Dow Jones Falls As Jobs Report Looms; AMD Warns, Elon Musk Wins Twitter Trial Delay

Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures, despite an AMD earnings warning. The stock market rally attempt lost ground Thursday, hitting resistance at short-term levels ahead of Friday’s key jobs report.

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Tesla CEO Elon Musk and his lawyers made several demands related to the Twitter (TWTR) takeover deal. Meanwhile, the judge overseeing the Twitter case gave Musk until Oct. 28 to close the deal. But that move does mean that the Musk-Twitter trial, if it occurs, won’t start until November. TWTR stock fell.

Separately S&P Global raised the Tesla (TSLA) credit rating to investment grade, a long-awaited move that will lower borrowing costs. But Tesla stock declined slightly, extending a sharp recent downtrend.

Shockwave Medical (SWAV), Arista Networks (ANET), Eli Lilly (LLY), On Semiconductor (ON) and Neurocrine Biosciences (NBIX) cleared or flirted with buy points during Thursday’s session.

NBIX stock is on IBD Leaderboard, while Shockwave is on the Leaderboard watchlist. Microsoft (MSFT) and Google stock are on the IBD Long-Term Leaders. SWAV stock and Onsemi are on the IBD 50 list. ANET stock and On Semiconductor are on the IBD Big Cap 20. SWAV was Wednesday’s IBD Stock Of The Day.

AMD Warning

After the close, Advanced Micro Devices (AMD) said third-quarter sales would be about $5.6 billion, far below the analyst consensus of about $6.7 billion. AMD blamed a weak PC market and ongoing inventory shifts.

AMD stock fell 4.5% overnight. Shares had dipped 0.1% to 67.85 in Thursday’s regular session. AMD stock is still up for the week after hitting two-year lows last week.

Intel (INTC), which vies with AMD in PC chips, retreated modestly. So did Nvidia (NVDA), which competes with AMD in graphics chips.

Separately, Aehr Test Systems (AEHR), a small chip-equipment maker with exposure to the EV space, reported better-than-expected fiscal first-quarter profit. AEHR stock jumped in extended action. Shares are signaling a move to around the 50-day line, not far from a trendline entry. AEHR stock fell 3.1% to 13.88 in Thursday’s session.

Jobs Report

The Labor Department will release the September jobs report at 8:30 a.m. ET. Wall Street expects nonfarm payrolls to rise by 250,000, a solid gain but down from August’s 315,000. The unemployment rate is seen holding at 3.7%. Labor force participation and wage gains also will be key.

The Federal Reserve wants to see labor markets easing substantially before backing off rate hikes. This week, the JOLTS survey showed job openings tumbled by 1 million in August, while weekly jobless claims rose more than expected. The ADP employment index showed solid private jobs higher, while ISM’s manufacturing and service gauges gave mixed readings on employment.

A weak September employment report could spur markets to downshift Fed rate hike expectations in the coming months. But the September consumer price index looms on Oct. 13.

Dow Jones Futures Today

Dow Jones futures were little changed vs. fair value. S&P 500 futures declined 0.1%. Nasdaq 100 futures fell 0.15%. Intel stock is on the Dow Jones, S&P 500 and Nasdaq, while AMD and Nvidia stock are notable S&P 500 and Nasdaq components.

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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Stock Market Rally

The stock market rally attempt started off with the major indexes moving modestly to just below short-term resistance, then falling back, closing at session lows as Treasury yields moved higher.

The Dow Jones Industrial Average retreated 1.15% in Thursday’s stock market trading. The S&P 500 index gave up 1%. The Nasdaq composite shed 0.7%. The small-cap Russell 2000 lost 0.6%.

The 10-year Treasury yield rose 7 basis points to 3.83%, as several Fed officials stuck to the central bank’s hawkish line. It jumped 14 basis points on Wednesday. The 10-year yield is now up for the week and not far from 12-year highs right around 4%. The 10-year Treasury yield falling Monday-Tuesday was a key tailwind for the new stock market rally attempt.

U.S. crude oil prices rose 0.8% to $88.45 a barrel, their fourth straight advance. OPEC+ on Wednesday agreed to cut production quotas by 2 million barrels per day.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.5%. The iShares Expanded Tech-Software Sector ETF (IGV) edged down 0.3%, with MSFT stock a huge component. The VanEck Vectors Semiconductor ETF (SMH) slipped 0.7%. SMH fell overnight, with AMD, Intel and Nvidia stocks all major components.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) edged up 0.3% and ARK Genomics ETF (ARKG) lost a fraction. TSLA stock is a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) backed off 0.45%. U.S. Global Jets ETF (JETS) sank 0.9%. The Energy Select SPDR ETF (XLE) added 1.8%. The Health Care Select Sector SPDR Fund (XLV) slumped 1.3%.

