Dow Jones Futures: Fed Minutes Lift Market Rally, Microsoft Makes Key Move; Tesla Rivals Are In Buy Zones

Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally rose slightly Wednesday in an up-and-down session as hawkish Fed minutes held few surprises. Treasury yields rebounded, still flashing a recession warning. Crude oil prices fell again, but came off lows.




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Microsoft stock and Google parent Alphabet (GOOGL) reclaimed their 50-day moving averages. Amazon.com (AMZN) and Apple (AAPL) moved above their 10-week lines. Microsoft (MSFT) and Google stock are IBD Long-Term Leaders.

Tesla rivals BYD (BYDDF) and Li Auto (LI) are in buy zones. BYD stock rose modestly within a buy zone while Li Auto fell back into range. Tesla stock edged lower.

GME Stock Split

After Wednesday’s close, original meme stock GameStop (GME) announced plans for a 4-for-1 stock split. GME stock popped 9% overnight after closing down 2.4% to 117.30.

Stock splits have come back in favor. Amazon stock split 20-for-1 in early June. Google stock will split 10-for-1 on July 15 while Tesla has proposed a 3-for-1 split. But those tech titans have or had high share prices, making it difficult to trade, say, AMZN stock options. That’s not the case with GME stock.

Dow Jones Futures Today

Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures dipped 0.2% and Nasdaq 100 futures lost 0.2%.

Crude oil prices sank 1%.

The 10-year Treasury yield was flat at 2.9%. The 2-year yield climbed 1 basis point to 2.97%.

At 8:15 a.m. ET, ADP will release its June estimate of private-sector hiring. At 8:30 a.m. ET, the Labor Department issues its weekly jobless claims report. Those come ahead of Friday’s June jobs report.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.


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Fed Minutes, Economic Data

Fed minutes from the June 14-15 policy meeting revealed that policymakers said a “restrictive policy” was needed, and might need to become “more restrictive,” fearing that inflation could become “entrenched.”

Policymakers saw a late July hike of 50 or 75 basis points as likely, according to the Fed meeting minutes. But Fed chief Jerome Powell already said as much after the meeting.

More generally, the Fed minutes offered no real surprises and underscored the big shift in economic conditions in the past three weeks.

The Fed minutes mentioned “inflation” 90 times but not “recession” even once. Since the mid-June Fed meeting, recession fears have swelled while commodity prices have fallen sharply.

The Fed minutes slightly reinforced market expectations for a rate hike of 75 basis points later this month, with 50 basis points in September. December still marks the likely end of Fed rate hikes.

Earlier Wednesday, the Labor Department’s JOLTS survey showed that jobs openings fell to 11.254 million in May from April’s upwardly revised 11.68 million. That was slightly higher than expected, but the biggest month-to-month drop since August 2020.

The June ISM nonmanufacturing index dipped to a two-year low but topped views and still pointed to solid growth. The jobs subindex fell to 47.4 from 50.2, below the break-even 50 level.

Stock Market Rally

The stock market rally moved between slim gains or losses for most of Wednesday’s trading. The major indexes gained steam after the 2 p.m. ET release of Fed meeting minutes, but then pared the advance in the closing minutes.

The Dow Jones Industrial Average rose 0.2% in Wednesday’s stock market trading. The S&P 500 index climbed 0.4%. The Nasdaq composite advanced 0.35%. The small-cap Russell 2000 fell 0.8%.

Microsoft and Google stock rose just over 1% to move above their 50-day moving averages. Amazon stock edged up 0.7%, coming right up to the 50-day line and above its 10-week line. Apple stock fell short of its 50-day, but Wednesday’s 1% gain pushed the iPhone giant above its 10-week line.

U.S. crude oil prices fell 1% to $98.53 a barrel, well off morning lows but after diving 8.2% on Tuesday. Gasoline futures, which topped $4 a gallon just a few weeks ago, sank 4% to $3.20. Prices at the pump have been falling for the past three weeks and are set to drop significantly in the next few weeks.

