Dow Jones futures will open Sunday evening along with S&P 500 futures and Nasdaq futures.
The stock market’s rally was hit hard this week by a poor Fed forecast and weak economic data, which fueled fears that the Federal Reserve will push the economy into recession. The Nasdaq and S&P 500 closed the week below their 50-day moving averages.
Megacap stocks continue to lag the major indexes, esp Apple: (AAPL) and Tesla ( TSLA ), shares of TSLA are falling to fresh bear market lows. Amazon.com: (AMZN) and parent of Google The alphabet (GOOGL) are not far off their lows. Microsoft didn’t lose much for the week, but retreated from the 200-day line. Nvidia: ( NVDA ), which was part of a chip comeback, turned lower below key support.
But the megacaps don’t hide the underlying power. Most stocks that had flashed buy signals in recent days and weeks turned south. The leading sectors were also affected.
Insulate (PODD), Commercial metals (CMC), Elf beauty (ELF), Peabody Energy (BTU) and Dow Jones giant Caterpillar (CAT) are relatively well tolerated. However, none are currently actionable.
Investors should be careful not to make any purchases in the current market, but focus on reducing exposures and making watch lists.
The video embedded in this article reviewed the market action in detail while also analyzing shares of Insulet, Elf Beauty and CAT.
Dow Jones futures today
Dow Jones futures open at 6pm ET, along with S&P 500 futures and Nasdaq 100 futures.
Keep in mind 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 stocks in action on IBD Live’s Stock Market Rally
Stock market rally
The stock market rallied on Tuesday morning, but then sold off heavily, ending the week with sharp losses.
The Dow Jones Industrial Average fell 1.7% in last week’s trading. The S&P 500 index fell by 2.1%. The Nasdaq composite fell 2.7%. The small-cap Russell 2000 was down 2.4%.
The 10-year Treasury yield fell 9 basis points to 3.48%. Despite the dovish talk from the Fed, markets expect quarter-point increases in February and March, but with an increasing likelihood of no move in March.
U.S. crude oil futures rose nearly 5% last week to $74.29 a barrel.
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Among the rising ETFs, the iShares Expanded Tech-Software Sector ETF ( IGV ) erased big early gains to end the week up 0.5%, with MSFT shares a large holding. The VanEck Vectors Semiconductor ETF ( SMH ) staged its outward, bearish reversal week, losing 2.9%. Nvidia stock is the best SMH component.
Reflecting more speculative stocks historically, the ARK Innovation ETF ( ARKK ) slid 4% last week, just above a five-year low. ARK Genomics ETF ( ARKG ) was down 0.4%. Tesla shares remain a core holding in Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF ( XME ) fell 2.6% last week. The Global X US Infrastructure Development ETF ( 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 a weekly low. The Energy Select SPDR ETF (XLE) returned 2% and the Financial Select SPDR ETF (XLF) gave up 2.5%. The Select Healthcare Sector SPDR Fund ( XLV ) shed 1.8 percent after hitting a record high on Tuesday.
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Shares of Dow Jones tech titan Apple traded up 5.4% for the week to 134.51. AAPL broke the October-November low, and was next topped by the June bear market low of 129.04. Microsoft’s peer Dow fell 0.3% to 244.69, but after retreating from 263.92 on Tuesday morning when it broke through a 200-day line. Amazon shares fell just 1.4% to 87.66, but were off a weekly high of 96.25 to close near the Nov. 9 bear market low of 85.87. Shares of Google fell 2.8%, retreating from Tuesday’s high. Nvidia broke above its 50-day line earlier in the week, but ended with a 2.5% decline.
Tesla shares suffered major losses, falling 16.1% to 150.23, the lowest since November 2020. It was the worst weekly decline since the Covid crash in March 2020. China demand concerns, Elon Musk’s recent TSLA stock selloff and Musk’s Twitter attention all weigh in. on shares.
Tesla will build a new car factory in northeastern Mexico, Bloomberg reported Friday evening, with an announcement possible in the coming days. It’s unclear what cars the plant might produce. The Mexico plant will offer relatively lower costs compared to Tesla’s Fremont, Austin and Berlin plants, while still being close to the US.
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Market rally analysis
Over the course of a few days, the stock market rally changed dramatically from moving above the trading range to falling below. The weekly percentage losses on the major indexes were large, but the damage was much greater.
After Tuesday’s open, the major indexes all hit rally highs amid a soft inflation report, with the S&P 500 rebounding from its 200-day line and the Dow Jones at its best levels in nearly eight months. But indexes pared gains as the S&P 500 closed below its 200-day period. Major indexes turned lower on Wednesday as the Federal Reserve and Fed Chair Jerome Powell signaled several rate hikes ahead.
Selling intensified on Thursday amid weak economic data that fueled recession fears. The Nasdaq and Russell 2000 fell below their 50-day lines, while the S&P 500 and Dow Jones were below their 21-day lines. All fell to their worst levels in more than a month, curtailing weeks of sideways trading.
The S&P 500 fell below its 50-day line on Friday. The Dow is almost there.
It was a big, negative outside week for all the major indices, with highs and lows exceeding the range of the previous four weeks.
Leading stocks were down, with a few exceptions. Industrial, solar, medical, travel, and various chip and networking titles are all under modest to intense pressure.
Megacap stocks remain clear laggards overall. Tesla shares continue to fall to new two-year lows. Amazon shares are just shy of a bear market low, while Google is moving in that direction. Shares of AAPL fell to their lowest level in nearly six months, with bearish lows in sight.
Microsoft stock and Nvidia may not be laggards, but they’re not leaders either. Both are below their 200-day lines.
Perhaps this uptrend is a bear market rally that is taking its course as the indices retrace their October lows. The S&P 500 is likely to turn around quickly or turn into a range for an extended period of time.
The only thing that is clear is that the market is not doing well right now.
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What to do now?
Investors should reduce exposure to the general market’s deterioration and the performance of most individual stocks.
Although under pressure, it is still a market rally. A few good days could bolster confidence in the uptrend and bring back more stocks to buy into territories. Of course, even in that scenario, investors should be wary of new buying given the rally pattern pulling back and erasing solid gains.
So stay engaged! Keep working on the playlists. Focus on stocks that have key moving averages and support levels and generally show strong relative strength, such as the Caterpillar, Insulet and ELF funds.
Read The Big Picture daily to stay in sync with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter @IBD_ECarson for stock market updates and more.
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