Dow Jones futures edged 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 digest Fed chief Jerome Powell’s hawkish comments that the peak or “terminal” interest rate could be higher than previously expected.
The major indices fell on Thursday morning. They returned early lows, with the Dow Jones briefly turning positive, but stocks faded toward the end.
Megacap technologies continue to thin the major indexes, especially the Nasdaq. The Microsoft share joined Amazon.com (AMZN), Facebook parent Meta platforms (META) and Google parent Alphabet (GOOGL) in setting bear market lows. apple (AAPL) is still above the June low, but has fallen this week back towards its October low.
Important earnings movements on Thursday night included Amgen (AMGN), Yelp (YELP), EOG Resources (EOG), PayPal (PYPL), quadratic parent Block (SQ), Offspring (PGNY), Cloudflare (NET) and Paylocity (PCTY).
Amgen shares were little changed, while Yelp and PYPL shares fell. NET stock also plunged, with cloud software names cratering overnight. SQ stock rose and PGNY jumped. PCTY did not yet act.
Cardinal health (CAH) reports early Friday, with CAH stock slightly extended from a buy zone.
Economists expect the October jobs report to show nonfarm payrolls rising by 210,000, with the unemployment rate rising to 3.6%. That would be the third straight month of declining hiring and the smallest job growth since December 2020, but not cool enough for the Fed’s liking.
There is reason to believe that the employment figures for October will be much weaker than expected.
However, other labor data this week has been warmer than expected, including September job vacancies and weekly jobless claims.
Friday’s October jobs report will be key to Fed rate hike expectations and perhaps the direction of the stock market, at least in the near term. The November jobs report and two CPI inflation reports will also come before the Fed meeting in December.
Markets now see a 50.4% chance of a fifth straight 75 basis point increase on December 14th. That’s up from 42% on Wednesday
Dow Jones Futures today
Dow Jones futures fell 0.2% relative to fair value. S&P 500 futures fell 0.15% and Nasdaq 100 futures fell 0.1%.
The Labor Department’s jobs report for October is due out at 8:30 a.m. ET on Friday. Expect big moves, possibly whipsaw action, for Dow futures and Treasury yields.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
IBD experts analyze the stock market rally on IBD Live
Stock market rally
The stock rally lost more ground on Thursday, with the Nasdaq again suffering the most.
The Dow Jones Industrial Average fell 0.5% in Thursday’s trading. The S&P 500 retreated 1.1%. The Nasdaq composite fell 1.7 percent. The small-cap Russell 2000 gave up 0.6%.
The 10-year government yield rose 6 basis points to 4.12%, but from an intraday high of 4.2%. The dollar bounced after a strong upside reversal on Wednesday.
U.S. crude oil prices fell 2% to $88.17 a barrel, amid a strong dollar and concerns about global demand.
Apple Stock, Megacaps
The Apple share sold 4.2 percent. Now down 10.2% for the week, the Dow Jones, S&P 500 and Nasdaq titan have retreated from their 200-day line and dipped below their 50-day line.
Google shares gave up 4.1%, hitting a two-year low. GOOGL stock is down 10.4% for the week.
Microsoft shares fell 2.7% to 214.25, finally breaking below their October low to their worst levels since January 2021. MSFT shares have fallen 9.2% this week.
Amazon stock lost 3.1% to its lowest point since March 2020. AMZN stock has plunged 13.6% this week.
META shares retreated 1.8%, hitting a seven-year low. The Facebook parent has lost 10.4% this week after crashing nearly 24% last week.
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Among the top ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.4%. The iShares Expanded Tech-Software Sector ETF ( IGV ) was down 2.5%, with the MSFT stock a key component. VanEck Vectors Semiconductor ETF ( SMH ) lost 1.2%.
The SPDR S&P Metals & Mining ETF ( XME ) fell 0.3%. The US Global Jets ETF (JETS) fell 0.1 percent. The Energy Select SPDR ETF (XLE) rose 1.85% and the Financial Select SPDR ETF (XLF) fell 1.1%. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.4%.
ARK Innovation ETF ( ARKK ) reflected more speculative story stocks, falling 0.7% and ARK Genomics ETF ( ARKG ) giving up 0.9%.
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Market rally analysis
The stock rally moved to “uptrend under pressure” after Wednesday’s big downside reversal on Fed chief Powell’s hawkish comments.
The Nasdaq closed below the lowest of the follow-up day on October 21. That’s a very bearish sign for the market rally, although the Nasdaq has clearly been the laggard in the current uptrend. The other major indexes are well above FTD lows, although the S&P 500 fell below its 50-day line and the Dow Jones undercut its 200-day line.
The sell-off continued Thursday, with the Nasdaq once again leading the decliners and finishing near lows.
That’s largely because of megacaps Apple, Amazon, Microsoft, Google and Meta Platforms.
The S&P 500, Dow Jones and Russell 2000 fared better, but faded towards the end.
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 its 50-day.
Don’t exaggerate market power outside of Apple and megacaps. The Russell 2000 and the RSP ETF reversed sharply on Wednesday, along with most leading stocks. And they lost more ground on Thursday.
With the Fed once again reinforcing its hawkish stance and Treasury yields rising, the stock market will struggle to hold on, let alone make meaningful progress.
Friday’s jobs report could bolster the market rally, or send the major indexes tumbling toward the bear market.
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What to do now
With the market under pressure and leading stocks volatile, investors should keep exposure light. If the rally picks up again, such as the S&P 500 regaining its 50-day line, it could be a signal to consider gradually increasing exposure again.
There are a number of shares that are relatively close to being actionable. So work on these watch lists. Stay engaged and flexible so you’re ready to add exposure or step aside.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
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