S&P 500 Drops Below Key Level in Election, Tesla, Bitcoin; CPI inflation report threatens

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Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, after a rough day for the S&P 500 and the stock market rally. All eyes will be on the October CPI inflation report.




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The stock rally lost ground on Wednesday, with the S&P 500 back below its 50-day moving average. Mixed Election Results, Bitcoin’s ongoing woesrenewed China lockdowns – and the looming consumer price index – may have contributed.

Bitcoin plunged to new lows in two years when Binance, the world’s largest cryptocurrency exchange, said Wednesday afternoon that it would not buy a rival FTX.

Mega caps didn’t help. Tesla (TSLA) plunged below key levels to its two-year low. Amazon.com (AMZN) also set new bear market lows. Apple (AAPL) had its worst close since June, while Microsoft (MSFT) and Google parent Alphabet (GOOGL) fell a little.

Facebook parent Metaplatforms (META) was the exception, reflecting after job announcement and cutbacks. But the main suppliers fell.

Main income

Catalyst Drugs (CPRX), Excelerate Energy (EE), Celsius Holdings (CELH), Rivian (RIVN) and Wynn Resorts (WYNN) reported late Wednesday.

CPRX stock rose solidly in after-hours action as Catalyst Pharma beat EPS and income statements. The biotech also implied fourth quarter sales in line with consensus. Catalyst stock fell 5.35% on Wednesday, back to around an early entry.

CELH shares jumped overnight on strong Celsius sales growth after the energy drink maker plunged to its lowest level since July. Rivian shares recovered on mixed Q3 results after tumbling to a four-month low on Lucid (LCID) Results. EE shares fell modestly in limited trading after Excelerate earnings took the lead. Excelerate shares slipped Wednesday, testing the 50-day line.

Meanwhile, network company Digi International (DGII) and Tesla China EV rival Nioz (NIO) are on tap early Thursdays. DGII stock pulled back toward its 50-day line on Wednesday as it trades at a ascending basis buy point. Nio shares plunged to a two-year closing low as southern manufacturing hub Guangzhou announced Covid lockdowns, slamming many Chinese stocks.

CPI inflation report

The October Consumer Price Index will be released Thursday at 8:30 a.m. ET. Economists expect that the CPI inflation report shows that prices have increased by 0.7% compared to September. Core CPI, excluding food and energy, should rise 0.5%.

Annual CPI inflation should fall to 8% from 8.2% in September. Core inflation remains stable at 6.6%.

The Federal Reserve wants to see clear and compelling evidence that inflation is slowing before interest rate hikes stop. Markets are leaning slightly towards a 50 basis point Fed rate hike in December, but there is still a good chance of a fifth in a row of 75 basis points. November employment data and CPI report will be released ahead of the Fed meeting and announcement in December.

Dow Jones Futures Today

Dow Jones futures rose 0.2% from fair value. S&P 500 futures rose 0.2% and Nasdaq 100 futures climbed 0.3%.

The 10-year yield fell by 6 basis points to 4.09%.

Bitcoin was trading just above $16,000, still near its two-year low as of Wednesday afternoon.

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


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


stock market rally

The stock rally got off to a mixed start on Wednesday, but then lost ground, especially in the afternoon, closing at session lows.

The Dow Jones Industrial Average fell nearly 2% on Wednesday stock market. The S&P 500 index fell 2.1%. The Nasdaq composite slipped 2.5%. The small cap Russell 2000 fell 2.7%.

Ten-year government bond yields rose by 2 basis points to 4.15%.

The dollar had a strong session, following a major three-day decline.

The price of crude oil in the US fell by 3.5 percent to 85.83 dollars a barrel. Weekly US crude oil inventories rose the most in a month. Meanwhile, the lockdowns in China raised concerns about crude oil demand there. US natural gas futures were up 4.5%.

Bitcoin

Bitcoin collapsed again when Tuesday’s preliminary Binance deal to buy FTX fell apart, with Binance walking away after looking at its rival’s books. “Our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance said in a statement Wednesday afternoon.

FTX, which appeared to be a potential savior for ailing crypto firms earlier this year, is now in danger of collapse.

Bitcoin plunged to a low of $15,554.48, its worst in two years. The pioneer cryptocurrency broke below $20,000 on Monday. Other major cryptos such as Ethereum also continue to sell, along with crypto-related stocks.

ETFs

Below the best ETFsthe Innovator IBD 50 ETF (FFTY) fell 4.2%, while the Innovator IBD Breakout Opportunities ETF (BOLT) ceded 1.8%. The iShares Expanded Tech Software Sector ETF (IGV) fell 2.2%, with Microsoft stock being a major component. The VanEck Vectors Semiconductor ETF (SMH) withdrew 2.7%.

