Dow Jones futures will open on Sunday night, along with S&P 500 futures and Nasdaq futures. Even with a strong close to Friday’s session, the stock market’s rally took significant damage last week, with major indices falling on aggressive comments from Fed chief Jerome Powell.
X
The Nasdaq had its worst week since January as mega-caps plunged and cloud software crashed.
Apple (AAPL), amazon.com (AMZN) and main Google Alphabet (Google) all lost more than 10% for the week, with the father of Facebook Metaplatforms (GOAL), Tesla shares and Microsoft shares are not far behind. google actions, meta, amazon.com (AMZN) Y Microsoft (MSFT) all reached bear market lows. apple shares and Tesla (TSLA) did not, but they are close.
Meanwhile, twilio (TWO) Y Atlasian (EQUIPMENT) crashed on Friday due to disappointing results and guidance, losing more than 40% for the week. A host of other software names went down, with or without a profit.
A market rally trying to fight the Fed with the main tech sector plummeting? That is a difficult task. So while there are some stocks and sectors showing strength, investors need to be extremely cautious in the current environment.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 and Nasdaq 100 futures.
Remember that the overnight action in dow futures and elsewhere does not necessarily translate to actual trading in the next regular stock Exchange session.
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stock rally
The stock market rally started the week decently but then fizzled out on Wednesday afternoon due to aggressive comments from Fed chief Jerome Powell. Major indices lost more ground on Thursday. Stocks tumbled on Friday following a mixed employment report, but ultimately closed solidly higher that day.
The Dow Jones Industrial Average still fell 1.4% last week stock trading. The S&P 500 index fell 3.3%. The Nasdaq Composite plunged 5.7%, its worst loss since the week ending Jan. 1. 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 resumed its advance after breaking a 12-week winning streak and briefly retracing around 4%.
The dollar rose 0.2% for the week but plunged 1.9% on Friday, the biggest one-day drop in years. That likely contributed to Friday’s stock market advance.
Markets now see a 61.5% chance of a 50 basis point hike at the December Fed meeting. The consumer price index for October will be released on Thursday. Employment and CPI reports for November will be available before December 1. 14 Fed rate hike decision.
US crude oil futures rose 5.4% last week to $92.61 a barrel. Natural gas soared nearly 13%.
technological wreck
Shares of Apple, which had risen to its 200-day line the previous week, fell 11.15% to 138.38 last week. AAPL shares were within a penny of their October low, though they are still a little further from their bear market lows in June. Microsoft fell 6.1%, Google 10.1%, Amazon 12%, and shares of META 8.5%, all to multi-year lows. Shares of Tesla fell 9.2% during the week, approaching their price on October 1. Intraday low of 24 on Friday. That’s after starting the week strong, hitting 237.40 intraday on Tuesday.
Meanwhile, these are dark days for cloud software. Here are just a few examples: Atlassian shares plunged 29% on Friday and 38% for the week. Shares of Twilio plunged nearly 35% on Friday and 43.5% for the week. Snowflake (SNOW), which will not report for a few weeks, dipped 17% for the week.
Meanwhile, fortnite (FTNT) slumped 17.5% for the week after weak billing forecasts offset strong earnings and a bullish revenue outlook. paycom (TO PAY) plunged 10.3% despite strong results and guidance.
Businesses looking to cut costs can reduce software spending by setting budgets for 2023.
ETFs
Between best ETFsthe Innovator IBD 50 ETF (FFTY) fell 1.2% last week, while the Innovator IBD Breakout Opportunities ETF (COMBAT) lost 2%. The iShares Extended Technology Software Sector ETF (VAT) fell 10.2%, with MSFT shares a key holding. The VanEck Vector Semiconductor ETF (SMH) fell just 0.7%, after jumping 4.65% on Friday, closing high in the weekly range.
SPDR S&P Metals & Mining ETF (XME) rose 2% last week. The US Global X Infrastructure Development ETF (TO PAVE) fell 0.1%. US Global Jets ETF (JETS) rose 0.3%. SPDR S&P Home Builders ETF (XHB) fell 5%. The Energy Select SPDR ETFXLE) rose 2.4%, just below an eight-year high. The Financial Select SPDR ETFXLF) fell 0.9%. The SPDR Fund of the Select Sector of Health Care (XLV) yielded 1.5%.
Mirroring more speculative historical stocks, ARK Innovation ETF (ARKK) fell 9.4% last week and ARK Genomics ETF (ARKG) fell by 4.65%. Tesla shares are a major holding in Ark Invest ETFs.
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Market recovery analysis
The stock market rally had a poor week, with an aggressive Fed and often weak earnings weighing on major indices. The Dow Jones, which has led the market’s uptrend, had the slightest drop but moved back below its 200-day moving average. The Russell 2000 hit resistance near the 200-day line but rallied on Friday to close above the 50-day line. The S&P 500 went through 50 days.
The Nasdaq Composite, which never reached the 50-day moving average, fell the most, closing below its low. carry on through the day on Wednesday, a bearish sign.
Major indexes extended losses on Thursday and then whipped around on Friday with a mixed employment report.
Negative market action and large reversals in many stocks prompted a shift to “market under pressure.”
The big market driver was Fed chief Powell, who pulled the rug out from the market rally by signaling a shift to smaller hikes but a higher top fed funds rate.
Meanwhile, mega-cap tech companies including Apple, Tesla and Amazon suffered huge losses. Cloud software names like Atlassian and Twilio melted away, with recent gains and significant factors guiding.
Tokens didn’t have a terrible week, relatively, but only a few names are trading near highs.
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There are several resilient market areas. The health sector looks strong overall. Energy names, which include a wide range of oil stocks, LNG plays and coal miners, plus some solar stocks, are doing well.
Lithium and some steel works are doing well. Infrastructure companies for the energy, utility, and telecommunications industries are a bright area. Network business in general is a rare technology area that is leading. Some restaurants and discount stores are showing strength. Several financial companies, notably brokers and brokerage houses, have made strong profits.
Still, it’s hard to see a strong market rebound with such large tech sectors reeling. It would be quite difficult for the major indices to move forward with Apple, Google, Tesla and cloud software names lagging behind. But trying to move forward with those areas sinking or crashing?
If inflation reports show a clear and significant decline, triggering a downward shift in Fed rate hikes, then perhaps mega-caps and cloud software could bottom out. However, a return to technological leadership could be some way off. On the other hand, if the October CPI report on November 1. Chart 10 shows that inflation is still accelerating, tech stocks could drag leading sectors lower to end the market rally.
Tuesday is election day. The stock market tends to do better with divided government, and Republicans are poised to regain control of the House and perhaps the Senate. But political forecasters have been predicting at least one Republican win in the House all year, so it’s unclear whether Tuesday’s actual results will be much of a catalyst.
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What to do now
The stock market rally is under pressure. The Fed is switching from fast and furious to slow and long, but remains aggressive. The technology sector is a train wreck. Major indices have undercut some key levels. Indices and major stocks are subject to large daily and intraday swings.
This is not a good environment to buy stocks. Investors should look to reduce exposure, either explicitly or simply by cutting losses on various positions.
If the market rally shows renewed strength, with the S&P 500 and possibly the Nasdaq moving above their 50-day moving averages, investors could begin adding exposure. But that will likely require technology to stabilize and inflation data to show some cooling.
If conditions improve, you’ll want to be ready. Several actions are being established, with many more not far away. So create your watch lists, be patient, and stay engaged.
read The panorama every day to stay in sync with market direction and major stocks and sectors.
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