Dow Jones futures fell Monday morning, along with S&P 500 futures and Nasdaq futures, with Treasury yields moving above 5% briefly. Chevron (CVX) announced a big oil takeover deal.
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A huge week of earnings loom, including Microsoft, Meta Platforms and Google parent Alphabet (GOOGL).
The stock market suffered heavy losses last week amid surging Treasury yields and generally poor reactions to earnings. The Nasdaq just avoided undercutting its Sept. 27 low while small caps set a 52-week low. Leading stocks showed more weakness, with several more buckling on Friday.
Investors should be largely in cash, but staying engaged.
Magnificent Seven stocks Microsoft (MSFT), Google, Amazon.com (AMZN) and Meta Platforms (META) headline a massive week of earnings reports.
ServiceNow (NOW), Vertiv (VRT), Cadence Design Systems (CDNS), CME Group (CME), Weatherford (WFRD) are among other notable reports on tap.
Microsoft stock, Meta Platforms, ServiceNow, Vertiv and Cadence Design Systems are near buy points. Google stock arguably is close to various entries. Amazon stock is lagging, but a strong earnings reaction could be actionable.
Meta Platforms is on IBD Leaderboard, with NOW stock on the Leaderboard watchlist. Meta stock, Cadence Design is on the IBD 50. Google stock and ServiceNow are on the IBD BigCap 20. Microsoft and CDNS stock are on the IBD Long-Term Leaders list.
The video embedded in the article discussed the weekly stock market action while analyzing Microsoft, Meta and Google stock.
10-Year Treasury Yield Tops 5%
The 10-year Treasury yield jumped as high as 5.02%, moving above the 5% level for the first time since 2007. The yield is now at 4.98%.
Last week, the 10-year Treasury bond yield skyrocketed nearly 30 basis points last week to 4.93%. The 10-year bond yield came up to 4.996% intraday Thursday, the highest since 2007.
Dow Jones Futures Today
Dow Jones futures fell 0.4% vs. fair value, with CVX stock a slight drag. S&P 500 futures gave up 0.35% and Nasdaq 100 futures sank 0.4%.
Futures signal that the S&P 500 and Nasdaq composite will open below their recent lows. They’ve come off their worst levels as the 10-year Treasury yield backed off slightly.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Chevron To Buy Hess
Dow Jones giant Chevron will buy Hess (HES) for $53 billion, or $171 a share, in an all-stock deal. Hess shareholders will receive 1.0250 shares of Chevron for each Hess share.
CVX stock fell modestly. HES stock edged higher.
Earlier this month, Exxon Mobil (XOM) agreed to buy Permian Shale giant Pioneer Natural Resources (PXD) for $59.5 billion.
Join IBD experts as they analyze leading stocks and the market on IBD Live
Stock Market
The stock market tried to hang on or move higher early in the week, but hit resistance and fell significantly over the last three sessions. Some of Friday’s action in stocks and bonds likely reflected investor caution heading into another weekend of Israel-Hamas fighting.
The Dow Jones Industrial Average fell 1.6% in last week’s stock market trading. The S&P 500 index tumbled 2.4%. The Nasdaq composite sold off 3.2%.
On Monday, the Nasdaq came within a few points of undercutting the Sept. 27 low. The tech-heavy index hit a four-month closing low Friday and finished below the low of its Oct. 6 follow-through day, a highly bearish sign.
The S&P 500 fell just below its 200-day line and also came very close to undercutting recent lows. The Dow Jones also tumbled back below its 200-day.
Market breadth remains anemic, with losers outpacing winners and new lows crushing new highs.
The small-cap Russell 2000 shed 2.3%, hitting a 52-week low. The Invesco S&P 500 Equal Weight ETF (RSP) sank 2.3%, hitting a seven-month low. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) retreated 3%% to a four-month low, undercutting the 200-day line.
Leading stocks came under heavy pressure. Some of the most-resilient names started to crack Friday.
It’s hard to see the market having a sustained run as long as the 10-year Treasury yield is moving higher. Despite Friday’s retreat, the 10-year bond yield hasn’t given any real indication that it’s ready to level off or pull back meaningfully.
U.S. crude oil futures rose 1.2% to $88.75 a barrel last week, as Mideast tensions raised supply fears. Crude backed off a Friday morning move above $90. Copper prices sank 1.1% to the lowest close in nearly a year.
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ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) tumbled 4% last week. The iShares Expanded Tech-Software Sector ETF (IGV) shed 3%, but looked OK until Friday’s 2.5% tumble. Microsoft stock and ServiceNow are major members. The VanEck Vectors Semiconductor ETF (SMH) sold off 4.2%. CDNS stock is part of IGV and SMH.
