While S&P 500 futures and Nasdaq futures were little changed overnight, October’s jobs report loomed large.
The stock market rally, now under pressure, continued to digest Fed chief Jerome Powell’s hawkish comments that the peak or “terminal” Fed funds rate could be higher than previously expected.
Major indexes fell on Thursday morning. They bounced off early lows, with the Dow Jones briefly turning positive, but stocks faded at the close.
Megacap technologies continue to weigh on major indexes, especially the Nasdaq. Microsoft stock joined Amazon.com (AMZN), Facebook parent Meta Platforms (META) and Google Parent Alphabet (GOOGL) bear market bottom set. apple ( AAPL ) is still above the June lows, but has returned to October lows this week.
Thursday night’s main earnings movers include Amgen (AMGN), rebuke (YELP), EOG Resources (EOG), PayPal (PYPL), class parent Block (SQ), children (PGNY), Cloudflare (net) and Paylocity (PCTY).
Amgen stock was little changed while Yelp and PYPL stocks fell. Net stocks also plunged, with cloud software names cratering overnight. SQ stock rose and PGNY jumped. PCTY was not yet traded.
Cardinal Health (CAH) reports early on Friday, CAH stock has been slightly extended from a buy zone.
Economists expect the October jobs report to show nonfarm payrolls rose by 210,000, pushing the unemployment rate up to 3.6%. That would be the third straight month of the fewest hirings and the smallest job gains since December 2020, but not enough to the Fed’s liking.
There are reasons to believe that October employment data will be weaker than expected.
However, other labor data this week, including September job openings and weekly jobless claims, came in hotter than expected.
Friday’s October jobs report will be key to Fed rate hike expectations and possibly stock market direction, 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 52% chance of a 50-basis-point hike on December 14.
Dow Jones Futures Today
Dow Jones futures fell 0.2% versus fair value. S&P 500 futures fell 0.1% and Nasdaq 100 futures rose a fraction.
The 10-year Treasury yield rose 3 basis points to 4.15%.
The Labor Department’s October jobs report is due Friday at 8:30 a.m. ET. Expect big moves, possibly whiplash action, for Dow futures and Treasury yields.
Remember that overnight action in Dow futures and elsewhere does not translate into actual trading in the next regular stock market session.
IBD experts analyze the stock market rally on IBD Live
Stock market rally
The stock market rally lost more ground Thursday, with the Nasdaq once again suffering the most.
The Dow Jones Industrial Average fell 0.5 percent in stock market trading Thursday. The S&P 500 index retreated 1.1%. The Nasdaq Composite fell 1.7%. The small-cap Russell 2000 dropped 0.6%.
The 10-year Treasury yield rose 6 basis points to 4.12%, but closed at an intraday high of 4.2%. The dollar popped after a strong reversal on Wednesday.
U.S. crude oil prices fell 2% to $88.17 a barrel, amid concerns about a strong dollar and global demand.
Apple Stock, Megacaps
Apple stock sold off 4.2%. Now down 10.2% for the week, the Dow Jones, the S&P 500 and the Nasdaq titan have bounced back from their 200-day line and slipped below their 50-day line.
Google stock fell 4.1%, hitting a two-year low. GOOGL stock is down 10.4% for the week.
Microsoft stock fell 2.7% to 214.25, finally breaking below October’s low to its worst level since January 2021. MSFT stock has skidded 9.2% this week.
Amazon stock lost 3.1% to its lowest point since March 2020. AMZN stock sank 13.6% this week.
META stock retreated 1.8%, hitting a seven-year low. Facebook Parent has lost 10.4% this week after crashing nearly 24% last week.
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Among the best ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 0.4%. The iShares Expanded Tech-Software Sector ETF ( IGV ) skidded 2.5%, with MSFT stock a major 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%. The Energy Select SPDR ETF (XLE) rose 1.85% and the Financials Select SPDR ETF (XLF) rose 1.1%. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.4%.
Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) lost 0.7% and the ARK Genomics ETF ( ARKG ) lost 0.9%.
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Market Rally Analysis
The stock market rally moved to “uptrend under pressure” after Wednesday’s big drop on Fed chief Powell’s hawkish comments.
The Nasdaq closed below the October 21 follow-through day’s low. This is a very weak sign for a market rally, although the Nasdaq is clearly lagging behind in the current uptrend. Other major indexes are above FTD lows, although the S&P 500 has fallen below its 50-day line and the Dow Jones has breached its 200-day line.
The sell-off continued Thursday, with the Nasdaq again leading declines and near session lows.
That’s in large part due to megacaps Apple, Amazon, Microsoft, Google and Meta Platforms.
The S&P 500, Dow Jones and Russell 2000 performed well, but were off.
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%, better than the megacap-heavy S&P 500, but closed below its 50-day low.
Don’t exaggerate market rally resilience outside of Apple and megacaps. The Russell 2000 and RSP ETF turned sharply higher on Wednesday, along with several major stocks. And they lost more ground Thursday.
With the Fed once again strengthening its hawkish stance and Treasury yields rebounding, the stock market has stopped making meaningful progress.
Friday’s jobs report could put an end to a market rally, or push the major indexes to bear market lows.
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what to do now
With markets under pressure and major stocks volatile, investors should keep their exposure light. If the rally rebounds, such as the S&P 500 reclaiming its 50-day line, that could be a signal to reconsider gradually increasing exposure.
There are many stocks that are relatively close to being viable. So work on those watchlists. 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 key stocks and sectors.
Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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