Dow Jones Futures: Jobs report key to market rally as Apple and Google sink

Dow Jones futures slanted lower overnight, along with S&P 500 futures and Nasdaq futures, with the October jobs report in sight.




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The stock market rally, now under pressure, continued to digest aggressive comments from Fed chief Jerome Powell that the maximum or “terminal” fed funds rate could be higher than expected.

Major indices fell on Thursday morning. They bounced off early lows, and the Dow briefly turned positive, but stocks faded at the close.

Megacap’s technology continues to weigh on the main indices, especially the Nasdaq. Microsoft shares joined amazon.com (AMZN), father of Facebook Metaplatforms (META) and main Google Alphabet (GOOGL) by setting bear market lows. Apple (AAPL) is still above its June low, but this week it has fallen back towards its October lows.

Key earnings drivers Thursday night included Amgen (AMGN), Yelp (YELP), EOG Resources (EOG), PayPal (PYPL), square parent Block (QS), progeny (PGNY), cloud flare (NET) and paylocity (PCTY).

Amgen shares were little changed, while Yelp and PYPL shares fell. NET shares also tanked, and cloud software names plummeted overnight. SQ shares soared and PGNY jumped. PCTY was not yet listed.

cardinal health (CAH) reports early Friday, with CAH shares slightly extended from a buy zone.

Job report

Economists expect the October jobs report to show nonfarm payrolls rose by 210,000, with the unemployment rate rising to 3.6%. That would be the third straight month of a hiring slowdown and the smallest job gain since December 2020, but not good enough for the Fed’s liking.

There are reasons to believe that October employment data will be much weaker than expected.

However, other jobs data this week have been better 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 short term. The November jobs report and two CPI inflation reports will also come before the December Fed meeting.

Markets now see a 50.4% chance of a fifth consecutive 75 basis point hike on December 14. That’s an increase of 42% from Wednesday.

Dow Jones Futures Today

Dow Jones futures fell 0.2% against fair value. S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.1%.

The Labor Department’s October jobs report will be released Friday at 8:30 am ET. Expect big moves, possibly unexpected action, for Dow futures and Treasury yields.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.


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stock rally

The stock market rally lost more ground on Thursday, with the Nasdaq suffering the most once again.

The Dow Jones industrial average fell 0.5% in trading on Thursday. The S&P 500 index fell 1.1%. The Nasdaq Composite fell 1.7%. The small-cap Russell 2000 was down 0.6%.

The 10-year Treasury yield rose 6 basis points to 4.12%, but from an intraday high of 4.2%. The dollar jumped after a sharp bullish reversal on Wednesday.

US crude prices fell 2% to $88.17 a barrel, amid a stronger dollar and concerns about global demand.

Apple Stocks, Megacaps

Apple shares were down 4.2%. Now down 10.2% for the week, the Dow Jones, S&P 500 and Nasdaq have all retraced from their 200-day line and plunged below their 50-day line.

Google shares fell 4.1%, hitting a two-year low. GOOGL shares are down 10.4% for the week.

Microsoft shares fell 2.7% to 214.25, finally breaking below their October lows to their worst levels since January 2021. MSFT shares are down 9.2% this week.

Amazon shares lost 3.1% to the lowest point since March 2020. AMZN shares plunged 13.6% this week.

META shares fell 1.8%, hitting a seven-year low. The parent of Facebook has lost 10.4% this week after falling nearly 24% last week.


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ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) was up 0.4%. The iShares Expanded Technology Software Sector (IGV) ETF slid 2.5%, with shares of MSFT 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 SPDR Fund of the Select Health Care Sector (XLV) fell 0.4%.

Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) fell 0.7% and ARK Genomics ETF (ARKG) fell 0.9%.


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Market recovery analysis

The stock market rally moved into a “bullish trend under pressure” after Wednesday’s big reversal to the downside due to aggressive comments from Fed chief Powell.

The Nasdaq closed below the low of the October 21 tracking day. That is a very bearish sign for the market rally, although the Nasdaq has clearly been the laggard in the current uptrend. The other key indices are well above the FTD lows, although the S&P 500 fell below its 50-day line and the Dow broke above its 200-day line.

The selling continued on Thursday, with the Nasdaq once again leading the declines and ending near session lows.

That’s largely due to the megacap platforms of Apple, Amazon, Microsoft, Google and Meta.

The S&P 500, Dow Jones and Russell 2000 fared better but withered at the close.

The Russell 2000 managed to finish above its 50 and 21 day lines.

The Invest S&P 500 Equal Weight ETF (RSP) fell 0.5%, much better than the large-cap S&P 500, but closed lower than its 50-day index.

Don’t overestimate the market’s resilience outside of Apple and the mega-caps. The Russell 2000 and RSP ETF fell sharply on Wednesday, along with most of the leading stocks. And they lost more ground on Thursday.

With the Fed once again reinforcing its hawkish stance and Treasury yields rebounding, the stock market will have a hard time holding on, let alone making a significant breakthrough.

Friday’s jobs report could underpin the market rally or send major indices tumbling towards bear market lows.


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What to do now

With the market under pressure and major stocks volatile, investors should keep their exposure light. If the rally bounces back, such as when the S&P 500 retraces its 50-day line, that 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 flexible so you’re ready to add exposure or move on the sidelines.

Read The Big Picture every day to stay in sync with market direction and major stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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