Dow Jones futures open Sunday evening, along with S&P 500 futures and Nasdaq futures. Even with a solid finish in Friday’s whipsaw session, the stock market rally suffered significant damage last week, with major indexes falling on dovish comments from Federal Reserve Chairman Jerome Powell.
The Nasdaq had its worst week since January as megacaps slumped and cloud software crashed.
Apple (APL), Amazon.com (AMZN) and Google Parents letters (Google) all lost more than 10% for the week, with Facebook parenting Meta platforms (Meta), Tesla stock and Microsoft stock weren’t far behind. Google Stock, Meta, Amazon.com (AMZN) and Microsoft (MSFT) all hit the bear market low. Apple stock and Tesla (D.S.L.A) do not, but they are close.
A market rally as the central bank tries to fight off key tech sector declines? That’s a tall order. So while some stocks and sectors are showing strength, investors should be very cautious in the current environment.
Dow Jones Futures Today
Dow Jones futures open Sunday at 6 PM ET, along with S&P 500 futures and Nasdaq 100 futures.
Stock market rally
The stock market rallied off to a decent start to the weekend, but was sold off Wednesday afternoon on dovish comments from Federal Reserve Chairman Jerome Powell. Major indices gave more ground to Jupiter. Stocks hit a vip on Friday following a mixed jobs report, but ultimately closed solid for the day.
The Dow Jones Industrial Average fell another 1.4% last week 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 rose 15 basis points to 4.16%. The 10-year yield snapped a 12-week winning streak and resumed its gains after briefly trading back 4%.
The dollar rose 0.2% on the week, but fell 1.9% on Friday, its biggest one-day drop in years. This contributed to the stock market gains on Friday.
Markets now see a 61.5% chance of a 50-basis point hike at the December Fed meeting. The October Consumer Price Index is due on Thursday. The November jobs and CPI reports will be released before the Dec. 14 federal rate hike decision.
US crude oil futures rose 5.4% last week to settle at $92.61 a barrel. Natural gas rose nearly 13%.
Apple stock, which rallied to its 200-day line in the previous week, fell 11.15% last week to 138.38. AAPL stock came within a penny of its October low, though it still has some way to go before its bear market lows in June. Microsoft fell 6.1%, Google 10.1%, Amazon 12% and META shares fell 8.5%, hitting multi-year lows. Tesla shares fell 9.2% on the week, nearing their Oct. 24 intraday low on Friday. After a strong start to the week, it was at 237.40 on Tuesday.
Meanwhile, these are dark days for cloud software. Here are some examples: Atlassian stock fell 29% on Friday and 38% for the week. Twilio stock fell nearly 35% on Friday and 43.5% for the week. Snowflake (Snow), which won’t report for a few weeks, is down 17% for the week.
Businesses looking to cut costs can limit spending on software when setting a budget for 2023.
in the middle Best ETFsInnovator IBD 50 ETF (FFTY) fell 1.2% last week, while the Innovator IBD Breakout Opportunities ETF (Bot2% lost. iShares Expanded Technology-Software Sector ETF (VAT) fell 10.2%, with MSFT holding the lion’s share of the stock. VanEck Vectors Semiconductor ETF (SMH) fell just 0.7% after jumping 4.65% on Friday, finishing at a weekly range high.
SPDR S&P Metals & Mining ETF (XME) rose 2% last week. Global X US Infrastructure Development ETF (sidewalkdecreased by 0.1%. US Global Jets ETF (JETSUp 0.3%. SPDR S&P Homebuilders ETF (XHBfell by 5%. Energy Select SPDR ETF (XLE) rose 2.4%, below an eight-year high. Fund Selection SPDR ETF (45fell 0.9%. Health Care Select Sector SPDR Fund (XLVGave up to 1.5%.
Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKK) fell 9.4% last week and the ARK Genomics ETF (ARKGretreated 4.65%. Tesla shares are a major holding across ArcInvest’s ETFs.
Market rally analysis
The stock market rally had a rough week, with a hawkish Fed and mostly weak earnings weighing on major indexes. The Dow Jones, which led the market higher, had a slight decline but moved below its 200-day moving average. The Russell 2000 hit resistance near the 200-day line, but recovered on Friday to close above the 50-day line. The S&P 500 hit a 50-day low.
The Nasdaq composite, which never cleared the 50-day moving average, fell the least. Day after day Wednesday, a rough signal.
Major indexes extended losses on Thursday, then fell on Friday on a mixed jobs report.
Negative market action and large reversals in many stocks triggered a transition to a “market under pressure.”
The big market driver was Fed Chairman Powell, who pulled the rug out from the market rally, signaling a shift to smaller hikes, but a higher peak fed funds rate.
Meanwhile, megacap tech stocks including Apple, Tesla and Amazon suffered heavy losses. Cloud software names like Atlassian and Twilio have melted away with significant factors in recent earnings and guidance.
Chips haven’t had a terrible week, relatively speaking, but only a handful of names are trading highs.
There are many flexible market segments. Overall the health sector looks strong. Energy names performed well, including a broad range of oil stocks, LNG plays and coal mines, and some solar stocks.
Lithium and some steel plays work well. A bright area is infrastructure companies for the energy, utilities and telecom industries. A rare technology area in which networking companies are typically leaders. Some restaurants and discount retailers are showing strength. Diversified funds, particularly brokers and brokers, posted strong gains.
However, it’s hard to see a strong market rally with such big tech sectors holding back. Major indexes will struggle to advance with Apple, Google, Tesla and cloud software names lagging behind. But should we try to move forward with those areas declining or dysfunctional?
If inflation reports show a clear and meaningful decline, prompting a slowdown in Fed rate hikes, perhaps megacaps and cloud software will be cut. However, the return to technological leadership may be in some ways. On the other hand, if the October CPI report on November 10 shows that inflation is still tepid, tech stocks could drag the leading sectors to end the market rally.
Tuesday is election day. The stock market tends to do better with a divided government, and Republicans looking to regain control of the House and Senate. But political forecasters have been predicting at least a House GOP victory all year, so it’s unclear whether Tuesday’s actual results will be a big boost.
What to do now
The stock market bullishness is under pressure. The central bank is moving from fast and furious to slow and long, but it’s still hawkish. The tech industry is a train wreck. Major indices have dropped some key positions. Indices and leading stocks are subject to large intraday and daily swings.
This is not an ideal environment to buy stocks. Investors must either overtly or simply reduce exposure to various levels of losses.
If the market rally shows renewed strength and the S&P 500 and Nasdaq move above their 50-day moving averages, investors can start adding exposure. But that would require technology to stabilize and inflation data to show some cooling.
If conditions improve, you need to be prepared. Many stakes are set, and many more are not far off. So make your watch lists, be patient and get involved.
According to Big picture Each day should be in sync with the direction of the market and the leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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