Dow Jones Futures Fall: Inflation and jobs data could be the catalyst for a struggling market rally

Dow Jones futures fell early Thursday, along with S&P 500 and Nasdaq futures, with major jobs and inflation data expected before the market opens.




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The stock market rally was looking for direction on Wednesday. The main indices closed narrowly mixed. But the details showed an additional weakness, with the losers easily outweighing the winners.

With the uptrend under pressure, now is not a good time to make any new purchases or hold more than token exposure.

The medical sector continues to lead, rebounding from Tuesday’s losses. UnitedHealth (UNH) rose into a buy zone after breaking out on Wednesday. Vertex Pharmaceuticals (VRTX) picked up an early entry after Tuesday’s retreat. McKesson (MCK) holds key support in its shallow base, not far from an aggressive entry. Lanthee (LNTH) is trading around its 50-day line, consolidating after a huge surge earlier this year. All have relative strength lines close to record highs.

High-end furniture retailer HR (RH) cut its estimates for the full year, citing weaker demand and a deteriorating economic environment. RH stock fell sharply overnight, signaling a new two-year low. Shares were already down 11% so far this week.

Simply good food (SMPL), which makes low-carb snacks and shakes, announced its results early Thursday. SMPL stock rose 2% to 41.20 on Wednesday, near an early entry at 42.01 in a consolidation.

Some other food and beverage stocks are doing well, reflecting the defensive mindset of the market. Cereal Giant General Mills (GIS) jumped 6.35% on Wednesday to 74.72, driven by earnings and a rise in dividends. Publish holdings (POST) is just at a buy point while Kellogg (K) settles down.

Tesla stock fell 1.8% to 685.47, down 7% so far this week. Stocks continue to pull back from their 10-week moving average and are back towards recent lows. LI stock rose 2.7% to 38.08, back above a buy point, but still well off the major moving averages. You’re here (TSLA) and Chinese startup EV Li-Auto (LI) will release second quarter sales later this week.

The UNH stock is on the IBD ranking. LNTH stock is on the rating watch list. Simply Good Foods, UnitedHealth and VRTX stocks are on the IBD 50. Vertex and MCK stocks are on the IBD Big Cap 20. Lantheus was the IBD stock of the day on Wednesday.

The video embedded in this article analyzed Wednesday’s market action and discussed GIS, McKesson and Neurocrine Biosciences (NBIX).

Dow Jones Futures Today

Dow Jones futures were down 0.7% from fair value. S&P 500 futures lost 0.8% and Nasdaq 100 futures fell 0.9%.

The 10-year Treasury yield rose 1 basis point to 3.1%.

China’s manufacturing index for China rose 0.6 points in June to 50.2, returning above the breakeven point of 50 for the first time in four months as the country recovers from Covid lockdowns . But that was slightly below views for 50.5. The services index jumped to 54.7 from 47.8 in May.

The US ISM manufacturing index for June is due Friday morning, following several negative reports on regional factories.

At 8:30 a.m. ET on Thursday, investors will get key US jobs and inflation data. The Department of Labor will release weekly unemployment claims. The Commerce Department will release the May income and spending report, which includes the Federal Reserve’s preferred inflation gauge.

Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.


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


Stock market rally

The stock market rally traded in a narrow range on Wednesday.

The Dow Jones Industrial Average fell less than 0.1% in stock trading on Wednesday. The S&P 500 index lost a fraction. The Nasdaq composite climbed 0.3%. Small cap Russell 2000 lost 1%.

U.S. crude oil prices fell 1.8% to $109.78 a barrel, reversing from strong morning gains. Gasoline futures fell 2.8%.

The 10-year Treasury yield fell 12 basis points to 3.09%. The two-year yield fell to 3.06%. The yield spread between two and ten years fell to 3 basis points, underlining recession fears.

Fed Chief Jerome Powell again stressed on Wednesday that the central bank’s priority is to fight inflation, even at the risk of a recession.

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Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.25%, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 0.75%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 0.2%. ETF VanEck Vectors Semiconductor (SMH) fell 1.8%.

The SPDR S&P Metals & Mining ETF (XME) fell 2.8% and the Global X US Infrastructure Development ETF (PAVE) fell 1.3%. The US Global Jets ETF (JETS) fell 1.5%. The SPDR S&P Homebuilders ETF (XHB) fell 0.4%. ETF Energy Select SPDR (XLE) fell 3.5% and ETF Financial Select SPDR (XLF) slipped 0.6%. The SPDR healthcare sector fund (XLV) gained 0.9%, with UNH, Vertex and McKesson shares in the ETF.

Reflecting more speculative stocks, ARK Innovation ETF (ARKK) fell 1.6% and ARK Genomics ETF (ARKG) lost 0.6%. TSLA stock remains one of Ark Invest’s leading ETF stocks.


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Market rally analysis

The stock market rally showed no bullish action, managing only a mixed session after Tuesday’s big losses.

The details were less impressive, with declines outpacing rising stocks nearly 2-to-1 on both the NYSE and Nasdaq.

The market moved into a “pressurized uptrend” on Tuesday as the Nasdaq composite and S&P 500 closed below their day’s lows on Friday.

Research by Eric Krull, co-author of The Lifecycle Trade, shows that there is a 90% chance the rally will ultimately fail when an index closes below its trailing day low.

The rally isn’t officially over until the indices hit their recent lows.

The Dow Jones did not close below its low for the day, but it is not far off.

The Russell 2000, for its part, closed Wednesday below Friday’s lows.

Medicines rebounded, while defensive food stocks performed well. But energy stocks, which rebounded earlier in the week, fell sharply on Wednesday.


Time the Market with IBD’s ETF Market Strategy


What to do now

The stock market rally is not over, but the outlook is not high. The odds are just not in your favor right now. Investors should focus on preserving their mental and physical capital and prepare for a sustained uptrend in the market.

Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.

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

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