Dow Jones futures will open Sunday evening along with S&P 500 futures and Nasdaq futures. Despite a solid close to Friday’s whiplash session, the stock market rally took a significant hit this week, with major indexes falling on Fed Chair Jerome Powell’s dovish comments.
X
The Nasdaq had its worst week since January as megacaps tumbled and cloud software crashed.
apple (AAPL), Amazon.com (AMZN) and Google parent the alphabet (GOOGLE) all lost more than 10% for the week with Facebook mom Meta platforms (PURPOSE), Tesla shares and Microsoft shares are not far behind. Google stock, Meta, Amazon.com (AMZN) and Microsoft (MSFT) all hit bear market lows. Apple shares and Tesla (TSLA) did not, but they are close.
In the meantime, Twilio (TWLO) and Atlasian (TEAM) crashed on Friday with disappointing results and guidance, losing more than 40% for the week. Many other software titles have collapsed, profitable or not.
A market rally trying to fight the Fed with a sharp decline in the big tech sector? That’s a tall order. So, while there are some stocks and sectors showing strength, investors should be extremely cautious in the current environment.
Dow Jones Futures today
Dow Jones futures open at 6:00 PM ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
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.
Join IBD’s experts as they analyze the stocks that made the most of the stock rally on IBD Live
Stock market rally
The stock market rallied off to a decent start to the week, but then sold off on Wednesday afternoon with hawkish comments from Fed chief Jerome Powell. Major indexes were higher on Thursday. Stocks rallied on Friday after a mixed jobs report, but ended up closing firmly on the day.
The Dow Jones Industrial Average was still down 1.4% last week stock trading. The S&P 500 index fell 3.3%. The Nasdaq composite fell 5.7%, its worst loss since the week ending January. 21. The small-cap Russell 2000 fell 2.4%.
The 10-year Treasury yield rose 15 basis points to 4.16%. The 10-year yield ended its advance after snapping a 12-week winning streak and briefly trading back nearly 4%.
The dollar rose 0.2% for the week but fell 1.9% on Friday, its biggest one-day decline in years. That likely helped the stock market move higher on Friday.
Markets now see a 61.5% chance of a 50 basis point hike at the Fed’s December meeting. The consumer price index for October is due on Thursday. The November jobs and CPI reports will be released before December. 14 Fed rate hike decision.
US crude oil futures rose 5.4% last week to $92.61 per barrel. Natural gas increased by about 13 percent.
Technical Accident
Apple shares fell 11.15% this week to 138.38 after rising to the 200-day line the previous week. AAPL shares are within a penny of their October lows, though they’re still some distance from June’s bear market lows. Shares of Microsoft fell 6.1%, Google 10.1%, Amazon 12% and META 8.5%, all hitting multi-year lows. Tesla shares are down 9.2% for the week, closing in on October. Minimum for 24 days on Friday. It hit 237.40 on Tuesday after a strong start to the week.
Meanwhile, these are dark days for cloud software. Just a few examples: Atlassian shares fell 29% on Friday and 38% for the week. Twilio shares fell nearly 35% on Friday and 43.5% for the week. Snowflake (SNOW), which won’t report for several weeks, fell 17% for the week.
In the meantime, fortinet (FTNT) slumped 17.5% for the week after weak invoice guidance offset strong earnings and a bullish revenue forecast. paycom (PAY) fell 10.3% despite solid results and guidance.
Businesses looking to cut costs can limit software spending when setting budgets for 2023.
ETFs
Between the best ETFsInnovator IBD 50 ETF (FFTY) fell 1.2% last week, while the Innovator IBD Breakout Opportunities ETF (ABOUT) lost 2%. iShares Expanded Tech Software Sector ETF (IGV) lost 10.2%, MSFT stock is a key holding. VanEck Vectors Semiconductor ETF (SMH) was down just 0.7% after jumping 4.65% on Friday to close at the high of its weekly range.
