“Dow Jones Futures brace for a potential market correction as Apple’s performance and the Federal Reserve’s actions hang in the balance, while all eyes turn to Microsoft as it takes the lead among the must-watch stocks.”
The Dow Jones futures, S&P 500 futures, and Nasdaq futures will open on Sunday evening, signaling the start of another busy week of news. The stock market correction has intensified, with major indexes falling to multimonth lows. While the Nasdaq saw a slight gain on Friday, it was generally a weak session. Investors are advised to be cautious and hold onto cash. However, there are four big-cap tech stocks worth watching: Amazon, Meta Platforms, Microsoft, and ServiceNow. All of these stocks have already released their earnings and have shown multiple quarters of accelerating growth.
In terms of upcoming events, EV chipmaker On Semiconductor will report third-quarter earnings on Monday, while Arista Networks is expected to release its earnings report on Monday night. Apple will unveil new Mac computers on Monday night and will release its earnings report on Thursday night. Concerns about iPhone 15 demand, especially in China, have caused Apple stock to undercut its 200-day moving average.
The Federal Reserve will also be meeting this week, with little expectation of a rate hike on Wednesday. Several policymakers have indicated that there is little need for further action, as long-term Treasury yields have been surging. The week will be capped off with the release of the October jobs report on Friday.
Meta stock is on the IBD Leaderboard, while NOW stock is on the Leaderboard watchlist. Microsoft stock and Meta are on the IBD 50, and Microsoft and ServiceNow stock are on the IBD Big Cap 20.
In terms of market performance, the stock market correction has worsened, with indexes falling sharply once again. The Dow Jones Industrial Average fell 2.1% last week, while the S&P 500 index tumbled 2.5% and the Nasdaq composite skidded 2.6%. The small-cap Russell 2000 fell 2.5% for the week, reaching its lowest level since November 2020.
Tech stocks have remained leaders, but better market breadth is crucial. The Nasdaq needs to reclaim its 200-day line and retake the 21-day to break the short-term downtrend. A move above the 50-day line may break the downtrend from late July.
In terms of ETFs, the iShares Expanded Tech-Software Sector ETF and the VanEck Vectors Semiconductor ETF both retreated last week. Reflecting more speculative story stocks, the ARK Innovation ETF and the ARK Genomics ETF also saw significant declines.
Looking at individual stocks, Microsoft stock rose 1% last week and is currently above its 50-day line. Meta stock saw a decline of 3.9% for the week but bounced back slightly on Friday. Amazon stock jumped 6.8% on Friday, rebounding from the 40-week line. ServiceNow stock rose 2.1% last week and is just below the 50-day line.
Overall, the stock market is in a correction, and it is advised to be largely in cash. There needs to be several days of strong performance to signal that the downturn might be over. It is important to focus on stocks showing relative strength, such as Microsoft and ServiceNow. However, it is still unclear which stocks and sectors will lead the market in the next uptrend, so it is important to stay engaged and keep running screens to stay in sync with the market direction.