SPDR S&P Metals & Mining ETF (XME) fell 3.1% last week. SPDR S&P Homebuilders ETF (XHB) plunged 4.5%. The Energy Select SPDR ETF (XLE) edged up 0.75%. The Health Care Select Sector SPDR Fund (XLV) fell 1.6%. The Industrial Select Sector SPDR Fund (XLI) skidded 3%.
The Financial Select SPDR ETF (XLF) sank 3%, with CME stock part of the ETF.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) plunged 4.6% last week and ARK Genomics ETF (ARKG) dived 5.45%.
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Microsoft earnings are due Tuesday night. Analysts expect Microsoft earnings per share to rise 13% to $2.65 in fiscal Q1. Revenue is seen climbing 9% to $54.5 billion. Azure cloud-computing growth will be key. Investors also will want some indication on when AI will spur a revenue boost. MSFT stock fell 0.3% to 326.67 for the week, retreating Friday to just above the 50-day line. Microsoft has a 366.78 buy point, but investors could use 336.88 or 340.86 as early entries.
Google earnings also are late Tuesday. Earnings are rebounding, helped by easier comparisons. AI also will be in focus. Google stock has held up well, 1.3% to 135.60 last week. GOOGL stock now has a three-weeks-tight pattern and possible 50-day/10-week support. But those would be aggressive entries in a weak market.
Meta earnings are on tap after Wednesday’s close. Cost curbs and revived advertising has fueled the way. META stock fell 1.9% to 308.65, backing off a 362.20 buy point and moving back toward the 50-day line.
Amazon earnings loom Thursday night. Earnings should surge as Amazon rebounds from a tough year earlier. AMZN stock sank 3.6% to 125.17 last week, backing away from the 50-day line. Amazon has a 145.86 buy point, but a decisive move above the 50-day line would offer an early entry.
These earnings reports will have huge implications for AI, cloud-computing, software, e-commerce and more.
Not only are these earnings important, but they will have a huge impact on key sectors and the overall market. Amazon, Google and Microsoft are cloud-computing giants. Microsoft, Google, Meta and Amazon are big artificial intelligence players, with ServiceNow also touting its AI efforts and Vertiv a big AI-related play. Microsoft and ServiceNow will provide insight into business software.
Other Key Earnings
Cadence Design earnings are due Monday night. CDNS stock fell 4.6% to 238.64 ast week, back below a 247.50 cup-with-handle buy point.
ServiceNow earnings are scheduled for Tuesday night. NOW stock sank 1.3% to 542.51. Shares got above the 50-day line Tuesday, but not for long, sliding 3.1% on Friday. ServiceNow stock has a 607.90 buy point from a double-bottom base. A move above Tuesday’s high of 574.25 would present an early entry.
Vertiv earnings are set for early Wednesday. VRT stock tumbled 6% last week to 36.74, falling well below a 40.41 flat-base buy point and undercutting the 50-day line, according to MarketSmith analysis.
CME earnings Wednesday morning. CME stock fell 3% to 212.81, but is still in a buy zone from a flat base, base-on-base pattern.
WFRD earnings Wednesday morning. WFRD stock fell gave up 2.7% to 92.97 drifting back toward the 50-day line. Shares are working on a short consolidation. A move above 97.88 would act as an early entry.
Weatherford is just of many oil-related names reporting in the coming week, with Oceaneering International (OII), Baker Hughes (BKR), Halliburton (HAL) on tap, as well as Exxon Mobil (XOM) and Chevron (CVX) on Friday.
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What To Do Now
The S&P 500 and Nasdaq are on the edge of recent lows, with leading stocks ailing. Yes, some stocks are holding up reasonably well, such as Meta and Google, but even those were losing ground amid the heavy selling. It’s hard to fight the market, and the market is yielding to bonds.
Investors should pay close attention to stocks with strong relative strength. But it’s not a time to be buying. Instead, it’s been a week to scale out of positions.
Remember, in a market downturn, relative winners are often absolute losers.
Earnings could be a catalyst for Microsoft, Vertiv and the whole market, but which direction? So far stocks have generally been selling off on earnings or guidance.
If the market rebounds early this week, don’t get excited. The major indexes need strong gains before signaling an end to the recent downturn. The earnings wave adds to the uncertainty.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on X/Twitter at @IBD_ECarson, Threads at @edcarson1971 and Bluesky at @edcarson.bsky.social for stock market updates and more.
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Read More:Dow Jones Futures Fall As 10-Year Treasury Yield Tops 5%; Microsoft, Meta Lead Earnings Wave
2023-10-23 11:02:00
