Futures on the Dow Jones saw a modest rise on Sunday night, accompanied by gains in S&P 500 futures and Nasdaq futures. This upcoming week is expected to be eventful, with Apple (AAPL), the Federal Reserve meeting, and the October jobs report taking center stage.
The stock market correction witnessed a deepening this past week, with major indexes hitting multi-month lows due to mixed earnings reports. While the Nasdaq managed a small gain on Friday, mainly driven by Amazon.com (AMZN), it was generally a weak session.
Investors are advised to exercise caution and consider maintaining a significant cash position.
Four major tech giants, Amazon stock, Meta Platforms (META), Microsoft (MSFT), and ServiceNow (NOW), are currently close to buy points. Notably, all these companies have reported their earnings and displayed multiple quarters of accelerating growth.
In the upcoming week, we can expect early earnings reports from EV chipmaker On Semiconductor (ON) on Monday and Arista Networks (ANET) on Monday night. Additionally, Apple is scheduled to report earnings on Thursday night and unveil new Mac computers on Monday night. Apple’s stock has faced challenges, including concerns about demand for the iPhone 15, particularly in China.
The Federal Reserve is set to meet this week, with market expectations leaning toward no rate hike on Wednesday. Several policymakers have signaled that there’s little need for further action, given the surge in long-term Treasury yields. Fed Chairman Jerome Powell is likely to emphasize this message after the meeting announcement on Wednesday.
The week will culminate with the release of the October jobs report on Friday.
Over the weekend, Stellantis (STLA) and the United Auto Workers reached a tentative deal, similar to the preliminary accord struck between Ford Motor (F) and the UAW last week. However, General Motors (GM) and the UAW remain at odds, with the union expanding its strike to GM’s largest plant.
Several notable stocks, including Microsoft and Meta, are featured on various leaderboards and watchlists. Microsoft and Meta are part of the IBD 50 and IBD Big Cap 20 lists, and Microsoft holds a place on the IBD Long-Term Leaders list.
To summarize the market’s current state:
- Dow Jones futures saw a 0.2% rise compared to fair value.
- S&P 500 futures experienced a 0.35% increase.
- Nasdaq 100 futures rose by 0.5%.
- The 10-year Treasury yield inched up to 4.87%.
- Crude oil futures dropped by 1%.
It’s important to note that action in overnight futures markets may not necessarily translate into actual trading behavior in the regular stock market session.
The ongoing stock market correction has been increasingly challenging, with the indexes attempting to rebound early in the week but ultimately falling lower.
Concerns related to Israel-Hamas tensions contributed to the nervous market atmosphere for the third consecutive Friday, as Israeli forces escalated their operations in Gaza.
The past week saw the Dow Jones Industrial Average fall by 2.1%, while the S&P 500 index tumbled by 2.5%. The Nasdaq composite experienced a 2.6% decline.
Although the Nasdaq managed to post modest gains on Friday, it remained below the 200-day moving average. While this could signal the beginning of a new rally attempt, it will take more than this to confirm a strong uptrend.
Friday’s market performance was less convincing, with major gains mainly driven by big-cap stocks like Amazon, Microsoft, Meta, and ServiceNow. The Dow also fell to a seven-month low, while the Russell 2000 reached its lowest level since November 2020. The small-cap Russell 2000 saw a 2.5% drop for the week.
Furthermore, the Invesco S&P 500 Equal Weight ETF (RSP) set a 52-week low by falling 2.45% for the week.
It’s important to note that market breadth is crucial, and the Nasdaq needs to regain its 200-day moving average and the 21-day moving average to break the short-term downtrend. A decisive move above the 50-day moving average could signal the end of the downtrend that started in late July.
The 10-year Treasury yield initially exceeded 5% on Monday morning but then dropped by 8 basis points to 4.85%. Crude oil futures declined by 2.9% to $85.54 a barrel, despite experiencing a 2.8% gain on Friday.
In the world of exchange-traded funds (ETFs):
- The iShares Expanded Tech-Software Sector ETF (IGV) fell by 2.8%, despite counting Microsoft and ServiceNow as significant holdings.
- The VanEck Vectors Semiconductor ETF (SMH) experienced a 2.7% decline.
- ARK Innovation ETF (ARKK), representing speculative story stocks, plunged by 5.4% during the week, while ARK Genomics ETF (ARKG) fell by 6.4%.
- SPDR S&P Metals & Mining ETF (XME) posted a 1% gain for the week.
- SPDR S&P Homebuilders ETF (XHB) declined by 1.5%.
- The Energy Select SPDR ETF (XLE) fell by 6.2%, and the Health Care Select Sector SPDR Fund (XLV) tumbled to a 52-week low with a 3.8% decline.
- The Industrial Select Sector SPDR Fund (XLI) and the Financial Select SPDR ETF (XLF) saw declines of 2.3%.
For individual stocks:
- Microsoft stock saw a 1% gain for the week, closing at 329.81. It has retreated slightly from its high on October 25 but is currently the only Magnificent Seven stock trading above its 50-day moving average. The relative strength line for Microsoft stock has already reached a new high, and it holds a 366.78 consolidation buy point.
- Meta reported a 168% surge in earnings for Q3, thanks to cost-cutting measures and recovering ad sales. Revenue also grew by 23% to $34.1 billion. However, Meta stock declined as it mentioned some weakening advertising trends in Q4. The stock fell by 3.9% for the week, although it rebounded on Friday to slightly below the 50-day moving average. Meta stock is currently in a consolidation with buy points at 326.20 or 330.54.
- Amazon stock witnessed a remarkable 236% increase in earnings, comfortably beating expectations. Revenue also saw a 13% growth to $143.1 billion, marking the second consecutive quarter of accelerating growth. The stock jumped 6.8% on Friday, rebounding from the 40-week line, with a slight gain of just over 2% for the week. Amazon stock is forming a short consolidation with a possible double-bottom base and a buy point at 134.48, which involves reclaiming the 50-day moving average.
- ServiceNow stock experienced a 2.1% gain, closing at 554.01 for the week. It is currently just below the
