Dow Jones futures rose sharply early Friday, along with S&P 500 futures and Nasdaq futures. Tesla CEO Elon Musk said the Twitter deal is “temporarily on hold”, causing TWTR shares to crash, though it is limiting losses as Musk said he is “committed” to the acquisition.
The stock market saw large intraday swings on Thursday, with the S&P 500 nearly entering a bear market before major indices recovered to close closely mixed, while beat up small caps and story stocks recovered.
Apple (AAPL) and Tesla stocks, the two megacaps that held up reasonably well until last week, continued to be under pressure on Thursday. Apple stock plunged to its lowest point in seven months. Tesla (TSLA) broke below the February low of 700 to its worst level since late August, though it cut losses significantly.
Musk puts Twitter deal on hold
Elon Musk tweeted early Friday that he is “temporarily putting his Twitter deal on hold pending details to support the calculation that spam/fake accounts do indeed represent less than 5% of users.” Musk refers to an estimate by Twitter that spam and bot accounts make up less than 5% of the total number of users.
Twitter crashed by more than 25% at one point, but cut losses when Musk later tweeted that he was “still committed to the takeover”.
Twitter shares are currently down 11% to about 40. That’s well below its purchase price of $54.20. It’s slightly above the price of 39.31 on April 1, before Musk belatedly disclosed that he had built up a significant stake in TWTR stock.
Twitter shares had fallen to 45.08 in recent days amid speculation Musk could walk away from the deal or renegotiate the price. The sharp drop in Tesla stock, partly due to concerns that Musk would have to sell more shares before the Twitter deal, has heightened fears of such a scenario.
Musk faces a $1 billion severance payment if he walks away from the $43 billion deal.
Tesla shares jumped early Friday.
Digital World Acquisition Corp. (DWAC), the SPAC partner for Trump Media & Entertainment Group, which runs the struggling Truth Social network, showed up for the opening.
Dow Jones Futures Today
Dow Jones futures were up 1% from fair value. S&P 500 futures were up 1.4% and Nasdaq 100 futures were up 2%.
Ten-year government bond yields rose 9 basis points to 2.91%.
The price of crude oil rose almost 2%.
Keep in mind that an overnight action in Dow futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.
Stocks to watch
Northrop Grumman (NOC), Penske Automotive (PAG), money tree (DLTR) and Cigna (CI) are all worth checking out. All have relative strength at 52-week or record highs, reflecting their outperformance against the S&P 500 index.
NOC stocks are slightly below the 50-day moving average, but within a shallow head-to-head base. PAG forges a handle at the top of a long consolidation. DLTR stocks are fighting around the 50-day line, with a possible trendline entry. Cigna stocks are trading briskly in a long head-and-handle base, according to MarketSmith analysis.
Penske Automotive increased its quarterly dividend by 3 cents to 50 cents a share late Thursday. It also increased its plan to repurchase PAG shares, which still had $46.3 million, to $250 million.
DLTR stocks are on the IBD Leaderboard watchlist.
Join IBD experts as they analyze actionable stocks during the stock market rally on IBD Live
The stock market had a wild trading session. Major indices hit new lows in 2022 and also traded solidly higher at several points before finally closing narrowly mixed.
The Dow Jones Industrial Average fell 0.3% in Thursday’s stock market trading. The S&P 500 index fell 0.1%. The Nasdaq composite was up less than 0.1%. The small-cap Russell 2000 shot up 1.25%.
The price of crude oil in the US reversed early declines, rising 0.4% to $106.13 a barrel.
Gold, copper and palladium suffered significant losses. Growing concerns about global economic growth are weighing on oil and industrial commodities.
10-year government bond yields fell 10 basis points to 2.82%, the fourth consecutive decline after reversing from a 3-year high of 3.17% on Monday.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) closed flat, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 0.9%. The VanEck Vectors Semiconductor ETF (SMH) rose 0.5%.
SPDR S&P Metals & Mining ETF (XME) slipped 2.15% and the Global X US Infrastructure Development ETF (PAVE) rose 0.8%. US Global Jets ETF (JETS) fell 2.1%. SPDR S&P Homebuilders ETF (XHB) shot up 3.4%. The Energy Select SPDR ETF (XLE) climbed 0.4% and the Financial Select SPDR ETF (XLF) fell 0.75%. The Health Care Select Sector SPDR Fund (XLV) gained 1%
As a result of more speculative story stocks, ARK Innovation ETF (ARKK) rose 5.6% and ARK Genomics ETF (ARKG) 5.1%. Many defeated techies recovered Thursday after huge losses in recent days and weeks. TSLA Stocks Remain No. 1 in Ark Invest’s ETFs
Apple stocks, a heavyweight of the Dow Jones, S&P 500 and Nasdaq, weighed heavily on major indices, falling 2.7% to 142.56. That is after a 5.2% decline on Wednesday. As late as Tuesday, the RS line was near all-time highs even as AAPL shares had fallen below the 200-day line. Now the RS line is falling sharply.
On Thursday, Apple iPhone maker Foxconn warned of declining demand for consumer electronics, including smartphones. Last month, Taiwan Semiconductor (TSM), which makes chips for Apple and many others, also cited declining demand for consumer electronics.
AAPL shares rose nearly 2% early Friday.
Tesla shares fell 0.8% to 728. Over the course of the day, shares fell to 680, undercutting the Feb. 24 low of 700, and back to levels not seen since August. TSLA shares hit 1092.22 intraday after earnings on April 21, but have since fallen. The RS line for Tesla stock is just above recent lows.
Notably, Tesla stock failed to recover on Thursday, given gains in many other EV stock reports and ARK-esque stories, but the sell-off in recent weeks isn’t unusual.
Tesla shares were up 6% early Friday, partly due to the recovery of futures, but also due to Musk putting the Twitter deal on hold.
Five best Chinese stocks to watch right now
The stock market was looking for direction on Thursday. With Apple stocks wiping out big losses and Tesla moving higher in the mid-morning after undercutting lows, it looked like major indices might finally bounce.
But Apple and Tesla quickly faded, while key indices sold off quickly to hit new lows. The S&P 500 came within a few points of a 20% decline to hit a bear market. The Nasdaq is down more than 30% from its all-time high in November.
Major indices rebounded in the last 40 minutes, with the Nasdaq sneaking into the green just as the closing bell rang. Tesla shares trimmed the losses, while Apple only contained the latest major decline.
While the major indices fizzled, small caps and highly valued growth numbers experienced a solid relief. But these stocks have suffered massive losses in recent weeks.
Advancers outperformed fallers in Thursday’s session, but the trend has been very negative in recent days and weeks. New lows obliterated new highs.
As investor fears shift from inflation to concerns about growth – driven in part by Fed rate hikes to curb inflation – even commodity policy has faltered. Oil and gas supplies are a strong point, but some have failed, with even many leaders fighting for support at their 50-day lines.
Time the Market with IBD .’s ETF Market Strategy
What to do now
Futures point to a strong rebound as Friday opens, with defeated techs once again leading the way. But the market needs a lot more than a strong open, or even a good day or two. It takes several strong sessions to signal some kind of sustained rally. Even that could eventually just turn into a bear market rally toward the 21-day or 50-day lines before turning lower again.
There is no reason to be involved in this market other than long term winners.
Work on your watchlists. Focus on stocks with strong relative strength, such as Northrop, Dollar Tree and Cigna. Watch out for those who settle near points of sale, but don’t get too hung up on them now. If this market correction/bear market lasts for some time, resilient stocks will have time to form better patterns over time.
Read The Big Picture every day to stay informed about market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.
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