Dow Jones futures fell overnight, along with S&P 500 and Nasdaq futures as the October jobs report looms.
The stock market rally, now under pressure, continued to digest hawkish comments from Fed Chief Jerome Powell that the top or “terminal” federal funds rate could be higher than expected.
Major indexes fell on Thursday morning. They bounced off early lows, with the Dow briefly turning positive, but stocks faded on the close.
Megacap technologies continue to weigh on major indices, particularly the Nasdaq. Microsoft shares joined Amazon.co.uk (AMZN), Facebook parent Metaplatforms (META) and parent company of Google Alphabet (GOOGL) to set bear market lows. Apple (AAPL) is still above its June low, but has fallen this week towards its October lows.
Key Drivers of Thursday Night Earnings Included Amgen (AMGN), Yelp (YAP), EOG Resources (EOG), PayPal (PYPL), square parent To block (SQ), Progyny (PGNY), Cloudy (NET) and Paylocity (PCTY).
Amgen stock was little changed while Yelp and PYPL stock fell. NET stock also plunged, with cloud software names cratering overnight. SQ stock soared and PGNY surged. PCTY was not yet marketed.
Cardinal Health (CAH) reports early Friday, with CAH shares slightly extended from a buy zone.
Report on the works
Economists expect the October jobs report to show an increase of 210,000 in nonfarm payrolls, with the unemployment rate hitting 3.6%. It would be the third straight month of slowing 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’s employment data will be much weaker than expected.
However, other labor data this week was warmer than expected, including September job openings and weekly jobless claims.
Friday’s October jobs report will be key to Fed rate hike expectations and perhaps stock market direction, at least in the near term. The November jobs report and two CPI inflation reports will also arrive ahead of the Fed’s December meeting.
Markets now see a 50.4% chance of a fifth consecutive 75 basis point hike on Dec. 14. That’s up from 42% on Wednesday
Dow Jones Futures Today
Dow Jones futures fell 0.15% from fair value. S&P 500 futures fell 0.2% and Nasdaq 100 futures fell 0.15%.
The Labor Department’s October jobs report is due out at 8:30 a.m. ET on Friday. Expect big moves, perhaps some seesaw action, for Dow Jones futures and Treasury yields.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into 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 further ground on Thursday, with the Nasdaq again suffering the most.
The Dow Jones Industrial Average fell 0.5% in stock trading Thursday. The S&P 500 index fell 1.1%. The Nasdaq composite fell 1.7%. Small cap Russell 2000 lost 0.6%.
The 10-year Treasury yield rose 6 basis points to 4.12%, but after an intraday high of 4.2%. The dollar jumped after a sharp upside reversal on Wednesday.
U.S. crude oil prices fell 2% to $88.17 a barrel amid a strong dollar and global demand concerns.
Apple Stock, Megacaps
Apple shares fell 4.2%. Now down 10.2% for the week, the Dow Jones, S&P 500 and Nasdaq titan fell back from its 200-day line and broke below its 50-day line.
Google stock fell 4.1% to its lowest level in two years. GOOGL stock is down 10.4% for the week.
Microsoft stock slipped 2.7% to 214.25, finally dropping below its October lows to its worst levels since January 2021. MSFT stock has slipped 9.2% this week.
Amazon stock lost 3.1% to the lowest since March 2020. AMZN stock plunged 13.6% this week.
META stock fell 1.8% to a seven-year low. Parent Facebook lost 10.4% this week after falling nearly 24% last week.
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Among the top ETFs, the Innovator IBD 50 (FFTY) ETF edged up 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) slipped 2.5%, with MSFT stock a major contributor. ETF VanEck Vectors Semiconductor (SMH) lost 1.2%.
The SPDR S&P Metals & Mining ETF (XME) fell 0.3%. The US Global Jets ETF (JETS) fell 0.1%. ETF Energy Select SPDR (XLE) rose 1.85% and ETF Financial Select SPDR (XLF) lost 1.1%. The SPDR healthcare sector fund (XLV) fell 0.4%.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) slid 0.7% and ARK Genomics ETF (ARKG) fell 0.9%.
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Market rally analysis
The stock market rally shifted to a “pressurized uptrend” after Wednesday’s big downside reversal on Fed Chief Powell’s hawkish comments.
The Nasdaq closed below the October 21 tracking day low. This is a very bearish sign for the market rally, although the Nasdaq has clearly been lagging the current uptrend. Other key indexes are well above the FTD lows, although the S&P 500 fell below its 50-day line and the Dow Jones rose above its 200-day line.
The selling continued on Thursday, with the Nasdaq again leading the declines and ending near session lows.
This is largely due to Apple, Amazon, Microsoft, Google, and Meta Platforms megacaps.
The S&P 500, Dow Jones and Russell 2000 fared better, but faded at the close.
The Russell 2000 managed to finish above its 50 and 21 day lines.
The Invest S&P 500 Equal Weight (RSP) ETF fell 0.5%, much better than the megacap S&P 500, but closed below its 50-day mark.
Don’t overstate the resilience of the market rally outside of Apple and megacaps. The Russell 2000 and RSP ETFs reversed sharply on Wednesday, along with most major stocks. And they lost ground again on Thursday.
As the Fed once again strengthens its hawkish stance and Treasury yields rebound, the stock market will struggle to hold on, let alone make a meaningful advance.
Friday’s jobs report could bolster the market’s recovery or send major indexes down to bear market lows.
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What to do now
With a market under pressure and volatile top-tier stocks, investors should keep their exposure light. If the rally rebounds, like the S&P 500 recovering its 50-day line, it could be a signal to consider gradually increasing exposure again.
There are a number of actions that are relatively close to being actionable. So work on those watchlists. Stay engaged and be flexible so you’re ready to add exposure or pass away.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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