Dow Jones Futures Fall: Market Rally Wipes Out Powell Gains As Apple, Exxon, Tesla Skid

Dow Jones futures fell early Wednesday, along with S&P 500 futures and Nasdaq futures. Tesla stock retreated as the EV giant offered another price incentive in China.

The stock market rally had another weak session, with Apple (AAPL) and Exxon Mobil (XOM) breaking below key levels Tuesday while Amazon.com (AMZN) and Tesla (TSLA) are starting to move toward bear market lows.

The S&P 500 and other key indexes were testing or undercutting key levels, round-tripping last Wednesday's big gain following Fed chief Jerome Powell's speech.

This stock market rally has had several big one-day gains followed by pullbacks. That's made it difficult for stocks flashing buy signals to make headway. It's not a good time to be adding exposure, but investors should be looking for stocks setting up.

United Rentals (URI), UnitedHealth Group (UNH) and United Airlines (UAL) are all trading near buy points.

UAL stock is on IBD Leaderboard, while URI stock is on the Leaderboard watchlist. United Airlines, Charles Schwab and UNH stock are on the IBD 50. United Rentals was Tuesday's IBD Stock Of The Day.

Database software maker MongoDB (MDB) surged early Wednesday on a surprise profit. MDB stock has plunged over the past year.

Driver-assistance systems maker Mobileye (MBLY) beat views in its first report since coming public in late October. MBLY stock was up and down.

Ollie's Bargain Outlet (OLLI) tumbled after the close-out retailer missed on earnings and sales.

Dow Jones futures retreated 0.3% vs. fair value. S&P 500 futures sank 0.6% and Nasdaq 100 futures fell 1%.

The 10-year Treasury yield advanced 4 basis points to 3.55%.

Crude oil futures edged higher. Natural gas prices climbed 3%. The U.S. agreed to send more LNG to the U.K.

China scrapped some more Covid rules, as expected, but trade data came in weaker than expected. Hong Kong's Hang Seng, which had been running higher, fell 3.2%.

Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.

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

The stock market rally quickly retreated after Tuesday's open and continued to trend lower during the day before slightly paring losses near the close.

The Dow Jones Industrial Average fell 1% in Tuesday's stock market trading. The S&P 500 index gave up 1.4%. The Nasdaq composite tumbled 2%. The small-cap Russell 2000 retreated 1.5%

U.S. crude oil prices slumped 3.5% to $74.25 a barrel.

The 10-year Treasury yield fell 9 basis points to 3.51%, back near the lowest levels since Sept. 20.

The stock market's inverse relationship with Treasury yields may be breaking down. A lower 10-year Treasury yield increasingly may reflect rising recession risks vs. declining inflation pressures. The yield curve, which keeps inverting further, also indicates recession concerns.

Apple stock, a member of the Dow Jones, S&P 500 and Nasdaq composite, slid 2.5% to 142.91, back below its 50-day line. XOM stock sank 2.8%, also below its 50-day line as well as under a buy point. Exxon stock is struggling as oil, gasoline and natural gas prices all slump.

Amazon stock slumped 3% to 88.25, closing in on its Nov. 9 bear low of 85.87.

Tesla stock fell 1.4% to 179.82, off intraday lows, but after tumbling 6.4% on Monday. TSLA is moving toward 52-week lows but still has some distance to go before it drops to that 166.19 mark.

Tesla is now offering a 6,000 yuan ($860) discount on inventory cars in China, on top of an existing 4,000 yuan insurance subsidy. Along with other incentives, Tesla China is offering over 20,000 yuan in incentives, and that's before government subsidies of 11,088 yuan.

Meanwhile, there are more signs that Tesla will reintroduce radar into its vehicles. Elon Musk removed radar from new Tesla EVs in 2021, during the chip crisis, saying vision-only would be better for self-driving. Nearly all other autonomous driving players use a variety of sensors.

TSLA stock fell 3% early Wednesday.

Among key tech ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) gave up 1.7%. The VanEck Vectors Semiconductor ETF (SMH) slumped 2.2%.

SPDR S&P Metals & Mining ETF (XME) edged up 0.25% and the Global X U.S. Infrastructure Development ETF (PAVE) edged down 0.3%. U.S. Global Jets ETF (JETS) held altitude. SPDR S&P Homebuilders ETF (XHB) fell 1.4%. The Energy Select SPDR ETF (XLE) slumped 2.6% and the Financial Select SPDR ETF (XLF) 0.9%. The Health Care Select Sector SPDR Fund (XLV) declined 0.8%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 4% and ARK Genomics ETF (ARKG) 3%. Tesla stock is a major holding across Ark Invest's ETFs.

Five Best Chinese Stocks To Watch Now

United Rentals stock rose 0.5% to 347.29, just above the 21-day line. URI stock has a 368.04 handle buy point from a consolidation going back to November 2021. Breaking the downtrend of the handle could offer an early entry. Several heavy-equipment plays, including Deere (DE), Caterpillar (CAT) and Titan Machinery (TITN), also are looking strong.

UNH stock edged up 0.8% to 539.32. The Dow Jones giant has a 558.20 buy point from a flat base next to a cup-with-handle consolidation.

UAL stock climbed 2% to 45.92, just above the 45.67 cup-with-handle buy point, according to MarketSmith analysis. Some other airline and travel stocks are looking strong.

Why This IBD Tool Simplifies The Search For Top Stocks

The stock market rally continues a frustrating trend of jumping ahead four steps, then giving that back over the next few days.

The major indexes have fallen solidly for two straight sessions, wiping out or undercutting the big gains on Fed chief Jerome Powell's speech last Wednesday.

The S&P 500 index, which fell back below the 200-day line Monday, extended losses Tuesday to undercut the 21-day line. The Russell 2000, which dropped below the 200-day and 21-day lines, slid to the lowest close since Nov. 9, with the 50-day line coming back in play.

The S&P MidCap 400 closed below its 21-day line for the first time since Oct. 20 and retreated to test its 200-day.

The Dow Jones, which has led the market rally, fell below its 21-day line for the first time since Oct. 14, but is well above its 200-day.

The laggard Nasdaq undercut its 21-day line and is once again approaching its 50-day line, just above the 11,000 level.

All of these indexes closed at their worst levels since Oct. 9, just before the Oct. 10 gap-up on the October CPI inflation report.

Last Wednesday's big market gains were puzzling at the time, because Fed chief Powell didn't say anything especially different or dovish. The major indexes holding up Friday, with Treasury yields ultimately closing lower, despite the hot jobs report was even more puzzling.

But the technical picture is familiar.

Since the stock market rally began on Oct. 13, The major indexes have had several big one-day gains — such as Oct. 28 and Nov. 30. But then they've soon fallen back, wiping out most, all or more than all of that big gain.

So right as the major indexes hit higher highs and leading stocks flash buy signals, the market rally starts to fade again.

Time The Market With IBD's ETF Market Strategy

So far, the market rally has eventually rebounded each time, setting higher highs along the way. But that doesn't mean it will happen this time. More importantly, it doesn't mean that your stocks will rebound.

Until the S&P 500 moves decisively above the 200-day line, investors should be wary of adding exposure. The Nasdaq and Russell 2000 falling below their 50-day lines, and the S&P 500 testing its October highs, would be signs to reduce exposure further.

Also note that the November CPI inflation report comes out Dec. 13, with the year-end Fed rate hike and Powell news conference the following day. Those big events could provide the catalyst for a market rally break higher or lower.

So investors should be ready to act. That means having watchlists ready, but it also means staying engaged and flexible.

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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