Dow Jones futures tilted lower overnight along with S&P 500 futures and Nasdaq futures, with the October jobs report looming large.
The stock rally, now under pressure, continued to consume Fed chief Jerome Powell’s aggressive comments that the peak or “terminal” fed funds rate could be higher than previously expected.
Major indices fell Thursday morning. They bounced off early lows, with the Dow Jones turning positive briefly, but the stocks faded towards the end.
Megacap technologies continue to weigh on major indices, especially the Nasdaq. Microsoft stock has been added Amazon.com (AMZN), Facebook parent Metaplatforms (META) and Google parent Alphabet (GOOGL) in identifying bear market lows. Apple (AAPL) is still above the June bottom, but has slipped back to October lows this week.
Most important profit movers Thursday evening included Amgen (AMGN), Yelp (YELP), EOG Resources (EOG), paypal (PYPL), Square parent Block (SQ), progeny (PGNY), cloudflare (NET) and Pay location (PCTY).
Amgen stocks had changed little, while Yelp and PYPL stocks tumbled. NET stocks also plunged, with cloud software names collapsing overnight. SQ shares spiked and PGNY jumped. PCTY was not trading yet.
Cardinal health (CAH) reports early Friday, with CAH shares stretching slightly from a buy zone.
Economists expect the October jobs report to show nonfarm payrolls at 210,000, while the unemployment rate climbs to 3.6%. That would be the third straight month of declining hiring and the smallest job gain since December 2020, but not cool enough for the Fed’s liking.
There are reasons to believe that October employment data will be much weaker than expected.
However, other labor data has been hotter than expected this week, including job openings in September and weekly jobless claims.
Friday’s jobs report in October will be crucial for the Fed’s expectations about the rate hike and perhaps for 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 December Fed meeting.
Markets now see a 50.4% chance of a fifth consecutive 75 basis point increase on Dec. 14. That’s an increase of 42% on Wednesday
Dow Jones Futures Today
Dow Jones futures fell 0.15% from fair value. S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.15%.
The Labor Department’s October jobs report comes out Friday at 8:30 a.m. ET. Expect big moves, possibly whiplashes, for Dow futures and Treasury yields.
Keep in mind that an overnight action in Dow futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.
IBD experts analyze the stock market rally on IBD Live
stock market rally
The stock market rally lost more ground on Thursday, with the Nasdaq again suffering the most.
The Dow Jones Industrial Average fell 0.5% in Thursday’s stock market trading. The S&P 500 index fell 1.1%. The Nasdaq composite fell 1.7%. The small-cap Russell 2000 lost 0.6%.
The 10-year government bond yield rose 6 basis points to 4.12%, but was below an intraday high of 4.2%. The dollar emerged from a strong upward reversal on Wednesday.
The price of crude oil in the US fell 2% to $88.17 a barrel amid the strong dollar and concerns about global demand.
Apple supply, Mega caps
Apple shares sold 4.2%. The Dow Jones, S&P 500 and Nasdaq titan are now down 10.2% for the week, falling back from their 200-day line and moving below the 50-day line.
Shares of Google lost 4.1% and reached a two-year low. GOOGL shares are down 10.4% this week.
Microsoft shares fell 2.7% to 214.25, eventually breaking below the October low to the worst level since January 2021. MSFT shares are down 9.2% this week.
Amazon shares lost 3.1% to their lowest point since March 2020. AMZN shares are down 13.6% this week.
META shares fell 1.8%, reaching a seven-year low. The Facebook parent has lost 10.4% this week after a nearly 24% crash last week.
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One of the best ETFs, the Innovator IBD 50 ETF (FFTY) was up 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) slipped 2.5%, with MSFT stocks a major component. The VanEck Vectors Semiconductor ETF (SMH) lost 1.2%.
SPDR S&P Metals & Mining ETF (XME) fell 0.3%. The US Global Jets ETF (JETS) fell 0.1%. The Energy Select SPDR ETF (XLE) rose 1.85% and the Financial Select SPDR ETF (XLF) lost 1.1%. The Health Care Select Sector SPDR Fund (XLV) fell 0.4%.
Due to more speculative story stocks, ARK Innovation ETF (ARKK) lost 0.7% and ARK Genomics ETF (ARKG) lost 0.9%.
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Market rally analysis
The stock market rally moved into an “upward trend under pressure” after Wednesday’s major downside reversal following aggressive comments from Fed chief Powell.
The Nasdaq closed below the October 21 follow-up low. That is a very bearish sign for the market rally, although the Nasdaq has clearly been the laggard in the current uptrend. The other major indices are well above the FTD lows, although the S&P 500 has fallen below the 50-day line and the Dow Jones has fallen below the 200-day line.
The sale continued on Thursday with the Nasdaq leading the declines again and closing out near session lows.
This is largely due to the mega-caps Apple, Amazon, Microsoft, Google and Meta Platforms.
The S&P 500, Dow Jones and Russell 2000 outperformed, but slumped in the closing stages.
The Russell 2000 managed 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 megacap-heavy S&P 500, but closed below 50 days.
Don’t overestimate the resilience of the market rally outside of Apple and the megacaps. The Russell 2000 and RSP ETF fell sharply on Wednesday, along with most of the leading stocks. And on Thursday they lost more ground.
With the Fed reinforcing its aggressive stance and government bond yields recovering, the stock market will struggle to hold its own, let alone make any meaningful advances.
Friday’s jobs report could bolster the market rally, or send major indices tumbling to bear market lows.
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What to do now
With the market under pressure and leading stocks volatile, investors should keep their exposure light. If the rally recovers, such as the S&P 500 regaining its 50-day line, that could be a signal to consider gradually increasing exposure again.
There are some stocks that are relatively close to action-oriented. So work on those watchlists. Stay engaged and flexible so you’re ready to add fame or stand on the sidelines.
Read The Big Picture every day to stay up to date on market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.
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