Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. Apple (AAPL), the Federal Reserve and the October jobs report will headline another busy week of news.
The stock market correction intensified this past week, with the major indexes all falling to multimonth lows amid mixed earnings. The Nasdaq eked out a gain Friday, fueled by Amazon.com (AMZN). But it was generally another weak session.
Investors should be very cautious, largely holding cash.
Amazon stock, Meta Platforms (META), Microsoft (MSFT) and ServiceNow (NOW) are four big-cap techs that are worth watching. All are close to buy points. Notably, all have earnings out of the way and boast multiple quarters of accelerating growth.
Early Monday, EV chipmaker On Semiconductor (ON) will report third-quarter earnings. Arista Networks (ANET), which tumbled Thursday on Meta’s reduced capital spending plans, is due Monday night. Apple earnings are Thursday night. Apple stock has undercut its 200-day amid iPhone 15 demand concerns, especially in China.
The Federal Reserve meets this week, with markets seeing no chance of a rate hike Wednesday. Several policymakers have signaled little need to take further action with long-term Treasury yields surging. Fed chief Jerome Powell will likely reinforce that message Wednesday after the meeting announcement.
The October jobs report will cap the week on Friday.
Meta stock is on IBD Leaderboard, with NOW stock on the Leaderboard watchlist. MSFT stock is on IBD Long-Term Leaders. Microsoft stock and Meta are on the IBD 50. Microsoft and ServiceNow stock are on the IBD Big Cap 20.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Stock Market Correction
The stock market correction keeps getting worse. The indexes tried to bounce early in the week, but broke sharply lower once again.
Israel-Hamas fears were likely a factor for a third straight Friday heading into the weekend as Israeli forces stepped-up their efforts in Gaza.
The Dow Jones Industrial Average fell 2.1% in last week’s stock market trading. The S&P 500 index tumbled 2.5%. The Nasdaq composite skidded 2.6%.
The Nasdaq did rise modestly Friday, though well off session highs near the 200-day line. So a new stock market rally attempt is underway. But it will take a lot more than that to signal a convincing uptrend.
Friday wasn’t an especially convincing start, with Amazon and other big caps such as Microsoft, Meta and ServiceNow largely accounting for gains.
Not only did the Dow decline Friday to a seven-month low, but the Russell 2000 sank to its lowest level since November 2020. The small-cap Russell 2000 gave up 2.5% for the week.
The Invesco S&P 500 Equal Weight ETF (RSP) fell 2.45% for the week, setting a 52-week low.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 0.5% on Friday vs. a 0.5% gain for the Nasdaq 100, buoyed by giants such as Amazon and Microsoft. QQEW sank 3.15% for the week.
While tech titans may remain leaders, better market breadth is critical.
The Nasdaq needs to reclaim its 200-day line and retake the 21-day just to break the short-term downtrend. A decisive move above the 50-day line might break the downtrend from late July.
The 10-year Treasury yield fell 8 basis points to 4.85%, after briefly topping 5% Monday morning.
U.S. crude oil futures declined 2.9% to $85.54 a barrel, even with Friday’s 2.8% gain.
SPDR S&P Metals & Mining ETF (XME) rose 1% last week. SPDR S&P Homebuilders ETF (XHB) fell 1.5%. The Energy Select SPDR ETF (XLE) plunged 6.2% and the Health Care Select Sector SPDR Fund (XLV) tumbled 3.8% to a 52-week low. The Industrial Select Sector SPDR Fund (XLI) and the Financial Select SPDR ETF (XLF) declined 2.3%.
Microsoft stock rose 1% last week to 329.81, though it pulled back considerably from the Oct. 25 high of 346.20. It’s the only Magnificent Seven stock that’s currently above its 50-day line. The relative strength line for Microsoft stock is already at a new high. Shares have a 366.78 consolidation buy point, but the Oct. 25 high could serve as an early entry.
Microsoft earnings for fiscal Q1 2024 rose 27% vs. a year earlier, while revenue grew 13% to $56.5 billion. It was the third straight quarter of accelerating growth for both, with the Dow tech titan also guiding up for Q2 revenue. Unlike Amazon and Google-parent Alphabet (GOOGL), Microsoft beat views for cloud-computing services growth.
Meta earnings surged 168% in Q3, thanks to cost cuts and rebounding ad sales. Revenue swelled 23% to $34.1 billion. It was the third straight quarter of faster growth. But shares fell as Meta cited some weakening advertising trends in Q4. Meta stock fell 3.9% to 296.73 for the week, though it bounced back on Friday to slightly below the 50-day moving average.
Meta stock is still in a consolidation with either a 326.20 or 330.54 buy point. Investors could use a decisive move above the 50-day line as an early entry, but market conditions raise the risks.
Amazon earnings skyrocketed 236%, easily beating. Revenue climbed 13% to $143.1 billion, the second straight quarter of accelerating growth. EPS has increased substantially sequentially for the past three quarters. Amazon Web Services revenue slightly missed, but the tech giant sees momentum into Q4, and the prospect of AI-fueled gains for AWS.
Amazon stock jumped 6.8% to 127.74 on Friday, rebounding from the 40-week line. Shares climbed just over 2% for the week. AMZN stock has a short consolidation that investors could view as a double-bottom base with a 134.48 buy point. That would involve a decisive reclaiming of the 50-day line.
ServiceNow stock rose 2.1% to 554.01 last week, just below the 50-day line after briefly reclaiming that level on Thursday. NOW stock has a 607.90 buy point from a flattish double-bottom base. Investors could use Thursday’s high of 507.90 as an early entry. The RS line for NOW stock is already at a new high, a bullish sign.
ServiceNow earnings jumped 49% with revenue up 25%, the second straight quarter of faster growth for both. The software giant also guided up on subscription revenue.
What To Do Now
The stock market is in a correction. The major indexes are all below their 200-day lines. and the market internals look worse.
It’s a time to be largely, if not entirely, in cash. If you have long-term winners you can hold them. But at some point, investors have to have a line in the sand for cutting or exiting a winning position.
Don’t be in a hurry to get back in. The market needs several days of strong performance to signal that the downturn might be over. A morning bounce, like Friday’s narrow, Amazon-led gains, is hardly sufficient.
Very few stocks are in position, with a relatively low number of names that are close to being in position. So focus on stocks that are showing relative strength. Right now, that should include names such as Microsoft stock and ServiceNow, as well as some energy plays like WFRD stock. But it’s unclear which stocks and sectors will lead the market in the next uptrend.
So keep running your screens and stay engaged.
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