Dow Jones futures will open on Sunday evening along with S&P 500 futures and Nasdaq futures. Even with a solid finish in Friday’s whipsaw session, the stock market’s rally was hit hard over the past week, with major indices cracking down on scathing comments from Fed chief Jerome Powell.
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The Nasdaq had its worst week since January as megacaps collapsed and cloud software crashed.
Apple (AAPL), Amazon.Com (AMZN) and Google Parent Alphabet (GOOGL) With Facebook Guardian, everyone lost more than 10% during the week meta platform (Meta), Tesla stock and Microsoft stock are also not far behind. google stock, meta, Amazon.Com (AMZN) and Microsoft (MSFT) all hit the bottom of the bear market. apple stock and Tesla (TSLA) didn’t, but they are close.
During this, twilio (TWLO) and atlassian The (team) crashed on Friday on disappointing results and guidance, losing more than 40% for the week. Several other software names fell in with or without earnings.
A market rally trying to fight the Fed with key tech sector declines? This is a tall order. So, while some stocks and sectors are showing strength, investors should be extremely cautious in the current environment.
In other news, Warren Buffett’s Berkshire Hathaway (BRKB) on Saturday reported a 20% drop in operating profit. The group suffered a net loss as the ongoing bear market impacted investments.
dow jones futures today
Dow Jones futures, along with S&P 500 futures and Nasdaq 100 futures, open at 6 p.m. ET.
Goldman Sachs now expects S&P 500 earnings to be flat in 2023, down from its earlier target of 3%.
Remember that overnight action in Dow futures and elsewhere does not necessarily entail actual trading in the next regular stock market session.
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stock market rally
The stock market’s rally started the week well, but then sold out on scathing comments from Fed chief Jerome Powell on Wednesday afternoon. Major indices strengthened further on Thursday. The stock rose on Friday after a mixed jobs report, but ultimately closed the day firmly.
The Dow Jones Industrial Average still fell 1.4% in last week’s stock market trading. The S&P 500 index fell 3.3%. The Nasdaq Composite fell 5.7%, its worst loss since the week ended Jan. 21. The small-cap Russell 2000 fell 2.4%.
The 10-year Treasury yield jumped 15 basis points to 4.16%. The 10-year yield resumed its progress after breaking the 12-week winning streak and trading briefly around 4%.
The dollar rose 0.2% for the week, but fell 1.9% on Friday, its biggest one-day drop in years. Due to this, the stock market is likely to rise on Friday.
Markets now see a 61.5% chance of a 50-basis-point increase at the December Fed meeting. October Consumer Price Index is on Thursday. November’s jobs and CPI reports will be out before the December 14 Fed rate hike decision.
US crude oil futures jumped 5.4% last week to $92.61 a barrel. Natural gas rose nearly 13 per cent.
tech wreck
Apple stock, which had rallied to its 200-day line in the past week, fell 11.15% to 138.38 in the past week. AAPL’s stock came within a penny of its October low, though it’s still a bit far from its bear market low in June. Microsoft 6.1%, Google 10.1%, Amazon 12% and META stock 8.5%, all slipped to multi-year lows. Tesla stock fell 9.2% for the week, hitting its October 24 low on Friday. That is, after a strong start to the week, the intraday reached 237.40 on Tuesday.
Meanwhile, it’s a dark day for cloud software. Here are some examples: Atlassian stock fell 29% on Friday and 38% for the week. Twilio stock crashed nearly 35% on Friday and 43.5% for the week. snowflake (SNOW), which won’t report for a few weeks, took a 17% dive for the week.
During this, fortinet (FTNT) crashed 17.5% for the week after weak billing guidance offsetting strong earnings and a bullish revenue outlook. paycom (PAYC) fell 10.3% despite strong results and guidance.
Cost-cutting businesses can curb spending on software as they budget for 2023.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.2% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 2%. The iShares Extended Tech-Software Sector ETF (IGV) declined 10.2%, with MSFT stock being a major holding. The VanEck Vector Semiconductor ETF (SMH) fell just 0.7% after closing higher in the weekly range, after jumping 4.65% on Friday.
