e-commerce in general.

Individual, General Electric (GE) said ongoing supply chain problems are putting pressure on cash flow. GE shares fell 4% overnight.

Dow Jones Futures Today

Dow Jones futures fell 0.4% from fair value. S&P 500 futures fell 0.5%. Nasdaq 100 futures fell 0.6%.

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The 10-year yield fell by 2 basis points to 3.44%.

Keep in mind that an overnight action in Dow futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.


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stock market rally

The stock rally opened higher on Thursday, but it didn’t last as sales quickly got underway.

Unemployment claims fell again to a three-month low, but other data, including August retail sales, generally pointed to a weaker than expected economy, but with price pressure easing. The Atlanta Fed’s GDPNow tool estimates third-quarter GDP growth at just 0.5% from its forecast of 2.5% in August.

The Dow Jones Industrial Average fell 0.6% in Thursday’s trading. The S&P 500 index lost 1.1%. The Nasdaq composite lost 1.4%. The small-cap Russell 2000 lost 0.7%.

Apple shares fell 1.9% to 152.37, undermining the low of its already hefty handle. After rising above the 50- and 200-day lines on Monday, shares plunged back below those key levels during Tuesday’s market collapse.

Microsoft stock fell 2.7% to 245.38 on Thursday, its lowest point since the mid-June bottom. Google shares fell 2% to 102.91, not undercutting its May 24 intraday low, but its worst close since April 2022.

The price of crude oil in the US fell 3.8% to $85.10 a barrel. Natural gas prices fell by 8.7% as an averted railway strike will keep coal shipments going. Natgas was up on Wednesday.

The 10-year yield rose by 5 basis points to 3.46%, despite the lackluster economic data. That’s just below an 11-year high of 3.48% on June 14. The one-year interest rate has risen above 4%.

ETFs

One of the best ETFs was the Innovator IBD 50 ETF (FFTY) at 2.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 1%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 3.2%, with major stocks from Adobe and MSFT. The VanEck Vectors Semiconductor ETF (SMH) fell 1.8%.

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SPDR S&P Metals & Mining ETF (XME) fell 2.75%. The Energy Select SPDR ETF (XLE) fell 2.6% and the Financial Select SPDR ETF (XLF) rose 0.3%. The Health Care Select Sector SPDR Fund (XLV) rose 0.6%.

As a result of more speculative story stocks, ARK Innovation ETF (ARKK) rose 2.2% and ARK Genomics ETF (ARKG) rose 1.8%.


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NBIX Stock

Shares of NBIX rose 2.5% to 106.93 on Thursday. Neurocrine Biosciences is now flat with a buy point of 109.36, according to MarketSmith’s analysis. Stocks have seen some early entries in recent weeks but quickly retreated. Shortly after Wednesday’s open, NBIX stock plunged to 100.46, testing the 50-day line and the top of a previous base. In theory, a trader could have bought Neurocrine when it recovered from its 50-day line, but it would have taken a brave soul to place that bet given the market conditions.

The relative strength line is at a new high, reflecting the strong outperformance of the NBIX stock in a weak market.

VRTX stock

VRTX shares climbed 1% to 287.67, just below the 50-day line. Vertex Pharmaceuticals flashed some early buy signals late last week, but fell 4.4% on Tuesday, falling below the 50-day mark.

In a few days, Vertex stock may have its own flat base.

Market rally analysis

The stock market rally shows no appetite to bounce back. Following Wednesday’s tentative, moderate rebound after Tuesday’s sell-off, major indices have easily wiped out those gains.

The Nasdaq 100, with the main weights of Apple, Microsoft and Google, broke its intraday low of September 6. The Nasdaq and S&P 500 have not yet undercut the September 6 lows. but both hit their worst slots since July.

The Nasdaq closing below the September 6 low would likely mark the end of the long-running market rally.

Technically, the major indices should get back above their 50-day moving average. Their 21 day lines are now below 50 days.

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The impending Fed meeting increases the risks in the coming days. More broadly, the market is likely to struggle to make lasting progress until there is a strong sense that the Fed will slow rate hikes and pause soon. That was the hope heading into Tuesday’s CPI inflation report. But no longer.

Meanwhile, not only is inflation higher than assumed a few days ago, but so is economic activity. So the Federal Reserve will inflict more “pain” amid a struggling economy.

A recession – or a no-growth economy with tight labor markets – will be difficult for companies to navigate.


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What to do now

The market rally is again barely sustained. Far too many intriguing stocks will give a buy signal and fall again the next day. It’s just an extremely difficult environment to invest in.

Until major indices are back above their 50-day moving average, investors should at most have moderate exposure and be extremely cautious about new purchases. Clarity on an endgame of a Fed rate hike would be nice, but that may not come for a few weeks or more.

Market conditions can quickly improve or deteriorate. If it’s the first, you’ll want to have an up-to-date watchlist. If the latter, you’ll be glad you worked on watch lists instead of buying new stocks.

Read The Big Picture every day to stay up to date on market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.

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