Dow Jones futures fell overnight, along with S&P 500 and Nasdaq futures, following disappointing earnings reports from Apple (AAPL) and Amazon.com (AMZN). Additionally, the July jobs report is due early Friday, adding further uncertainty.
The stock market rally faced a setback on Thursday, undermining Wednesday’s bullish momentum. Weak economic data heightened recession fears, causing the 10-year Treasury yield to drop below 4%. The Russell 2000 experienced the largest loss, while the S&P 500 and Nasdaq reversed direction, breaching key levels.
Nvidia (NVDA) saw a sharp reversal from the 50-day moving average amid a day of significant market declines and poor breadth. Meta Platforms (META), which initially surged 11%, ended the day with a 4.3% gain as many earnings-driven gains evaporated.
Several companies, including Coinbase (COIN), Vertex Pharmaceuticals (VRTX), MercadoLibre (MELI), Monolithic Power (MPWR), DoorDash (DASH), Snapchat parent Snap (SNAP), and Intel (INTC), reported earnings Thursday night. Intel announced job cuts and a suspension of its dividend.
Among the post-earnings reactions, MELI, DoorDash, and Monolithic Power saw substantial gains, while Coinbase had a modest increase. Intel and Snap stocks suffered significant losses, and Vertex remained relatively unchanged.
Nvidia is currently listed on the IBD Leaderboard.
Dow Jones Futures Today
Dow Jones futures dropped 0.6% compared to fair value, with Apple and Intel stocks both being Dow components. S&P 500 futures fell 0.85%, and Nasdaq 100 futures lost 1.4%, with Apple and Amazon being major constituents of both indices. The 10-year Treasury yield slipped to 3.96%.
The upcoming jobs report is expected to influence Dow futures and Treasury yields significantly. Nonfarm payrolls are anticipated to rise by 180,000, down from June’s 206,000, while the jobless rate is forecasted to remain at 4.1%, and average hourly earnings are expected to increase by 0.3%.
Stock Market Expectations Breaker
After Wednesday’s bullish performance, the stock market experienced a sharp reversal on Thursday. The major indexes erased most or all of Wednesday’s AI and Fed-driven gains, prompted by disappointing July ISM manufacturing data and June construction spending, which fueled recession concerns. Despite closing off their worst levels, the Dow Jones Industrial Average fell 1.3%, remaining above its 21-day line. The S&P 500 dropped 1.4%, falling below both the 21-day and 50-day lines. The Nasdaq composite lost 2.3%, and the small-cap Russell 2000 slid 3%, though it stayed above the 21-day line.
U.S. crude oil prices decreased by 2.05% to $76.31 per barrel, while Bitcoin fell 2.85% to $63,379.19, extending its weekly losses amidst a general market sell-off. The 10-year Treasury yield plunged 13 basis points to 3.98%, falling below 4% for the first time since early February. The two-year yield dropped 17 basis points to 4.16%, the lowest since January.
Fed Chair Jerome Powell signaled potential rate cuts, yet investors worry that these actions may be too late. Despite the sharp declines, the CBOE Volatility Index (VIX) rose to a three-month high, indicating increased market fear, which can sometimes signal a temporary market bottom.
ETFs Performance
Growth ETFs were impacted, with the Innovator IBD 50 ETF (FFTY) falling 2.7%, the iShares Expanded Tech-Software Sector ETF (IGV) losing 1.6%, and the VanEck Vectors Semiconductor ETF (SMH) plunging 6.5%, with Nvidia being the top component.
Speculative story stocks also suffered, as the ARK Innovation ETF (ARKK) tumbled 5.1% and the ARK Genomics ETF (ARKG) declined 3.5%. Sector-specific ETFs saw significant losses, including SPDR S&P Metals & Mining ETF (XME) dropping 4.1%, SPDR S&P Homebuilders ETF (XHB) falling 3.2%, Energy Select SPDR ETF (XLE) losing 2.65%, and Financial Select SPDR ETF (XLF) declining 1.4%.
Apple and Amazon Earnings
Apple’s earnings slightly beat expectations, leading to a modest rise in its stock price during after-hours trading. However, shares fell 1.7% on Thursday, dipping below the 21-day line.
Amazon reported earnings that beat expectations, but sales fell short. Amazon Web Services revenue slightly exceeded forecasts. The company also issued lower-than-expected Q3 revenue guidance, causing its stock to drop significantly in late trading. Shares fell 1.6% on Thursday after initially moving above the 50-day line.
Nvidia’s Market Reversal
Nvidia saw a decent gain at the open, briefly touching its 50-day moving average after a 12.8% spike on Wednesday. However, as the market reversed, Nvidia’s stock led the decline, falling 6.7% to 109.21. Reports indicated that the Justice Department is reviewing Nvidia’s AI chip dominance and its planned takeover of startup Run
, according to Politico.
What to Do Now
Thursday’s market performance was a stark contrast to Wednesday’s gains. Investors need to be
cautious, especially those who acted on bullish signals. It’s advisable to avoid making new buys and consider exiting recent positions.
Friday’s jobs report could either calm or exacerbate recession fears, potentially impacting market reactions. Investors should also monitor the latest earnings reports from major companies like Apple and Amazon.
