Dow Jones, Nasdaq Break Key Levels As Apple Skids, Tesla Ends Dive; What To Do Now

Dow Jones futures were little changed after hours, along with S&P 500 futures and Nasdaq futures. The stock market suffered further losses Wednesday as rising Treasury yields, Apple iPhone woes and soaring China Covid cases added to selling pressure on the major indexes.

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The Nasdaq is near its bear market low, setting its worst close in over two years. The Dow Jones undercut a key level.

Apple (AAPL) fell again, setting a fresh bear low. AAPL stock is in danger of falling below a $2 trillion valuation. Tesla (TSLA), which also set another bear market low, rose modestly. But that only trimmed a steep weekly loss.

Energy stocks fell as crude and natural gas prices skidded, with natgas and coal producers hardest hit.

But several energy stocks are showing resilience. Exxon Mobil (XOM), Chevron (CVX), Schlumberger (SLB), Valaris (VAL) and, to some extent, First Solar (FSLR) are holding up reasonably well.

But whether these stocks make real progress from here depends greatly on whether unstable energy prices move higher.

CALM Earnings

After the close, egg producer Cal-Maine (CALM) reported surging earnings that slightly missed fiscal Q2 views. CALM stock fell 5% in extended trade, even with revenue soaring 110% and the egg producer announcing a $1.35-a-share dividend. Shares fell 2.5% to 62.19 in Wednesday’s regular session. That pulled CALM stock back within the 5% chase zone of a 60.11 handle buy point. But Cal-Maine could open Thursday below that entry.

Dow Jones Futures Today

Dow Jones futures fell 0.1% vs. fair value. S&P 500 futures were flat and Nasdaq 100 futures rose 0.25%.

The 10-year Treasury yield fell 3 basis points to 3.86%.

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 Wednesday

The stock market continued to decline, with all the major indexes down more than 1%.

The Dow Jones Industrial Average fell 1.1% in Wednesday’s stock market trading. The S&P 500 index slumped 1.2%. The Nasdaq composite gave up 1.35%. The small-cap Russell 2000 gave up 1.6%.

Apple stock sank 3.1% to 126.04, an 18-month low. TrendForce cut its 2022 iPhone shipments forecasts due to recent lockdowns at Foxconn’s Zhengzhou base. And it also its trimmed its forecast for early 2023 shipments, citing Foxconn’s labor shortages.

The Dow Jones tech titan is on track for its sixth straight weekly loss and its worst monthly loss in four years. AAPL stock’s valuation closed at $2.005 trillion.

Tesla rose 3.3% to 112.71 after plunging 11.4% on Tuesday, ending a seven-day losing streak. The EV giant is still down nearly 15% for the month. Late Wednesday, Morgan Stanley analyst Adam Jonas cut his TSLA stock price target to a still-hefty 250, but also slashed his Q4 delivery target to just 399,000 EVs. Tesla climbed 1% overnight.

U.S. crude oil prices dipped 0.4% to $79.23 a barrel. Natural gas futures tumbled 5.8%.

The 10-year Treasury yield rose 3 basis points to 3.89%. That’s up 49 basis points from the Dec. 7 low of 3.4%, with nearly all of the gain since Dec. 15.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) shed 1.1%. The VanEck Vectors Semiconductor ETF (SMH) retreated 1.3%. Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dipped 0.5%, setting a fresh five-year low. ARK Genomics ETF (ARKG) gave up 0.6%, just above its June bear low. Tesla stock is still a significant holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) tumbled 4% and the Global X U.S. Infrastructure Development ETF (PAVE) slumped 1.75%. U.S. Global Jets ETF (JETS) descended 2.4%. SPDR S&P Homebuilders ETF (XHB) fell 2%. The Energy Select SPDR ETF (XLE) retreated 2.2%, with XOM and CVX stocks easily the top components, and SLB stock coming in third. The Financial Select SPDR ETF (XLF) edged down 0.35%. The Health Care Select Sector SPDR Fund (XLV) gave up 0.65%.

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Energy Stocks To Watch

Exxon stock fell 1.6% to 108.38, back below the 50-day line a day after recently retaking that key level. XOM stock has a 114.76 buy point from a flat base above a prior consolidation. But a move above Tuesday’s high of 110.47 could offer an early entry.

Chevron stock looks a lot like Exxon Mobil’s. Shares sank 1.5% to 176.98, slipping below its 50-day. CVX stock has a flat base next to a prior consolidation, with a 189.78 buy point, according to MarketSmith analysis. Investors could use 180.33, just above Tuesday’s high, as an early entry for CVX stock.

Schlumberger stock retreated 1.7% to 52.60, finding support near the 10-week line. SLB stock has a 16%-deep consolidation above/next to a deep cup base. The official buy point is 56.14. But investors could use 54.28, just above the Dec. 5 high at 54.18, as an SLB stock early entry.

Valaris stock fell 2.6% to 64.74, rising slightly from a test of the 10-day, 21-day and 50-day lines. The offshore contract drilling firm has a 70.27 buy point from a 17%-deep cup base above a deep cup-with-handle pattern. The buy point is 70.27. Investors could use 67.75, just above Tuesday’s high, as an early entry. That could develop into a proper handle buy point in a few days.

First Solar sank 2.7% to 146.17, losing further ground from the 50-day line, but came off an intraday low of 142.35. FSLR stock needs some work, and could easily break down from this point. Ideally other solar stocks, which are even harder hit, will also improve. But watch to see if First Solar can regain its 50-day and 21-day lines. There could then be a trendline, or perhaps a move above the Dec. 21 high of 162.20, to offer an early entry. FSLR stock could have a new base at the end of next week.

Market Analysis

The stock market had another rough session Wednesday.

The Dow Jones, which eked out a gain Tuesday, was unable to resist Wednesday. The Dow closed below its rising 50-day moving average for the first time since Oct. 21.

The S&P 500 continued to slide from its rising 50-day line. The benchmark index held above last Thursday’s lows but ended with its worst close since Nov. 9. The S&P 500’s best performers, Generac (GNRC) and Tesla stock, have been the S&P 500’s biggest losers in 2022. Not exactly inspiring.

The Russell 2000 undercut Thursday’s low, hitting its worst level in two months.

The Nasdaq composite fell to just within 135 points of its Oct. 13 bear market intraday low. The tech-heavy index finished with its weakest close since July 2020. Apple stock and a slew of other growth names slumped.

Until there’s clarity on the Fed rate end game and the economic outlook — including China’s Covid surge — the stock market will likely be choppy at best. And the major indexes are doing far worse than that right now.

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What To Do Now

The stock market is not acting well. While certain sectors are holding up better than others, it’s hard for any stocks to make much headway. Sectors and individual stocks can quickly deteriorate as well.

Investors could have small positions in some promising sectors but should be steering clear of growth for the time being. There’s nothing wrong with being all in cash. Keeping your financial and mental capital intact is critical.

But work on your watchlists. Many stocks from a variety of sectors are near buy points, or could be quickly if the market perks up. Focus on stocks with strong relative strength and holding key levels. Don’t exclude resilient names that don’t have a clear buy point yet.

If you’ve had a bad year, you’re not going to make it up in the final two trading days of 2022 with the market struggling. Learn from your mistakes and prepare for the next sustained market rally in 2023.

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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