The October jobs report looms large, along with Dow Jones futures, S&P 500 futures and Nasdaq futures little changed overnight.
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The stock rally, now under pressure, continued to digest Fed Chairman Jerome Powell’s hawkish comments that the peak or “terminal” fed funds rate could be higher than previously expected.
Major indices were lower on Thursday morning. They overcame early lows, with the Dow Jones briefly turning positive, but stocks faded to the close.
Megacap techs continue to influence major indexes, especially the Nasdaq. Microsoft shares joined Amazon.com (AMZN), a Facebook parent Meta platforms (PURPOSE) and Google parent the alphabet (GOOGLE) in identifying bear market lows. apple (AAPL) is still above the June lows, but has retreated to October lows this week.
Major earnings transfers include Thursday night Amgen (AMGN), Yelp (YELP), EOG Resources (EOG), PayPal (PYPL), square parent Block (SQ), generation (PGNY), cloud fire (NET) and Salary (PCTY).
Amgen shares were little changed, while Yelp and PYPL fell. NET shares also sank overnight, cratering cloud software names. SQ shares rose and PGNY rose. PCTY was not yet trading.
Cardinal Health (CAH) reports on Friday that CAH shares are slightly extended from a buy zone.
Job Report
Economists expect the October jobs report to show nonfarm payrolls rose by 210,000 and the unemployment rate to rise to 3.6%. It would be the third straight month of slowing hiring and the smallest job gains since December 2020, but it’s not too cool for the Fed to like.
There are reasons to believe Employment data will be weaker in October than expected.
However, other labor data this week was warmer than expected, including September jobs and weekly jobless claims.
Friday’s October jobs report will be key to Fed rate hike expectations and perhaps stock market direction, at least in the short term. The November jobs report and two CPI inflation reports are also due ahead of the Fed’s December meeting.
Markets now see a 52% chance of a 50 basis point hike in December. 14.
Dow Jones Futures today
Dow Jones futures fell 0.1%. fair value. S&P 500 futures were up 0.1%, while Nasdaq 100 futures were up 0.1%.
The 10-year Treasury yield rose 3 basis points to 4.15%.
The Labor Department’s October jobs report is due out at 8:30 a.m. ET on Friday. Expect big moves, possibly whiplash, for Dow futures and Treasury yields.
Don’t forget that it’s a one night stand Dow futures and elsewhere does not necessarily become the actual trade on a regular basis Stock market session.
IBD experts analyze the stock market rally on IBD Live
Stock market rally
Thursday’s stock market rally lost more ground, with the Nasdaq once again suffering the most.
The Dow Jones Industrial Average fell 0.5% on Thursday stock trading. The S&P 500 index fell 1.1%. The Nasdaq lost 1.7%. The small-cap Russell 2000 yielded 0.6%.
The 10-year Treasury yield rose 6 basis points to 4.12%, but hit an intraday high of 4.2%. The dollar rose after a strong rally on Wednesday.
U.S. crude fell 2% to $88.17 a barrel amid a strong dollar and global demand concerns.
Apple Stock, Megacaps
Apple shares fell 4.2%. Now down 10.2% for the week, the Dow Jones, S&P 500 and Nasdaq titans have retreated from their 200-day line and slipped below their 50-day line.
Google shares fell 4.1% to hit a two-year low. GOOGL shares fell 10.4% for the week.
Shares of Microsoft fell 2.7% to 214.25, finally hitting their worst level since January 2021, after falling from October. MSFT shares are down 9.2% this week.
Amazon shares fell 3.1% to their lowest point since March 2020. AMZN shares are down 13.6% this week.
META shares fell 1.8% to a seven-year low. Parent company Facebook has lost 10.4% this week after plunging nearly 24% last week.
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ETFs
Between the best ETFsInnovator IBD 50 ETF (FFTY) increased by 0.4%. iShares Expanded Tech Software Sector ETF (IGV) slipped 2.5%, with the MSFT fund a key component. VanEck Vectors Semiconductor ETF (SMH) lost 1.2%.
SPDR S&P Metals & Mining ETF (XME) decreased by 0.3%. US Global Jets ETF (JETS) decreased by 0.1%. Energy Select SPDR ETF (XLE) 1.85% and Financial Select SPDR ETF (XLF) decreased by 1.1%. Healthcare Select Sector SPDR Fund (XLV) decreased by 0.4%.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) 0.7% and ARK Genomics ETF (ARKG) gave 0.9%.
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Market rally analysis
The stock market rallied into an “uptrend under pressure” after Wednesday’s big drop on Fed Chair Powell’s hawkish comments.
The Nasdaq closed below its October low. 21 follow-up days. While the Nasdaq has clearly lagged behind in the current rally, this is too low a sign for a market rally. Other major indexes are well above FTD lows, although the S&P 500 fell below its 50-day line and the Dow Jones dipped below its 200-day line.
The sell-off continued Thursday, with the Nasdaq once again leading decliners and nearing session lows.
This is largely due to the megacaps of Apple, Amazon, Microsoft, Google and Meta Platforms.
While the S&P 500, Dow Jones and Russell 2000 outperformed, they have weakened recently.
The Russell 2000 managed to finish above the 50-day and 21-day lines.
Invest S&P 500 Equal Weight ETF (RSP) fell 0.5%, better than the megacap-heavy S&P 500 but closed below its 50-day low.
Don’t exaggerate the resilience of the market rally outside of Apple and the megacaps. The Russell 2000 and RSP ETFs rebounded sharply on Wednesday, along with leading stocks. And on Thursday, they lost more ground.
With the Fed once again strengthening its hawkish stance and Treasury yields rising again, the stock market will struggle to maintain, let alone make, a significant advance.
Friday’s jobs report could fuel a market rally or push the major indexes back toward bear market lows.
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What to do now
With the market under pressure and leading volatile stocks, investors should keep their exposure light. If the rally breaks out, as the S&P 500 retraces its 50-day line, that could be a signal to consider gradually increasing exposure again.
There are a number of stocks that are relatively close to being traded. So work on those watch lists. Stay busy and flexible so you’re ready to add exposure or step aside.
to read The Big Picture daily to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson for stock updates and more.
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