Dow Jones Futures: Market Rally Hits China Wall; Tesla, Twitter are tumbling over this

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Dow Jones futures rose overnight along with S&P 500 futures and Nasdaq futures. The stock market rally bounced back from Monday’s main resistance amid inflation and recession concerns that spurred key economic data, along with renewed concerns about China.



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The Nasdaq, which led gains in the major indices last week, suffered its biggest losses on Monday. Government bond yields remain inverted, warning of a recession.

Chinese stocks were big losers as Covid restrictions returned and regulators imposed fines on tech companies, including Alibaba †BABA†

BABA stock and Li Auto †LI), which went into the week buy points, withdrew on Monday. In the meantime, AstraZeneca †AZNO) and Hershey †HSY) did well, due to its defensive tendency.

Tesla †TSLA) and TWTR shares plunged after Tesla CEO Elon Musk moved late Friday to end the $44 billion Twitter acquisition. Twitter †TWTR) has vowed to fight in court to close the transaction.

Li Auto, Hershey and AZN shares are on the IBD 50† Hershey was from Monday IBD Stock of the Day† The video embedded in the article highlighted the market action and analyzed BABA stocks, AstraZeneca and Hershey.

Dow Jones Futures Today

Dow Jones futures were up 0.1% from fair value. S&P 500 futures were up 0.1% and Nasdaq 100 futures were up 0.1%.

The price of crude oil fell by 1%.

Remember that nighttime action in Dow Futures and elsewhere does not necessarily translate into actual trading in the following regular stock market session.


stock market rally

The stock market rally lost ground on Monday with major indices closing close to session lows.

The Dow Jones Industrial Average fell 0.5% Monday stock market† The S&P 500 index fell 1.15%. The Nasdaq composite fell 2.3%. The small cap Russell 2000 fell 2%.

The price of crude oil in the US fell 0.7% to $104.90 a barrel, well beyond morning lows.

Ten-year government bond yields fell 11 basis points to 2.99%. Two-year yields fell 5 basis points to 3.07%, again inverted along much of the yield curve. One-year government bond yields rose 4 basis points to 2.99%, which corresponds to the 10-year yield.

ETFs

Below the best ETFsthe Innovator IBD 50 ETF (FFTY) lost 1.3%, while the Innovator IBD Breakout Opportunities ETF (BOLT) decreased by 0.7%. The iShares Expanded Tech Software Sector ETF (IGV) fell 1.7%. The VanEck Vectors Semiconductor ETF (SMH) gave up 2.4%.

SPDR S&P Metals & Mining ETF (XME) fell 1.65% and the Global X US Infrastructure Development ETF (PAVE) fell by 0.4%. US Global Jets ETF (JETS) decreased by 2.3%. SPDR S&P Homebuilders ETF (XHB) fell 0.5%. The Energy Select SPDR ETF (XLE) and the Financial Select SPDR ETF (XLF) gave up 0.8%. The Health Care Select Sector SPDR Fund (XLV) tilted 0.25% lower.

Due to more speculative story stocks, ARK Innovation ETF (ARKK) sold 6.9% and ARK Genomics ETF (ARKG) 5%. Tesla stocks remain a top spot in Ark Invest’s ETFs.


Alibaba stock

Over the weekend, regulators fined Alibaba, Tencent †TCEHY) and several other tech companies for failing to disclose some previous acquisitions. The 500,000 yuan fines were relatively small, but raised concerns that Beijing’s crackdown on the tech giants is not over.

Macau shut down casinos and most businesses for a week, fueling fears of China Covid restrictions again.

Alibaba shares plunged 9.4% at 109.57, falling below the 21-day moving average for the first time since late May. Last Thursday, BABA stock moved above its 200-day line and cleared some resistance above the 121 level, providing an aggressive entry. Shares plunged below those key levels Friday.

While a strong move above last week’s highs could be doable, BABA stock should ideally consolidate above the 200-day line

Li Auto Stock

Shares of Li Auto fell 4% to 37.33. just under 37.55 point of sale. Shares are still greatly extended from their 50-day line. It is possible that LI stocks will form a shallow base on top of the long, deep consolidation. The past few weeks can be seen as a handle to a foundation going all the way back to the end of 2020.

AZN Stock

AstraZeneca shares fell 0.3% to 66.75 after flirting with a 67.50 double bottom point of sale, according to MarketSmith analysis. The relative strength line for AZN stocks, the blue line in the charts provided, is just below a high.

Hershey stock

HSY shares rose 0.4% to 220.65, just below a 222.75 cup-with-handle buy point. While defense stocks are popular right now, that doesn’t mean they’re safe. Much food and drink, including Hershey stock, collapsed on May 18. However, since the end of June, equities have recovered.

musk vs. Twitter Saga

Faced with buyer’s remorse, Musk said late Friday that he no longer wants to buy Twitter, something he’d strongly signaled in recent months. Twitter said a deal is a deal, to force Musk to go through with the $44 billion, $54 a share acquisition. Twitter hired a heavyweight for the merger bill to represent it. Legal experts say Musk has a weak case.

Twitter shares fell 11.3% during Monday’s regular session to 32.65, the lowest level since mid-March. TWTR shares hit a two-year low of 31.30 on Feb. 24.

After the shutdown, Twitter, through its attorneys, said Musk’s bid to end the acquisition is “void and unlawful.”

Tesla shares, which rose slightly near the opening, fell 6.55% to 701.99. It is likely that some or even most of Monday’s losses reflected growth-led market weakness and concerns about China. TSLA shares fell back below the 50-day line after closing above that level for the first time in two months on Friday. Shares also fell slightly below their 21-day line.


Market Rally Analysis

Given last week’s market gains reached significant levels, Monday’s decline was not surprising, especially with the negative China news and so much key data on tap.

The Nasdaq fell from the 50-day and 10-week moving averages. which have served as major resistance in 2022. That doesn’t mean this test has already failed. The index can hang around these levels for several days or weeks before breaking through.

The Nasdaq closed slightly below its 21-day moving average. The S&P 500, Dow Jones and Russell 2000 also broke that short-term level.

China news aside, it’s hard to be brave at the current level with important news on tap.

Wednesday’s consumer price index is expected to show inflation rising slightly from its 40-year high in May of 8.6%. Core inflation should cool slightly. With gasoline prices having fallen significantly since their June 14 peak and commodity prices have fallen sharply in recent weeks, headline inflation should ease. So it’s unclear how markets will react to June’s inflation data.

A 75 basis point Fed rate hike at the end of July looks set to be stuck, with a slim chance of a full percentage point. The real impact will be on the impact of future Fed rate hikes. But policymakers will get two more CPI and jobs reports before the September meeting, with a slew of other data by the November Fed meeting.

In the meantime, JPMorgan Chase †JPM† Morgan Stanley †MRS) and Delta Airlines †VALLEY) report Wednesday start, with several other banks and UnitedHealth †UNH) on tap later in the week.

Guidance will be crucial in rapid changes in the economy.


What to do now

With the market encountering resistance in anticipation of major economic and corporate news, investors may not want to add modest exposure in the very short term. Certain sectors work, especially defensive or defensive growth names like HSY stocks and AbbVie. But if the market recovers strongly, defensive names may sell or lag. So don’t focus too much on a particular sector or theme.

Investors may want to take partial profits in recent winners.

Read The big picture every day to stay in sync with market direction and leading stocks and sectors.

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