Saturday, December 10, 2022

futures loom as bears rule; Twitter warm for Kasturi bid

Dow Jones futures will open on Sunday evening along with S&P 500 futures and Nasdaq futures. Twitter reportedly heating up for acquisition Tesla (TSLA) CEO Elon Musk.


The stock market suffered another week of losses while Treasury yields continued to climb. Major indices hit resistance levels last week and broke below support levels. It was worse under the surface. Major stocks and sectors that were holding well showed tension, with miners in particular selling hard. Buying opportunities quickly reversed. Growth stocks continued to decline.

earning week

This is the top week for earning, with Apple (AAPL), Microsoft (MSFT), Amazon.Com (AMZN), Google Parent Alphabet (Google), Exxon Mobil (XOM), Kamla (Cat), beam (CVX), Raytheon Technologies (RTX) and normal mobility (GD) of hundreds of companies to report this coming week.

But with market conditions deteriorating, the flood of earnings gives investors another reason to stay on edge. But keep a close eye on big earners like Apple, Axon and General Dynamics, and the market’s reaction to those reports.

Tesla stock is on the IBD leaderboard and IBD 50. XOM stock is on the Big Cap 20 list, which is full of energy and commodity play.

Video embedded in this article reviews market action in detail analyzing AAPL stock, Exxon and General Dynamics.

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dow jones futures today

The Dow Jones futures opened at 6 p.m. ET along with the S&P 500 futures and Nasdaq 100 futures.

ETFs tracking the Dow Jones and the S&P 500 fell 0.5% and 0.4%, respectively, on Friday night. The Nasdaq-100 Tracker Invesco QQQ ETF (QQQ) dropped 0.35%.

With French President Emmanuel Macron winning re-election on Sunday, the EU is expected to begin discussions on a ban on imports of Russian crude.

Remember that overnight action in Dow futures and elsewhere does not necessarily entail actual trading in the next regular stock market session.

Join IBD experts as they analyze stock market rally actionable stocks on IBD Live

Twitter open for Elon Musk bid?

According to The Wall Street Journal, Twitter is more open to a takeover bid from Tesla CEO Musk. Musk announced Friday that the CEO has arranged financing for the Twitter bid, including some of his TSLA stock holdings. The two sides are meeting on Sunday, the WSJ said, citing sources to discuss an informal offer of $43 billion, or $54.20 per share.

It is unclear whether Musk will make his offer or whether another bidder will be present.

Twitter stock rose 8.5 percent to 48.93 last week. That’s up from 24.5% before April 4, when Musk disclosed a late 9.1% TWTR stake. During this, crack (SNAP) is down 20% and Facebook stock 18% over that period, even with a small Musk-Twitter bump on April 4. This suggests that if a deal doesn’t work out, TWTR stock could drop below ex-Musk levels.

After worse-than-expected Snap results last week, Twitter and Facebook reported earnings this week.

As for Tesla’s stock, it rose 2% last week to 1,005.05, but that’s after Thursday’s post-earnings 1,092.22 intraday.

Tesla’s earnings boom, but it’s poised to seize the rival EV crown

stock market action

The stock market tried to rally, but then sold heavily, to end weekly lows. But the sharp weekly loss hides the sell-off shape from Thursday’s intraday high.

The Dow Jones Industrial Average fell 1.75% in last week’s stock market trading. The S&P 500 index fell 2.7%. The Nasdaq Composite lost 3.8%. The small-cap Russell 2000 offered a 3.1% discount.

The 10-year Treasury yield rose 8 basis points to 2.91%. The 50-basis point hike in the Fed rate in early May marks a virtual lock-in, as well as the beginning of balance sheet cuts. Now the markets have risen by a massive 75-basis points in the June meeting.

Last week, US crude oil futures fell 4.1% to $102.71 a barrel.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 6.3% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) rallied just over 4%. The iShares Extended Tech-Software Sector ETF (IGV) slipped 5.5%. The VanEck Vector Semiconductor ETF (SMH) lost 1.5% after delivering solid gains midweek.

The SPDR S&P Metals & Mining ETF (XME) lost 11.3% last week. The Global X US Infrastructure Development ETF (PAVE) rallied 1.9%. The US Global Jets ETF (JETS) dropped 2.7%. The SPDR S&P Homebuilders ETF (XHB) dropped 0.2%. The Energy Select SPDR ETF (XLE) fell 4.5%, with Exxon stock and Chevron the top two holdings. The Financial Select SPDR ETF (XLF) declined nearly 2%. Health Care Select Sector SPDR Fund (XLV) gave a discount of 3.5%.

Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) fell 11.1% last week and the ARK Genomics ETF (ARKG) 9.8%.