Due to more speculative story stocks, ARK Innovation ETF (ARKK) fell 6.5% and ARK Genomics ETF (ARKG) 4.3%. Tesla stocks are a major holding in Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) slipped 5.4% and the Global X US Infrastructure Development ETF (PAVE) lost 2.1%. US Global Jets ETF (JETS) decreased by about 1%. SPDR S&P Homebuilders ETF (XHB) fell 1.75%. The Energy Select SPDR ETF (XLE) sold 4.9% and the Financial Select SPDR ETF (XLF) fell by 1.7%. The Health Care Select Sector SPDR Fund (XLV) fell 1.1%.


Five best Chinese stocks to watch right now


Tesla stock

Tesla shares plunged 7.2% to 177.59, undercutting the 2021 lows. Late Tuesday, Elon Musk announced that he sold nearly $4 billion worth of TSLA stock on November 4, 7 and 8, possibly to fund his Twitter acquisition. The disclosure could lift an overhang over TSLA stock, though Musk hasn’t said he’s done with his latest batch of stock sales.

Elon Musk’s takeover of Twitter has a broader impact. It takes up a lot of his time, and there are concerns that his Twitter moves and tweets will damage the Elon Musk brand, and perhaps Tesla’s as well. At a Twitter Spaces event Wednesday, Musk talked about subscriptions and adding savings-and-payments features, but didn’t do much to win back wary advertisers.

Also, Tesla could coincide with other stocks exposed to China in the wake of the tightened lockdowns there. Furthermore, many US and Chinese EV stocks suffered double-digit losses on Wednesday, including Nio, Lucid and RIVN stocks.

Finally, Tesla still owns some Bitcoin.

TSLA stocks remained active overnight. On Wednesday, in response to a question about whether Musk poses a national security risk, President Biden said “it’s worth looking into,” adding that there are “many ways” to do that.


Tesla vs BYD: Which EV Giant is the Best Buy?


Other Megacap Stocks

Meta Platforms is cutting 11,000 jobs, or 13% of the workforce. The Facebook parent company will also curb infrastructure spending as investors shy away from huge metaverse costs. META shares were up 5.2%, but spending restrictions hit Arista Networks (A NET), Nvidia (NVDA) and other vendors taking advantage of the metaverse splurge.

Apple shares fell 3.3% to 134.87. While the iPhone maker hasn’t undercut its October intraday lows or the June 16 bear market bottom, AAPL stock closed at its worst level since June 17. Earlier this week, Apple warned that China Covid restrictions will hurt iPhone 14 Pro production.

Amazon shares lost 4.3%, falling to their lowest point since March 2020. MSFT shares fell 1.9%. Shares of Google fell 1.8%. But both are still up slightly for the week.

Market rally analysis

Just as the stock market rally seemed to be gaining momentum, sales returned on Wednesday. The Dow Jones retreated to just below the 200-day mark. The S&P 500 fell back below its 50-day moving average. The Russell 2000 also broke below the 50-day mark.

The lagging Nasdaq pulled back after hitting resistance at the 21-day line on Tuesday.

Government bond yields rose, but not much. The dollar has recovered but is in a recent downtrend. Still uncertain election results, suggesting a less GOP surge than expected, may have played a role. Bitcoin’s plunge, China lockdowns and often negative earnings reactions all contributed.

Finally, the market rally was under pressure last week. The S&P 500 above the 50-day line is a minimum level for market strength. The Nasdaq moving above that key level would be an even stronger signal.

The October CPI report could set the tone for Fed expectations, and perhaps market direction, for at least a few weeks.


Time the Market with IBD .’s ETF Market Strategy


What to do now

The market rally is range-bound, although the Dow is close to recent highs and the Nasdaq close to bear market declines. A volatile, sideways market is extremely dangerous for investors.

A strong bull market generally lifts all boats. A bear market sinks them and drives everyone to dry land. But tumultuous market waters will do just enough to entice investors with index mini-runs and strong gains for individual stocks. But after investors buy near the short-term top, they are caught in the undertow as stocks slide back. This can go on and on, with investors taking some small losses or some very large losses.

It’s fine to make some test buys and hold positions if they work, although in this environment you might want to consider making at least partial profits quickly. But investors will have to wait for the market rally to show sustained strength before they have substantial exposure.

But it’s important to stay involved. Investors should have a game plan and execute if the market or individual positions go lower or higher. Keep your watchlists up to date so you are ready to take advantage of the next real bull market rally.

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

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

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