Dow Jones futures edged lower overnight, along with S&P 500 futures and Nasdaq futures, as the October jobs report looms large.
The stock market rally, now under pressure, continued to absorb Fed chief Jerome Powell’s hawkish comments that the peak or “end” fed funds rate may be higher than previously expected.
Major indices fell on Thursday morning. They rebounded from early lows, with the Dow Jones briefly turning positive, but stocks faded by the end.
Megacap technicals continue to influence the major indexes, especially the Nasdaq. Microsoft action joined Amazon.com (AMZN), parent of Facebook Meta platforms (META) and Google Parent Alphabet (GOOGLE) in identifying bear market bottoms. An apple (AAPL) is still above its June lows, but this week has fallen back to its October lows.
Shares of Amgen were little changed, while shares of Yelp and PYPL fell. NET shares also fell, with cloud software names disappearing overnight. SQ shares jumped and PGNY jumped. PCTY was not yet trading.
Cardinal health (CAH) report early on Friday, with CAH shares slightly up from a buy zone.
Economists expect the October jobs report to show nonfarm payrolls rose by 210,000, with the unemployment rate rising to 3.6 percent. That would be the third straight month of slowing hiring and the smallest job gain since December 2020, but not cool enough to please the Fed.
There are reasons to believe Employment data in October will be much weaker than expected.
However, other labor data this week was hotter than expected, including September job openings and weekly jobless claims.
Friday’s October jobs report will be key to the Fed’s rate hike expectations and perhaps the direction of the stock market, at least in the short term. The November jobs report and two CPI inflation reports will also arrive before the Fed’s December meeting.
Markets now see a 50.4% chance of a fifth straight hike of 75 basis points on December 14. That’s up from 42% on Wednesday
Dow Jones futures today
Dow Jones futures were down 0.1% at fair value. S&P 500 futures were down 0.15 percent and Nasdaq 100 futures were down 0.1 percent.
The Labor Department’s October jobs report is due out at 8:30 a.m. ET on Friday. Expect big moves, possibly shocks, for Dow futures and Treasury yields.
Stock market rallies
The stock market rally lost more ground on Thursday, with the Nasdaq once again suffering the most.
The Dow Jones Industrial Average fell 0.5% on Thursday Exchange Trading. The S&P 500 declined 1.1%. The Nasdaq Composite fell 1.7%. The small-cap Russell 2000 gave up 0.6%.
The yield on the 10-year Treasury rose 6 basis points to 4.12%, but above the daily peak of 4.2%. The dollar jumped after a strong reversal higher on Wednesday.
U.S. crude oil prices fell 2 percent to $88.17 a barrel amid a strong dollar and concerns about global demand.
Apple Stock, Megacaps
Apple shares sold off 4.2%. Now down 10.2% for the week, the Dow Jones, the S&P 500 and the titan Nasdaq fell off their 200-day line and fell below their 50-day line.
Google shares gave up 4.1%, hitting a two-year low. Shares of GOOGL are down 10.4% for the week.
Microsoft shares fell 2.7% to 214.25, finally breaking through their October lows to their worst levels since January 2021. Shares of MSFT tumbled 9.2% this week.
Amazon shares lost 3.1% to their lowest point since March 2020. AMZN shares tumbled 13.6% this week.
META shares fell 1.8% to hit a seven-year low. Facebook’s parent company has lost 10.4% this week after plunging nearly 24% last week.
Avg the best ETFsInnovator IBD 50 ETF (FFTY) rose by 0.4%. iShares Expanded Tech-Software Sector ETF (IGV) fell 2.5%, with MSFT shares a major component. VanEck Vectors Semiconductor ETF (SMH) lost 1.2%.
SPDR S&P Metals & Mining ETF (XME) submerged 0.3%. US Global Jets ETF (STREAMS) submerged 0.1%. Energy Select SPDR ETF (XLE) rose 1.85%, and the Financial Select SPDR ETF (XLF) lost 1.1%. Select Healthcare Sector SPDR Fund (XLV) fell by 0.4%.
Market Rally Analysis
The stock market rally moved into an “uptrend under pressure” after Wednesday’s big reversal to the downside on hawkish comments from Fed chief Powell.
The Nasdaq closed below the following day’s low on October 21. This is a very bearish sign for the market rally, although the Nasdaq is clearly the laggard in the current uptrend. The other major indexes are well above the FTD bottom, although the S&P 500 fell below its 50-day line and the Dow Jones broke its 200-day line.
The sell-off continued on Thursday, with the Nasdaq once again leading decliners and ending near the session’s bottom.
This is largely due to the megacaps of Apple, Amazon, Microsoft, Google and Meta platforms.
The S&P 500, Dow Jones and Russell 2000 outperformed but faded at the close.
The Russell 2000 was able to finish above its 50-day and 21-day lines.
The Invest S&P 500 Equal Weight ETF (RSP) fell 0.5%, much better than the mega-cap S&P 500, but closed below its 50-day index.
Don’t overstate the durability of the market rally outside of Apple and megacaps. The Russell 2000 and RSP ETFs turned strong on Wednesday, along with most leading stocks. And they lost more ground on Thursday.
Once the Fed reasserts its hawkish stance and Treasury yields recover, the stock market will struggle to hold on, let alone make significant progress.
Friday’s jobs report could support a market rally or send the major indexes to bearish lows.
What should we do now
With the market under pressure and leading stocks volatile, investors should maintain light exposure. If the rally resumes, such as the S&P 500 retracing its 50-day line, this may be a signal to consider gradually increasing exposure again.
There are a number of stocks that are relatively close to being actionable. So work on those watch lists. Stay engaged and flexible so you’re ready to add exposure or move sideways.
Read it The big picture every day to stay in sync with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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