The 10-year Treasury yield rebounded 10 basis points to 2.9% after plunging 30 basis points in the prior three sessions. The two-year Treasury yield jumped 14 basis points to 2.96%. The Treasury yield curve is now slightly more inverted, reflecting rising recession risks.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) was flat, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.1%, with MSFT stock a top holding. The VanEck Vectors Semiconductor ETF (SMH) rose 0.7%.

SPDR S&P Metals & Mining ETF (XME) fell 0.7% and the Global X U.S. Infrastructure Development ETF (PAVE) ticked 0.1% higher. U.S. Global Jets ETF (JETS) descended 1.5%. SPDR S&P Homebuilders ETF (XHB) lost 0.6%. The Energy Select SPDR ETF (XLE) gave up 1.7% and the Financial Select SPDR ETF (XLF) dipped 0.25%. The Health Care Select Sector SPDR Fund (XLV) climbed 0.7%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 2.25% and ARK Genomics ETF (ARKG) dipped 0.2% after both surged above their 50-day lines on Tuesday. Tesla stock is a major holding across Ark Invest’s ETFs. Cathie Wood’s Ark Invest also owns some BYD stock.


Five Best Chinese Stocks To Watch Now


China EV Stocks In Buy Zones

BYD stock rose 1.1% to 40.55, after briefly testing its 39.81 buy point from a deep cup-with-handle base for a fifth straight session intraday. On Sunday, BYD reported June sales of 134,036 EVs and plug-in hybrids, up 224% vs. a year earlier. For the second quarter, BYD sales topped Tesla deliveries by more than 100,000 vehicles. Tesla continues to lead in all-electric “BEV” sales, though that gap has narrowed considerably over the past year.

Li Auto stock fell 3.5% to 38.60. Intraday, shares sank to 37.10, but closed above the 37.55 buy point from a long, deep base. LI stock is still 39% above its 50-day line. Ideally, the hybrid SUV maker would form a short base here, letting Li Auto stock digest its huge gains from early May to late June. Li Auto will begin deliveries of its second premium SUV, the L9, in late August.

Tesla stock edged down 0.6% to 695.20 on Wednesday, just below the 21-day line.

China’s Commerce Ministry and 16 other departments jointly issued a notice on July 7 that supports new energy vehicle (NEV) buys and will consider extending the NEV purchase tax exemption past year-end. That follows similar signals from a high-level meeting on June 22. when it expires.

That could benefit BYD, Li Auto, Tesla and other EV makers in China.


Tesla Vs. BYD: Which EV Giant Is The Better Buy?


Market Rally Analysis

The stock market rally added to Tuesday’s rebound from intraday lows, but the major indexes still seemed to searching for direction.

The Nasdaq composite moved above its 21-day moving average on Wednesday, but the S&P 500 and Dow Jones hit resistance at that short-term average. All three major indexes are now back above the lows of their June 24 follow-through days. Tumbling below their FTDs last week pushed the market rally to “under pressure,” where it remains.

The late June and the 50-day line loom above the 21-day lines, with the early June peaks above that.

While the major indexes rose Wednesday, breadth was weak, with losers outnumbering winners easily on the Nasdaq and NYSE.

Good news on inflation and Fed rate hikes, including tumbling commodity prices and easing job markets, are bad news for a possible recession. So markets don’t quite know how to handle economic data.

It’s possible that the market will trend sideways for some time. That would allow a lot of bases to form and for clarity to develop on the economy and Fed policy. But even that occurs, there could be head fakes and shakeouts along the way for individual stocks and the overall market.

Medical stocks remain the clear leaders right now, including IBD 50 members Evolent Health (EVH), McKesson (MCK), UnitedHealth (UNH), Harmony Biosciences (HRMY) and AstraZeneca (AZN).


Time The Market With IBD’s ETF Market Strategy


What To Do Now

The stock market rally is under pressure, with the major indexes still facing a lot of key resistance levels. While a number of medicals and a handful of other stocks are acting well, even they can be prone to notable shakeouts.

So if you’re going to take positions, make them small and look for early entries. Consider taking at least partial profits quickly to lock in some gains. Don’t hesitate to cut losses short.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

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

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