The SPDR S&P Metals & Mining ETF (XME) climbed 2% last week. The Global X US Infrastructure Development ETF (PAVE) is down 0.1%. The US Global Jets ETF (JETS) rose 0.3%. The SPDR S&P Homebuilders ETF (XHB) fell 5%. The Energy Select SPDR ETF (XLE) climbed 2.4%, just below an eight-year high. The Financial Select SPDR ETF (XLF) fell 0.9%. Health Care Select Sector SPDR Fund (XLV) gave a discount of 1.5%.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) rallied 9.4% last week and the ARK Genomics ETF (ARKG) 4.65%. Tesla stock is a major holding in Arch Invest’s ETF.
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market rally analysis
The stock market rally had a bad week, with Fed and often-weak earnings weighing on major indices. The Dow Jones, which has led the market bullish, declined the lightest, but moved below the 200-day moving average. The Russell 2000 found resistance near the 200-day line, but recovered to close above the 50-day line on Friday. The S&P 500 took the knife over the course of 50 days.
The Nasdaq Composite, which never quite reached the 50-day moving average, fell the most, signaling a bearish move, closing below its follow-up day’s low on Wednesday.
Major indices extended losses on Thursday, then whipsawed Friday on mixed jobs reports.
Negative market action and major reversals in many stocks triggered a “market under pressure” turnaround.
The big market driver was Fed chief Powell, who pulled the rug from the market rally by signaling a turnaround for a smaller hike, but a higher peak fed funds rate.
Meanwhile, megacap techs including Apple, Tesla and Amazon suffered heavy losses. Cloud software names like Atlassian and Twilio melted away, with recent earnings and guidance being key factors.
Chips hasn’t had a terrible week, relatively, but only a few names are trading near highs.
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There are many flexible market segments. The health care sector overall looks strong. Energy names including a wide range of oil stocks, LNG plays and coal miners, as well as some solar stocks, are performing well.
Lithium and some steel play are doing well. Infrastructure firms are a bright area for the energy, utilities and telecommunications industries. Networking firms in general are a rare tech sector leading the way. Some restaurants and discount retailers are showing strength. Various financials, especially brokers and brokerages, have made strong profits.
Still, it is difficult to see a strong market rally with such large technical areas. With Apple, Google, Tesla and cloud software names lagging behind, the major indexes will find it tough to move up. But to try to move forward with those areas sinking or crashing?
If inflation reports show a clear and meaningful decline, leading to a decline in Fed rate hikes, perhaps MegaCap and Cloud Software could be down. However, a return to technical leadership may be some way off. On the other hand, if the October CPI report of November 10 shows that inflation is still trending hot, tech stocks could pull down key sectors to end the market’s rally.
Tuesday is election day. The stock market does better with a divided government, and Republicans are poised to reclaim control of the House and perhaps the Senate. But political forecasters have been predicting at least a House GOP win all year, so it’s unclear whether Tuesday’s actual results will be a big catalyst.
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What should we do now
The stock market is under pressure. The Fed is switching from fast and furious to slow and long, but it is still hawkish. The tech sector is a train wreck. Major indices have broken some key levels. Indices and major stocks are subject to large intraday and daily volatility.
This is not a good environment to buy shares. Investors should consider deducting exposure, either explicitly or by deducting losses on various positions.
If the market rally shows renewed strength, with the S&P 500 and possibly the Nasdaq moving above its 50-day moving average, investors can begin to add exposure. But that will probably require inflation data to stabilize the technology and show some coolness.
If the situation improves, you’ll want to be prepared. Many stocks are setting up, many of which are not too far away. So make your watchlist, be patient and persevere.
Read The Big Picture every day to keep up with the market direction and key stocks and sectors.
Please follow Ed Carson on Twitter @ibd_ecarson For stock market updates and much more.
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