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Tesla Stock

Tesla stock fell 1.1% to 238.13, even with the investment grade credit rating news. Shares have tumbled 10% this week, first on disappointing third-quarter deliveries and then on Twitter news.

Late Thursday, Musk tweeted that Tesla Semi production has began with deliveries to PepsiCo (PEP) starting on Dec. 1. The Semi, delayed for years, will have a 500-mile range, he said. Other specs are not clear.

Musk-Twitter Deal Saga

Tesla CEO Elon Musk on Tuesday appeared to reverse course, saying he wanted to go ahead with the $44 billion Twitter deal.

But the two sides haven’t agreed on new terms. Musk reportedly wants the deal contingent on debt financing — an escape clause that wasn’t in the April takeover deal. He also wants to reserve the right to renew his fraud claims.

Meanwhile, Musk’s lawyers filed a motion with Delaware’s Court of Chancery to stay the upcoming Twitter trial, saying the deal should now close before Oct. 28.

Twitter immediately objected, saying it was an “invitation to mischief and delay.” Its lawyers also called on Musk to pay $44 billion, plus interest.

However, the Chancery Court judge, in a temporary victory for Musk, late Thursday pushed back the Twitter trial, which was set to start Oct. 17. If the Twitter deal doesn’t close by Oct. 28, she’ll set November trial dates.

TWTR stock slumped 3.7% on Thursday to 49.39, then fell 2% overnight after the judge delayed the Twitter trial. Shares dipped 1.35% on Wednesday after spiking 22% on Tuesday. Musk agreed in April to pay $54.20 a share for Twitter stock.

Assuming Musk ends up buying Twitter, it’s possible he’ll need to sell further TSLA stock to finance the takeover. So that’s an overhang on Tesla shares.

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Stocks Near Buy Points

NBIX stock rose modestly to close above a 109.36 flat-base buy point for the first time, according to MarketSmith analysis. While breakouts have struggled in 2022, Neurocrine is 7% above its 50-day line.

LLY stock climbed slightly on fresh positive drug news, but was unable to close above a traditional buy point.

ANET stock and Onsemi closed just above downward-sloping trendlines, which are slightly above their 50-day lines. Both are technically early buy points within new consolidations, but have rallied on light volume while Friday’s jobs report looms for the market rally.

SWAV stock touched a trendline Thursday, then reversed slightly lower. Shares are still above their 21-day and 50-day lines. Shockwave stock will have a proper base after Friday.

Market Rally Analysis

The stock market rally attempt lost ground again Thursday. The major indexes hit resistance at the 21-day line soon after the open. They remained in flux but generally down for the rest of the session, closing near session lows.

On Wednesday, stocks slashed losses even as Treasury yields jumped. But they struggled Thursday with the 10-year Treasury yield, and the dollar, up solidly for a second straight session.

The major indexes remain sharply higher for the week.

Investors weren’t ready to make big bets heading into Friday’s jobs report. The employment report could be pivotal for the market rally attempt. A strong move could trigger a follow-through day to confirm the new uptrend, with the likes of Arista Networks, On Semiconductor and Shockwave  being actionable. But a negative jobs report reaction could send the indexes tumbling toward their bear market lows again.

Energy stocks continued to lead Thursday, but many look extended after running up for several sessions. Medical plays remain intriguing while the chip, networking, restaurant, insurance, fertilizer and several other groups have at least some names around buy points.

On the downside, trash hauling firms such as Waste Connections (WCN) sold off hard. Solar stocks struggled again.

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What To Do Now

While a few stocks flashed buy signals Thursday, at least intraday, there weren’t a whole lot of reasons to make new buys with the new market rally heading into the jobs report.

Even if the market stages a follow-through in the next few days, that doesn’t mean investors should ramp up exposure quickly. The market would still face a number of technical challenges and economic headwinds while the AMD warning is just the latest grim news heading into earnings seasons.

But get those watchlists ready. As a market rally builds momentum, you want to be ready to take advantage by spotting the potential big winners in advance.

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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