Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. Even with a solid close in Friday’s whipsaw session, the stock market rally suffered significant damage this past week, with major indexes tumbling on hawkish comments from Fed chief Jerome Powell.
The Nasdaq had its worst week since January as megacaps plunged and cloud software crashed.
apples (AAPL), Amazon.com (AMZN) and its parent Google Sundanese script (Google) all lost more than 10% for a week, with Facebook mother Platform Meta (map), Tesla shares and Microsoft shares are not far behind. Google stock, Meta, Amazon.com (AMZN) and Microsoft (MSFT) all hit bear market lows. Apple stock and Tesla (salad) no, but they are close.
Meanwhile, Twilio (TWLO) and Atlassian (team) crashed Friday on disappointing results and guidance, losing more than 40% for the week. A slew of other software names tumbled, with or without earnings.
A market rally trying to fight the Fed and the major tech sector plummeting? That’s a tall order. So while there are some stocks and sectors that are showing strength, investors should be very cautious in the current environment.
Dow Jones Futures Today
Dow Jones futures open at 6 pm ET, along with S&P 500 futures and Nasdaq 100 futures.
Goldman Sachs now expects S&P 500 earnings to be flat in 2023, down from its prior target of 3%.
Stock Market Rally
The stock market rally started the week off in decent fashion but then sold off Wednesday afternoon on Fed chief Jerome Powell’s hawkish comments. The main indexes gave up ground Thursday. Stocks whipsawed Friday following a mixed jobs report, but ultimately closed solidly higher that day.
The Dow Jones Industrial Average is still down 1.4% in the last week stock market trading. The S&P 500 index fell 3.3%. The Nasdaq Composite plunged 5.7%, its worst loss since the week ended 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 continued its progress after snapping a 12-week winning streak and briefly traded back around 4%.
The dollar rose 0.2% for the week, but rose 1.9% on Friday, its biggest one-day drop in years. That likely contributed to Friday’s stock market advance.
The market now sees a 61.5% probability 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 come out before the December 14 decision to raise the Fed rate.
US crude oil futures jumped 5.4% last week to $92.61 a barrel. Natural gas rose almost 13%.
Apple shares, which had rallied up to their 200-day line in the previous week, fell 11.15% to 138.38 last week. AAPL stock came within a penny of its October low, although it still has a little distance above its bear market lows in June. Microsoft skidded 6.1%, Google 10.1%, Amazon 12% and META stock 8.5%, all to multiyear lows. Tesla shares tumbled 9.2% for the week, coming close to its October 24 intraday low on Friday. That’s after a strong start to the week, hitting 237.40 intraday on Tuesday.
Meanwhile, the days are dark for cloud software. Here are just a few examples: Atlassian shares plunged 29% on Friday and 38% for the week. Twilio shares crashed nearly 35% on Friday and 43.5% for the week. Snowflakes (SNOW), which will not report for several weeks, dived 17% for the week.
Businesses looking to cut costs may cut back on software spending as they set their budgets for 2023.
including The best ETFsInnovator IBD 50 ETF (FFTY) fell 1.2% last week, while the Innovator IBD Breakout Opportunities ETF (out) lost 2%. iShares Expanded Tech-Software Sector ETFVAT) plunged 10.2%, with MSFT shares holding the key. VanEck Vectors Semiconductor ETFSMH) fell only 0.7%, after jumping 4.65% on Friday, closing high in the weekly range.
SPDR S&P Metals & Mining ETFXME) rose 2% last week. Global X US Infrastructure Development ETF is capitalizedSave) down 0.1%. US Global Jets ETFJETS) increased by 0.3%. SPDR S&P Homebuilders ETFXHB) down 5%. The Energy Select SPDR ETFAxle) rose 2.4%, below an eight-year high. The Financial Select SPDR ETF45) down 0.9%. The Health Care Select Sector SPDR Fund (XIV) gave up 1.5%.
Market Rally Analysis
The stock market rally had a bad week, with the hawkish Fed and often-weak earnings weighing on the major indexes. The Dow Jones, which has led the uptrend of the market, had the mildest decline, but did not move back below the 200 day moving average. The Russell 2000 hit resistance near the 200-day line but recovered Friday to close above the 50-day line. The S&P 500 knifed through 50 days.
The Nasdaq Composite, which never reached its 50-day moving average, was the most down, closing below its low. day to follow Wednesday, bearish signal.
The major indexes extended losses Thursday, then whipsawed Friday on a mixed jobs report.
Negative market action and large reversals in many stocks triggered a shift to “market under pressure”.
The big market driver was Fed chairman Powell, who pulled the rug out of the market rally by signaling a shift to small hikes but the top of the Fed funds rate.
Meanwhile, tech megacaps, including Apple, Tesla and Amazon, suffered huge losses. Names of cloud software such as Atlassian and Twilio melted down, with recent earnings and guidance a significant factor.
Chips did not have a terrible week, relatively, but only a few names are trading near highs.
There are some areas of the market that are resilient. The healthcare sector looks strong overall. Energy names, including various oil stocks, LNG plays and coal miners, plus some diesel stocks, are doing well.
Lithium and some steel plays are doing well. Infrastructure companies for the energy, utilities and telecommunications industries are bright areas. Networking firms in general are a rare area of technology that is leading. Some restaurants and discount retailers are showing strength. Various financial, especially brokers and brokers, have made strong profits.
Still, it’s hard to see a strong market rally with the big tech sector reeling. It will be hard enough for the main indexes to advance with Apple, Google, Tesla and cloud software names lagging behind. But to try to move forward with the area plunged or crashed?
If the inflation report shows a clear and meaningful decline, spurring a downshift in Fed rate hikes, then maybe megacaps and cloud software can go down. However, the return to technology leadership can take several forms. On the flip side, if the October CPI report on November 10 shows that inflation is still running hot, tech stocks can drag down leading sectors to finish off the market rally.
Tuesday is Election Day. The stock market tends to do better with divided government, and Republicans are set to regain control of the House and perhaps the Senate. But political forecasters have been predicting at least one House GOP victory all year, so it’s unclear whether Tuesday’s actual results will be a big catalyst.
What To Do Now
The stock market rally is under pressure. The Fed moved from fast and furious to slow and long, but it remains hawkish. The tech sector is a train wreck. The main indexes have undercut some key levels. Leading indices and stocks are subject to large intraday and daily swings.
This is not a good environment to buy stocks. Investors should seek to reduce exposure, either explicitly or simply by reducing losses in some positions.
If the market rally shows renewed strength, and the S&P 500 and Nasdaq are likely to move above their 50-day moving averages, investors can start adding exposure. But it may need technology to balance with inflation data to show some cooling.
If things improve, you’ll be ready. There are several stocks set up, and many more are not too far away. So build your watch list, be patient and stay engaged.
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