Futures: After an ugly week out, what do you do now?
Dow futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures.
The stock market rally suffered major damage this week in the wake of the Fed’s hawkish outlook and weak economic data that raised fears that the Fed will push the economy into recession. The NASDAQ and S&P 500 closed the week below the 50-day moving averages.
Megacap stocks continue to be a drag on major indices in particular an Apple (AAPL) and Tesla (TSLA), with TSLA stock falling to fresh bear market lows. Amazon.com (AMZN) and the parent of Google the alphabet (GOOGL) Not too far off the lows. Microsoft didn’t lose much during the week but it did pull back from the 200 day streak. nvidia (NVDA), which was part of the slide bounce, reversed lower, popping up below major support.
But the mega-hits do not hide the underlying strength. Most of the stocks that have been flashing buy signals in recent days and weeks have turned south. The leading sectors also suffered.
isolation (podcast), commercial minerals (CMC), Elf Beauty (dwarf), Peabody Energy (BTU) and Dow Jones Giant Larva (CAT) holds up relatively well. However, no action can be taken at this time.
Investors should be wary of making any purchases in the current market, but focus on reducing exposure and building watch lists.
The video embedded in this article reviewed market action in depth, analyzing Insulet, Elf Beauty, and CAT stock.
Dow jones futures today
Dow futures open at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable shares in the bullish stock market on IBD Live
Stock market rise
The stock market rallied on Tuesday morning, but then sold off aggressively, ending the week with sharp losses.
The Dow Jones Industrial Average fell 1.7% in last week’s trading on the stock market. The S&P 500 fell 2.1%. The Nasdaq Composite fell 2.7%. Small-cap Russell 2000 fell 2.4%.
The 10-year Treasury yield fell 9 basis points, to 3.48%. Despite the Fed’s hawkish talk, markets expect a quarter-point rally in February and March, but with an increasing chance of no action in March.
US crude oil futures rose nearly 5% to $74.29 a barrel last week.
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Exchange Traded Funds
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) erased big early gains to end the week down 0.5%, with a large stake in MSFT shares. The VanEck Vectors Semiconductor ETF (SMH) had its own negative external reversal week, losing 2.9%. Nvidia stock is one of the most important components of SMH.
Reflecting more speculative stock stories, the ARK Innovation ETF (ARKK) slid 4% last week, just above a five-year low. ARK Genomics ETF (ARKG) fell 0.4%. Tesla stock remains a major holding via Ark Invest’s ETF.
The SPDR S&P Metals & Mining ETF (XME) sank 2.6% last week. US Global X Infrastructure Development Fund (PAVE) lost 2.6%. The US Global Jets ETF (JETS) fell 3.6%. The SPDR S&P Homebuilders ETF (XHB) rose 0.4%, but closed near weekly lows. The Energy Select SPDR ETF (XLE) rebounded 2% and the Financial Select SPDR ETF (XLF) fell 2.5%. The SPDR (XLV) Healthcare Sector Fund (XLV) fell 1.8% after hitting near record highs on Tuesday.
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Megacap Stocks: From Mean to Breakdown
Shares of Dow Jones tech titan Apple are down 5.4% this week, to 134.51. The AAPL has cleared the October-November lows, with the June bear market of 129.04 rising next. Microsoft shares, which is a component of the Dow Jones, fell 0.3% to 244.69, but after retreating from 263.92 Tuesday morning as it reached the 200-day line. Amazon stock fell just 1.4% to 87.66, but fell from its weekly high of 96.25 to close near the November 9 bear market low of 85.87. Google shares fell 2.8 percent, retreating from Tuesday’s high. Nvidia moved above the 50-day line early in the week, but ended down 2.5%.
Tesla stock was the biggest loser, dropping 16.1% to 150.23, the lowest since November 2020. It was the worst weekly drop since the Covid crash in March 2020. Demand fears in China, Elon Musk’s latest TSLA sales and Musk’s focus on Twitter All of these factors affect stocks.
Bloomberg reported Friday evening that Tesla will build a new car factory in northeastern Mexico, with an announcement likely in the coming days. It is unclear what compounds the plant may produce. The Mexico plant will offer relatively lower costs versus Tesla’s Fremont, Austin and Berlin plants, while still being close to the US.
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Market rally analysis
Within a few days, the stock market rally suddenly shifted from moving above the trading range to falling below. The percentage of weekly losses on the major indices was significant, but the damage was much worse.
Shortly after Tuesday’s open, all major indices hit highs on a weak inflation report, with the S&P 500 back above its 200-day line and the Dow Jones at its best in nearly eight months. But indexes pared gains, with the S&P 500 closing below 200 a day. On Wednesday, the major indices reversed lower as the Federal Reserve and Federal Reserve Chairman Jerome Powell signaled several rate hikes ahead.
Selling intensified on Thursday amid weak economic data that raised recession fears. The Nasdaq and Russell 2000 fell below the 50-day lines, while the S&P 500 and Dow Jones broke below the 21-day lines. All fell to their worst levels in over a month, undermining weeks of sideways trading.
On Friday, the S&P 500 fell below its 50-day line. daw nearly there.
It was a big, negative outside week for all the major indices, with highs and lows out of range over the previous four weeks.
Leading stocks took a solid beating, with a few exceptions. Industrial, solar, medical, travel, and many more chip and network names are all under modest to severe pressure.
Megacap shares are still lagging behind overall. Tesla stock continues to drop to its lowest level in two years. Amazon stock is just above its bear market lows while Google is moving in that direction. AAPL stock has fallen to its lowest level in nearly six months, with a decline in sight.
Microsoft and Nvidia stock may not be lagging behind, but they’re not getting ahead either. Both are below the 200-day lines.
Perhaps this upside is the bear market rally running its course, with indices heading towards their October lows. The S&P 500 could either bounce quickly or be range bound for a long time.
One thing that is clear is that the market is not doing very well at the moment.
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What are you doing now
Investors should reduce exposure due to the overall market deterioration and the performance of most individual stocks.
While under pressure, the market is still going up. A few good days can boost confidence to the upside and bring back more stocks to buy areas. Of course, even in this scenario, investors should be wary of new buys, given the rally’s pattern of pulling back and erasing strong gains.
So stay tuned. Keep working on the watchlists. Focus on stocks that hold key moving averages and support levels and generally show strong relative strength, such as Caterpillar, Insulet, and ELF stocks.
Read the big picture every day to stay in sync with the market trend, leading stocks and sectors.
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