Dow Jones Breaches 30,000; Powell Contagion Hits World Markets

Dow Jones futures undercut the June bear-market low in Friday’s premarket session, falling more than 400 points as the industry average probes that critical level in the first hour of trading.


Powell contagion hit Europe, sending UK GILT yields to multi-year highs while local bourses tumbled. Asia also lost ground in a global defeat fueled by this week’s hawkish dot plot.

The Dow Jones is down 1.2%, while the S&P 500 index fell another 1.6%. The Nasdaq Composite is trading 1.8% lower, while the Russell 2000 small-cap index is down 2.5%.

The major indices are now poised to post their sixth weekly loss in the past seven weeks.

Volume on the NYSE is up more than 40% from the same time on Thursday, while Nasdaq volume is close to yesterday’s levels.

Government bond yields are volatile, with the 10-year note criss-crossing over 3.70%. Intermediate West Texas Crude slips again, breaking psychological $80 a barrel level.

World markets trading in the red

Germany’s DAX fell to its lowest level since November 2020. Most European bourses are down more than 2% in their afternoon sessions. London’s FTSE 100 lost 2.4%.

Overview of today’s US stock market

index symbol Price loss of gain % change
Dow Jones (0DJIA) 29653.40 -423.28 -1.41
S&P500 (0S&P5) 3692.85 -65.14 -1.73
Nasdaq (0NDQC) 10851.98 -214.83 -1.94
Russell 2000 (IWM) 166.51 -4.88 -2.85
IBD 50 (FFTY) 24.23 -1.20 -4.72
Last Updated: 10:28am ET 9/23/2022

The British pound fell more than 1.5% after Prime Minister Liz Truss proposed radical tax cuts. The 5-year UK gilt yield rose more than 50 basis points, the highest on record. The bond started 2022 with a yield of 0.82%, catapulting to 2.82% in early September and 4% this week.

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“A recession in the eurozone is looming as companies report deteriorating business conditions and increasing pricing pressures related to rising energy costs,” said Chris Williamson, chief operating officer at S&P Global Market Intelligence. Williamson was quoted in a press release by S&P Global.

Asian stocks also fell across the board despite a raft of declarations to reopen countries to tourism.

Capping off a tough week, Chairman Jerome Powell is on the Friday calendar, speaking at 2:00 p.m. ET.

Dow Jones tests June low

Dow Jones futures undercut the June low premarket on Friday, while the industrial average probed that critical level on Friday morning. The S&P 500, Nasdaq Composite and Russell 2000 indices all remain above their respective lows.

Unfortunately, there will likely be more pain.

Price zones around major lows mark natural testing grounds, suggesting that volatility will surge over the next week, eventually leading to a notable reversal or a painful collapse.

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As we’ve seen over the past three years, this type of action can lead to large breaches of support and resistance before a sustained trend up or down gets underway. Therefore, this is a good time to take additional defensive measures.

Some of the top stocks to watch amid the market’s biggest weakness include Continental Resources (CLR) DoubleVerify (DV), Neurocrine Life Sciences (NBIX) and Apex Pharma (VRTX). Dow Jones stock rafters (CVX) is also up, although it fell below the 200-day moving average this morning. Keep in mind that the market correction is a good reason for investors to stay on the sidelines for most, if not all.

Costco lower despite strong quarter

Costco Wholesale (COST) traded 2.1% lower after beating earnings in the fiscal fourth quarter by 3 cents and reported earnings of $4.20 per share. Revenue rose a healthy 17.3% year over year to $72.09 billion, also in line with estimates.

The bearish market environment took control after the bullish release, with traders selling the positive news. The big-box retailer is expected to post 12% annualized earnings growth in 2022 and 2023, lifting earnings per share to an impressive 90%.

However, the retail sector is a tough sell for investors these days as expectations for a recession rise, reducing floor traffic and comparable selling.

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In early September, Costco stock triggered the 7%-8% loss cap rule from a buy point of 552.81 from a cup and handle basis.

Outside the Dow Jones: IBD 50 stocks in play

KnowBe4 (KNBE), which entered the IBD 50 this week, is continuing to consolidate after a large-volume breakout above the 200-day moving average.

The security software maker is expected to grow profits by 46% this year and 37% in 2023. This week’s bullish gap could signal a period of large accumulation despite difficult macro market conditions.

ovitive (OVV) has been carving a mug with a handle since June. However, the handle has now fallen below the 200-day moving average.

HF Sinclair (DINO) will be around the corner from June in a cup with a handle. The oil and gas refinery is hanging tough despite the sharp drop in crude oil.


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