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apple stock

Apple’s earnings for the second quarter of the fiscal year are due Thursday night. Analysts expect EPS to increase 2% to $1.43, with revenue up marginally compared to a year ago. The iPhone giant will highlight the production crisis for Q2 and the current Q3. Analysts are also predicting a dividend hike and AAPL stock buybacks for the cash-flush tech titan.

After flashing some buy signals during an 11-session winning streak in late March, Apple stock has fallen below its 50-day line for four straight weeks. It was down 2.1% last week at 161.79, and the shares are moving back towards their 200-day moving average. Technically, Apple stock still has a handle buying point of 179.71, just above its March 30 high.

The relative strength line for AAPL stock isn’t too far off from record highs. This is more indicative of the weakness of the S&P 500 than the strength of Apple. Still, if Apple’s earnings are solid and the market corrects, AAPL stock could be one of the leaders.

exxon stock

Exxon’s earnings call is due Friday with fellow oil major Chevron stock.

After a strong run-up, XOM stock is acting on a shallow cup basis, finding support with the 21-day moving average. Exxon stock fell 3.1% to 85.13 last week, a bit of a jolt after some wedding action in the past weeks.

According to MarketSmith analysis, it is not far from the 91.60 buy point on the daily chart. On the weekly chart, XOM stock has a handle with an entry of 89.90. But either way, investors should avoid making new purchases until earnings are announced.

Fellow oil major Chevron also reports on Friday. CVX stock has shown similar chart action in recent weeks and months.

General Dynamics Stock

General Dynamics earnings are due on Wednesday. This past week, General Dynamics stock fell 2% to 238.79, well below its 21-day moving average. On the weekly chart, GD stock is finding support just above its 10-week line.

The defense giant has a flat base with a buy point of 255.09. On the weekly chart, General Dynamics stock has a four-week-tight, just missing a fifth “tight” week. Investors can use 249.79 just above Wednesday’s high as an early entry.

rtx stock, Northrop Grumman (NOC), and L3Harris Technologies (LHX) has also posted gains this coming week with shares in a flat base near their 10-week lines. Lockheed Martin (LMT), which reported this last week, shows similar chart action.

stock market analysis

The stock market suffered significant weekly losses once again, as Treasury yields rose sharply. Last week, major indices rose to or above key levels but then fell sharply, closing weekly lows. The Nasdaq and then the S&P 500 fell from last week’s lows.

The Nasdaq is having a bad day lowering its March lows. The S&P 500 and Russell 2000 are not far from their worst levels since 2022.

google and NVIDIA (NVDA) has already lowered its March low. ARKK and ARKG are just above the levels.

Major stocks also sent negative signals.

Mining stocks sold sharply as warnings of weak production updates and rising costs came. alcoa (AA), bhp (BHP), rio tinto (Rio), valley (val), Freeport McMoran (FCX) and Newmont Mining (NEM) all declined below their 50-day moving average.

fortinet (ftnt) and Expedia (EXPE), the two stocks pocketed vicious negative reversals relative to market forces. Talking about Expedia, hotels also backed down despite reports of more boom from the airlines.

hospitals were taking shape, but HCA Healthcare (HCA) crashed on Friday, pulling the group down on profit warnings. HCA, with cautious guidance from spontaneous surgery (ISRG) also influenced many medical product manufacturers.

Drugmakers and biotechs suffered some notable losses last week. some still have good charts, but Eli Lilly (LLY) has slipped to lower buy points for nine consecutive sessions. Lily’s earnings are going to happen in this coming week.

Nevertheless, steel stocks still looked fine, though they slipped on Friday.

Many energy stocks are still looking good, but they have also lost ground. Meanwhile, coal, uranium and solar stocks fell below recent entries late last week.

Defense contractors such as General Dynamics and Raytheon have held positions. REITs and insurers are relatively safe. But pockets of strength are shrinking — and increasingly regarding relative strength versus actual gains — while the broader market barely sells.

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What do we do now

The stock market has gone from bad to worse. Even the strength zones are beginning to suffer and are subject to sudden, violent selloffs.

With the possible exception of long-term big winners, there is no real reason to have anything more than minimal risk in the current market. Being completely in cash means a lot.

Market conditions will improve eventually, but they could get much worse before that happens. There is no guarantee that the former leader, or your current holding, will lead the next progression.

Right now investors should focus on conserving their financial and mental capital. You don’t want to fight a negative market trend and then get too tired and gun-shamed to take advantage of the next continued uptrend.

Don’t get caught up in a strong market open, or even a solid session or two. Big gains in bad markets should be viewed with suspicion.

Keep working on your watchlist. Focus on relative strength, even if the stock isn’t necessarily in the position.

Read The Big Picture every day to learn the direction of the market and keep up with the major stocks and sectors.

Please follow Ed Carson on Twitter @ibd_ecarson For stock market updates and much more.

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