Dow Jones futures, S&P 500 futures and Nasdaq futures fell on Thursday morning. Nvidia (NVDA) and AMD stock fell overnight, dragged down by semiconductors after the U.S. government said it had imposed export restrictions on some chip sales to China.
The stock market rally attempted a brief, weak recovery on Wednesday, before the major indexes hit resistance at the 50-day moving average and turned lower.
China EV startups like Neo released August sales on Thursday morning.
AMD, Nvidia shares fall on China curbs
Nvidia shares fell 4% in premarket trading. The U.S. government has imposed new licensing requirements that would block sales of certain advanced data center chips to China and Russia, chip company Chip said in an SEC filing late Wednesday. Nvidia said the US was citing concerns about “military end use”. Nvidia, which does not currently sell products to Russia, said the restrictions could affect $400 million in sales to China.
The US government is increasing restrictions on high-end chip technology for China. Beijing responded to the new export bans by saying the US was trying to impose a technological blockade on China.
Nvidia is a competitor Advanced Micro Devices (AMD) reported a similar US announcement about China selling various GPUs with AI applications. AMD shares fell more than 2% in early trading. Taiwan Semiconductor Manufacturing (TSMNvidia, which makes chips, fell 2%.
The SMH ETF, in which all three chipmakers are major players, fell nearly 2%. Many chip stocks were modestly lower following the Nvidia and AMD news.
Pure savings (PSTG) overnight headline earnings. PSTG stock rose on better-than-expected revenue and earnings guidance. Shares fell 1.8% to 28.97 on Wednesday, finishing just above the 200-day line. PSTG stock may test a 31.62 buy point Handle with cup the foundation.
China EV sales
Early Thursday, Chinese EV startups Neo (NIO), Li Auto (LI) and Xpeng Motors (XPEV) reporting August delivery data. EV and battery giant BYD (I will do) can be reported on Friday or Saturday. Neo shares, along with shares of Li Auto, Xpeng, BYD and EV companies Tesla (D.S.L.A) are now struggling.
The new U.S. ban on certain Nvidia and AMD chip sales could have an impact on Chinese EV makers, especially those with self-driving or driver-assistance efforts.
Dow Jones Futures Today
Dow Jones futures fell 0.2%. fair value. S&P 500 futures fell 0.3% and Nasdaq 100 futures fell 0.5%, with AMD and Nvidia stocks and chips weighing on overall S&P 500 and Nasdaq futures. But futures are much lower overnight.
The 10-year Treasury yield rose 6 basis points to 3.19%.
Crude oil lost more than 1% and copper fell nearly 2%.
Meanwhile, Chengdu, the capital of Sichuan province in SW China, is locking down its 21 million residents due to Covid cases.
As the market rally is very weak, investors should be cautious about new purchases and act to reduce exposure. But they need to look for potential leaders for their watch lists.
Stock market rally
The stock market rally tried to bounce back on Wednesday morning, but the major indices retreated quickly and ended the session lower.
The Dow Jones Industrial Average lost 0.9% on Wednesday Stock market trading. The S&P 500 index was down 0.8%. The Nasdaq composite and small-cap Russell 2000 retreated 0.6%.
U.S. crude futures fell 2.3% to $89.55 a barrel.
The 10-year Treasury yield rose 2 basis points to 3.13%.
in the middle Best ETFsInnovator IBD 50 ETF (FFTYdecreased by 0.4%. iShares Expanded Technology-Software Sector ETF (VAT) and the VanEck Vectors Semiconductor ETF (SMHfell 0.7%. TSM, Nvidia and AMD stocks are major SMH holdings.
Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKKARK Genomics ETF ( ) slipped 0.1%ARKG1.3% up. Tesla shares are a major holding across ArcInvest’s ETFs. Cathie Wood’s Ark also has some Nio and BYD stock.
China EV sales
Neo, Li Auto and Xpeng have announced August deliveries ahead of Thursday’s open.
Neo delivered 10,677 vehicles in August, up 82% year-on-year and 6% against July. This includes some ES8 SUVs, which started deliveries on August 28.
Neo shares fell 2% before the open on Thursday. Shares rose 0.6% to 19.95 on Wednesday, below the 50-day line. Neo is working on a bottom base buy point of 24.53, which includes getting above the 200-day line.
LI stock delivered just 4,577 hybrid SUVs, down 56% versus July and 52% a year ago. The upcoming vehicles may reduce demand for the existing Li One hybrid SUV. The L9 hybrid SUV began deliveries on August 30, while the L8 arrives in November.
Li Auto fell 2% before the open. Shares fell 0.1% to 28.77 on Wednesday, hitting the 200-day line resistance again.
XPeng deliveries came in at 9,578, up 96% from a year ago and down 17% versus July. Xpeng’s new SUV, the G9, will be launched in Q4. XPEV shares fell 2% on Thursday. Shares rose 1.4% to 18.52 on Wednesday after hitting a 22-month low on Tuesday.
Meanwhile, BYD will report August sales on Friday or Saturday. Sales of EVs and plug-in hybrids in July rose 222% from a year earlier to 162,350. There are signs that BYD will make another record in August.
On Monday, BYD said first-half earnings tripled from a year ago, with sales up 60%. This raised the stakes modestly.
But BYD shares fell 7.8% on Tuesday, followed by a 4.35% drop to 30.75 on Wednesday. Shares of the EV and battery company have stabbed below the 200-day mark after hitting a record high of 43.61 on June 28.
Warren Buffett’s Berkshire Hathaway (BRKB) sold 1.33 million H-shares on August 24 in Hong Kong on Tuesday, less than 1% of its larger BYD stake. Berkshire still owns less than 8% of BYD, but investors worry that it will keep selling shares.
Tesla didn’t break China sales, but a trade official said Shanghai production hit a record 77,000 in July. Industry data showed local sales rose 30,000 in August, excluding exports to Europe and other countries. Fuller industry data for Tesla is due later in September.
Near the 50-day line, shares fell 1% before the open. Tesla shares fell 0.75% to 275.61 on Wednesday. Stocks are falling from the 200-day and 21-day moving averages.
Market rally analysis
The stock market rally hasn’t shown much of a fight. Major indices rose on Wednesday morning, but quickly hit a wall at the 50-day moving average. They retreated, eventually ending the session lower.
The Russell 2000 and S&P 400 MidCap retreated slightly above their 50-day range, though they finished below their 10-week moving averages.
A return above the 50-day line is important for the Nasdaq, but it certainly isn’t a clear signal for the bulls. On the other hand, it doesn’t take much of a decline to push a wobbly market rally into a correction.
A US ban on some Nvidia and AMD chip sales will hit the semiconductor industry Thursday. Software names, especially high-value growth, are under similar pressure Octa (OKTA), MongoDB (MTP) and Viva (VEEV) fell more than 10% following earnings.
What to do now
The market rally is under pressure now, but weakness is evident. Investors should look to maximize profits and minimize losses rather than adding exposure.
Work on your watch lists. Continue to look for potential setups, but be sure to keep an eye on quality stocks with high relative strength, even if the charts are still immature. But stocks can perform well in a weak market until they suddenly falter. Relative winners can still be absolute losers.
According to Big picture Each day should be in sync with the direction of the market and the leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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