Futures on the Dow Jones will open on Sunday evening, along with futures on the S&P 500 and Nasdaq.
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The stock market rally suffered heavy damage this week following a hawkish outlook from the Fed and weak economic data that raised fears that the Federal Reserve could drive the economy into a recession. The Nasdaq and S&P 500 indices ended the week below their 50-day moving averages.
Megacap shares continue to hold back major indices, especially Apple (AAPL) and You’re here (TSLA), with TSLA shares plunging to fresh bear market lows. Amazon.co.uk (AMZN) and parent Google Alphabet (GOOGL) are not too far from their lows. Microsoft didn’t lose too much for the week but fell back after its 200-day streak. Nvidia (NVDA), which had been part of a chip bounce, reversed lower, back below key support.
But megacaps don’t hide their underlying strength. Most of the stocks that had issued buy signals over the past few days and weeks moved south. High-tech sectors also suffered.
island (PODD), Trade metals (CMC), elf beauty (ELF), Peabody Energy (BTUs) and the Dow Jones giant caterpillar (CAT) hold up relatively well. However, none are actionable at the moment.
Investors should be wary of buying in the current market, but focus on reducing exposure and building watchlists.
The video embedded in this article reviewed the market action in depth, while also analyzing Insulet, Elf Beauty and CAT stocks.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET, along with S&P 500 and Nasdaq 100 futures.
Remember that overnight action in Make futures contracts and elsewhere does not necessarily translate into actual trading over the next stock Exchange session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally took off on Tuesday morning, but then sold off sharply, ending the week with heavy losses.
The Dow Jones Industrial Average fell 1.7% last week stock market trading. The S&P 500 index lost 2.1%. The Nasdaq composite fell 2.7%. Small cap Russell 2000 fell 2.4%.
The 10-year Treasury yield fell 9 points to 3.48%. Despite the Fed’s hawkish rhetoric, markets are expecting a quarter-point hike in February and March, but with a growing likelihood of no move in March.
U.S. crude oil futures rose nearly 5% to $74.29 a barrel last week.
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Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (VIG) erased strong early gains to end the week down 0.5%, with MSFT stock a major holding. The VanEck Vector Semiconductor ETF (SMH) staged its own week of downward reversal, losing 2.9%. Nvidia action is one of the main SMH components.
Reflecting more specific story actions, ARK Innovation ETF (ARKK) slipped 4% last week, just above a five-year low. Genomic ARK ETF (ARKGdecreased by 0.4%. Tesla stock remains a major holding in Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XMEfell 2.6% last week. The Global X US Infrastructure Development ETF (PAVE) lost 2.6%. US Global Jets ETF (JETS) fell 3.6%. ETF SPDR S&P Home Builders (XHB) edged up 0.4%, but closed near weekly lows. The SPDR Energy Select ETF (xle) rebounded 2% and the Financial Select SPDR ETF (XLF) lost 2.5%. The SPDR healthcare sector fund (XLV) lost 1.8% after nearing record highs on Tuesday.
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Megacap stocks: from mediocrity to collapse
Tech titan Dow Jones’ Apple stock was down 5.4% for the week at $134.51. AAPL moved above the October-November lows, followed by the June bear market low at 129.04. Fellow Dow component Microsoft fell 0.3% to 244.69 but fell from 263.92 on Tuesday morning as it hit the 200-day line. Amazon shares fell just 1.4% to 87.66, but fell from weekly highs of 96.25 to near November. 9 bear market low of 85.87. Google stock slid 2.8%, reversing from Tuesday’s highs. Nvidia broke above its 50-day line earlier in the week, but ended up falling 2.5%.
Tesla stock was the big loser, plunging 16.1% to 150.23, the lowest since November 2020. It was the worst weekly decline since the Covid crash in March 2020. Concerns over the demand in China, Elon Musk’s latest TSLA stock sales and Musk’s attention on Twitter all weigh in. on stocks.
Tesla will build a new auto plant in northeastern Mexico, Bloomberg reported late Friday, with an announcement likely in the coming days. It is unknown which vehicles the plant can produce. A factory in Mexico would offer relatively lower costs compared to Tesla’s factories in Fremont, Austin and Berlin, while remaining close to the United States
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Market rally analysis
Within days, the stock market rally went sharply from moving above a trading range to falling below it. The weekly percentage losses on the major indices were significant, but the damage was much worse.
Shortly after Tuesday’s open, the major indices all hit rally highs on a subdued inflation report, with the S&P 500 back above its 200-day streak and the Dow Jones at its best. levels in nearly eight months. But the indices pared their gains, with the S&P 500 closing below the 200-day mark. On Wednesday, key indexes reversed lower as the Federal Reserve and Fed chief Jerome Powell announced several more rate hikes to come.
Selling intensified on Thursday amid weak economic data that stoked recession fears. The Nasdaq and Russell 2000 fell below their 50-day lines, while the S&P 500 and Dow Jones broke below their 21-day lines. All fell to their worst levels in more than a month, undermining weeks of sideways trading.
On Friday, the S&P 500 fell below its 50-day line. The Dow is almost there.
It was a strong and negative outer week for all major indices, with the highs and lows exceeding the range of the previous four weeks.
Major stocks were beaten, with a few exceptions. Industries, solar, medical, travel, and various chip and network names are all under moderate to intense pressure.
Megacap shares continue to lag overall. Tesla stock continues to plunge to new two-year lows. Amazon shares are just above bear market lows while Google is moving in that direction. AAPL stock fell to its lowest level in nearly six months, with bearish lows in sight.
Microsoft and Nvidia stocks may not be lagging behind, but they’re not leading either. Both are below their 200-day lines.
This uptrend is possibly a bear market rally that is running its course, with the indices heading back towards their October lows. Perhaps the S&P 500 will rebound quickly or remain constrained for an extended period.
The only thing that is clear is that the market is not acting well right now.
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What to do now
Investors should reduce their exposure due to the deterioration in the overall market and the performance of most individual stocks.
Although under pressure, it is still a market rally. A few good days could boost confidence in the uptrend and push more stocks back into buy zones. Of course, even in this scenario, investors should be wary of further buying, given the tendency of the rally to pull back and erase strong gains.
So stay engaged. Keep working on 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 tune with market direction and major stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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