Stock futures pared losses Thursday following positive central bank news from Europe, as investors awaited weekly unemployment data and a raft of Federal Reserve commentary. Lululemon led a handful of retailers scoring big moves on earnings news. Further regulatory tightening placed China stocks under sharp pressure. Meanwhile, Nike led the S&P 500 and the Dow Jones today.
Dow Jones futures exited early losses and rose a fraction, after the European Central Bank announced plans to begin cutting back its massive monetary stimulus effort. S&P 500 futures pared back to trade slightly below fair value, leaning toward a fourth straight decline. Nasdaq 100 futures reversed narrowly higher on the stock market today, with China-based names notching four of the five deepest early losses on the index.
The U.S. Labor Department reported that jobless claims fell to a new pandemic low of 310,000 for the week of Sept. 4. That’s a decline of 35,000 and better than economist forecasts.
Lululemon Athletica (LULU) rocketed nearly 14% higher to the head of the Nasdaq 100. The fitness-wear retailer delivered a solid second-quarter report late Wednesday, and announced it was preparing to raise employee wages.
Academy Sports (ASO) traded 1.8% higher just ahead of its second-quarter report. ASO stock dropped 3.85% to 43.40 on Wednesday, holding above the 42.85 buy point. IBD Long-Term Leader Copart (CPRT) dipped 0.2% after reporting late Wednesday.
Earnings news sent several top retail stocks, aside from Lululemon, into motion: Lovesac (LOVE) vaulted 10%, RH (RH) added 1.8% after earnings reports. July IPO Torrid Holdings (CURV) rallied 15%.
On the downside, GameStop (GME)E dropped more than 7% and AeroVironment (AVAV) fell almost 6% on earnings. Boston Beer (SAM) dived 9% after withdrawing its 2021 guidance due to deteriorated demand.
Nike (NKE) jumped 1.6%, leading the Dow Jones today, ahead of its fiscal first quarter report due later this month. A UBS report noted potential upside in the stock after its recent four-week decline showed overreaction to Covid-driven supply chain interruptions in Vietnam.
Nike has lagged the market this year, with a 10.4% gain through Wednesday. Shares are pulled back below their 50-day and 10-week moving averages. And shares are up more than 8% following a breakout in June.
On The Radar: Unemployment Data, Fed Commentary
Weekly unemployment data are due out from the Labor Department at 8:20 a.m. ET. Weekly oil inventories from the Energy Information Administration are slated for release at 10:30 a.m. ET.
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Investors also receive a heavy dose of Federal Reserve commentary today, after markets on Wednesday felt some impact following comments from St. Louis Fed President James Bullard. Presidents of the Federal Reserve Banks of New York, San Francisco, Dallas, Chicago, Minneapolis and Boston, plus Fed Governor Michelle Bowman, are all scheduled to speak during trading hours.
Hong Kong Tumbles, Shanghai Gains; Europe Under Pressure
A mixed day on China’s markets saw Hong Kong’s Hang Seng Index dive 2.5%, in a second straight heavy loss. The South China Morning Post reported that Chinese officials meeting with executives from Tencent Holdings (TCEHY) and NetEase (NTES) put a freeze on new video game approvals, as China’s effort to manage tech sector expansion continued.
The Shanghai Composite sidestepped the damage, rising 0.5% putting it ahead 2.9% for the week as its rebound tracks toward a third week. In Japan, Tokyo’s Nikkei 225 dropped 0.6%, ending an eight-day rally, but it held above the 30,000 level.
In U.S. premarket action, NetEase dropped 4.4%, on the heels of its 5.2% dive on Wednesday. Tencent shares were inactive.
Among China-based ETFs, the iShares MSCI China ETF (MCHI) was inactive early Thursday. The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) slumped 0.2% in premarket trade. The KraneShares CSI China Internet ETF (KWEB) fell 3.9%, after a 3.5% nose-dive on Wednesday.
Europe’s markets turned mixed after the European Central Bank’s announcement. Frankfurt’s DAX reversed to a fractional gain. London’s FTSE 100 traded 0.95% lower, while the CAC-40 in Paris shed losses and rose 0.2%. The SPDR Portfolio Europe ETF (SPEU) was inactive. The fund continues to trade just below a 44.06 entry in what IBD MarketSmith analysis marks as an 11-week flat base.
Bitcoin Holds Above $46,000
Meanwhile, Bitcoin held above $46,100 after diving as much as 17% on Tuesday, according to Fintech Zoom. It traded in a narrow range between $46,773 and $45,575 over the past 24 hours.
The bitcoin tumble occurred on the same day that El Salvador launched the cryptocurrency as the country’s official currency — an event that stirred broad speculative buying, and which stumbled in its early roll out. The Salvadoran government reported that it purchased 400 bitcoins during Tuesday’s sell-off, raising the country’s bitcoin cache to 500.
Coinbase Global (COIN) added a fraction in early trade, following a 4.2% drop on Tuesday. Marathon Digital Holdings (MARA) bounced 0.8%. MicroStrategy (MSTR) gained 0.4%. Grayscale Bitcoin Trust (GBTC) was inactive.
A five-week advance in interest rates points to money coming out of bonds, which is generally a positive for the stock market. Financial stocks love rising rates, and Keefe, Bruyette & Woods upgraded the banking sector to overweight on Monday. Chips, housing and industrial sectors are also key to watch.
However, there remains ongoing skittishness over Federal Reserve policy, as well as uncertainty regarding the end of supplemental unemployment support, a rising wave of Covid-19 infections and the outcome of massive stimulus spending plans in process in Washington — combined with impact from the regulatory crackdown in China’s markets. Charts for the Nasdaq and S&P 500 remain in strong standing, paused just off record highs. However, a three-day slide has left the Dow Jones today testing support at its 50-day moving average.
For more detailed analysis of the current stock market and its status, study the Big Picture.
Small caps are also easing, with the Russell 2000 and S&P Smallcap 600 testing key levels of support. The Innovator IBD 50 ETF (FFTY) is set to snap a two-week rally, and is below a 50.06 buy point in a 28-week cup base.
Now is a good time to review portfolios and assess holdings. Investors may want to adopt a somewhat defensive stance in the short run. If gains are fading in some of your big winners, trimming positions probably makes sense, especially with stocks that have breached support at their 21-day exponential moving average. And keep in mind, a market pause or pullback could quickly offer new buying opportunities.
3 Stocks To Watch: Generac, Atkore, Copart
Generac Holdings (GNRC) is a stock to watch this week, with the impact of Hurricane Ida driving additional demand for emergency generators. The stock closed on Friday less than 1% below a potential 457.10 buy point in a cup base. It is a late-stage base, however.
Atkore (ATKR) dropped Wednesday, falling back below a 90.18 entry in a 13-week cup.
Copart, the top-ranked stock in the auto retailers industry group, appears to be forming a flat base. It reported results late Wednesday. The buy point is at 149.16, 3% above where the stock closed on Wednesday.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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