SPDR S&P Metals & Mining ETF (XME) rose 2% last week. Global X US Infrastructure Development ETF (HANG) decreased by 0.1%. US Global Jets ETF (JETS) increased by 0.3%. SPDR S&P Homebuilders ETF (XHB) lost 5%. Energy Select SPDR ETF (XLE) rose 2.4%, just below an eight-year high. Financial Select SPDR ETF (XLF) decreased by 0.9%. Healthcare Select Sector SPDR Fund (XLV) declined 1.5%.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) fell 9.4% last week and the ARK Genomics ETF (ARKG) retreated 4.65%. Tesla stock is a key holding among Ark Invest’s ETFs.
Five Best China Stocks to Watch Now
Market rally analysis
The stock market rally had a bad week, with a hawkish Fed and often weak earnings weighing on the major indexes. The Dow Jones, which led the market higher, had the softest decline, but slipped below its 200-day moving average. The Russell 2000 held resistance near the 200-day line, but recovered on Friday to close above the 50-day line. The S&P 500 has failed for 50 days.
The Nasdaq composite, which never reached its 50-day moving average, fell the most, closing below the low. follow-up day Wednesday, bearish signal.
Major indexes extended their losses on Thursday, then lashed out on Friday on a mixed jobs report.
Negative market action and large reversals in many stocks have led to a transition to a “market under pressure.”
The big market driver was Fed Chairman Powell, who pulled the rug out from the market rally by signaling a transition to smaller hikes, but a higher peak fed funds rate.
Meanwhile, cap techs including Apple, Tesla and Amazon suffered huge mega losses. Cloud software names like Atlassian and Twilio have melted away with recent earnings and significant guidance factors.
Chips haven’t had a relatively terrible week, but only a few names are trading near highs.
Tesla vs. BYD: Which fast-growing EV giant is better to buy?
There are several sustainable market areas. The healthcare sector looks strong overall. Energy names are doing well, including a wide range of oil stocks, LNG plays and coal miners, plus a few solar stocks.
Lithium and some steel plays are doing well. Infrastructure firms for the energy, utilities and telecommunications industries are a bright spot. It’s a rare tech field that networking companies are generally leading. Some restaurants and discount retailers are showing strength. Various financials, particularly brokerages and brokerages, posted strong gains.
Still, it’s hard to see a strong market rally with such huge tech sector shakeups. With Apple, Google, Tesla and cloud software names lagging behind, it would be difficult for the major indexes to advance. What about trying to move forward with these areas dipping or collapsing?
If inflation reports show a clear and meaningful decline, prompting a downward slide in the Fed’s rate hikes, then megacaps and cloud software could fall. However, a return to technological leadership may be in some ways. On the other hand, the October CPI report in November. 10 shows that inflation is still hot, tech stocks could drag down leading sectors to end the market rally.
Tuesday is election day. The stock market tends to do better with a divided government, and Republicans are poised to regain control of the House and possibly 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.
Market Timing with IBD’s ETF Market Strategy
What to do now
The stock market rally is under pressure. The Fed is going from fast and furious to slow and long, but still hawkish. The technology sector is a train wreck. Major indices have moved lower at some key levels. Indices and leading stocks are subject to large intraday and daily fluctuations.
This is not a favorable environment for buying stocks. Investors should try to reduce exposure losses either outright or simply by cutting losses.
If the market rally shows renewed strength with the S&P 500 and possibly the Nasdaq moving above their 50-day moving averages, investors may begin to add risk. But it will probably require technology to stabilize and inflation data to show some cooling.
If conditions improve, you’ll want to be prepared. A number of stocks are being built, with more not far away. So create your watch lists, be patient and get busy.
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.
YOU MAY ALSO LIKE:
Why this IBD Tool simplifies to frych For the best stocks
Catch the next big winning stocks with MarketSmith
Want to make quick profits and avoid big losses? Try SwingTrader
The best growth stocks to buy and track
IBD Digital: Discover IBD’s Premium Stock Lists, Tools and Analysis today
