Dow Jones Futures Rise After Stock Market's Damaging Losses; What To Do Now

Dow Jones futures remained stable on Sunday evening, alongside S&P 500 futures and Nasdaq futures. This comes as significant economic and industry conferences are on the horizon, with earnings season gaining momentum.

The stock market experienced significant declines over the past week. The Nasdaq finally closed beneath the 50-day moving average, while Treasury yields surged to new annual highs.

Nvidia (NVDA) faced a sell-off following record high prices. The semiconductor manufacturer Taiwan Semiconductor (TSM) remained nearly unchanged for the week but retained its buy point amid record sales.

Tesla (TSLA) also fell in value throughout the week, yet the stock found essential support on Friday as it launched the new Model Y.

Delta Air Lines (DAL), FTAI Aviation (FTAI), Globus Medical (GMED), and Constellation Energy (CEG) surged on Friday, while Meta Platforms (META) reclaimed a notable buy point. More generally, energy stocks, discount retailers, and medical products companies demonstrated resilience.

Despite pockets of strength, the overall market has been tumultuous, trending downward. Investors are advised to reduce their stock exposure while preparing for potential rallies.

Nvidia is notable on IBD Leaderboard, and Tesla is also monitored closely. Both Taiwan Semiconductor and Nvidia are listed on IBD 50.

Current Dow Jones Futures

As of now, Dow Jones futures are slightly higher compared to fair value. S&P 500 futures showed little variation, while Nasdaq 100 futures saw a 0.1% increase.

The yield on the 10-year Treasury fell slightly to 4.76%.

Meanwhile, crude oil futures increased by 2%.

It is important to note that movements in Dow futures during off-hours do not always reflect what will happen in regular trading sessions.

Stock Market Overview

The stock market started the week positively, with the S&P 500 initially regaining its 50-day line. However, it soon saw declines, culminating in the S&P 500 and the Nasdaq composite both dropping below this critical level.

The Dow Jones Industrial Average fell by 1.9% last week, hitting its lowest point since Election Day on November 5. The S&P 500 index also lost 1.9%, reaching levels not seen since November 6, while the Nasdaq composite decreased by 2.3%, marking its lowest intraday point since late November. Similarly, the small-cap Russell 2000 dropped by 3.5%, hitting a three-month low.

All major indexes showcased significant declines, significantly undercutting their recent low points.

A positive note is that a rebound for the Nasdaq and S&P 500 above their 50-day lines would signal recovery, with further hurdles ahead at the January 6 intraday highs and the all-time highs from late 2024.

A rally that occurred on Friday faltered in the early afternoon, with the Nasdaq finishing just short of its 50-day line.

On the downside, there is minimal support for the Nasdaq and S&P 500, with the Russell 2000 currently testing its 200-day line. If the main indexes fall beneath Friday's lows decisively, it may indicate the onset of a deeper correction.

The 10-year Treasury yield increased significantly to 4.77%, marking a 17.5 basis point jump - the highest level since November 2023.

Oil prices soared on Friday, climbing 3.5% to $76.57 per barrel, largely due to new sanctions imposed on Russia's oil industry by the U.S. government.

Performance of ETFs

In terms of growth Exchange Traded Funds (ETFs), the Innovator IBD 50 ETF (FFTY) dropped by 3.1% last week, while the iShares Expanded Tech-Software Sector ETF (IGV) fell by 4.2%. The VanEck Vectors Semiconductor ETF (SMH) also experienced a 1.9% decline. Notably, Nvidia and Taiwan Semiconductor are major holdings within the SMH fund.

ARK Innovation ETF (ARKK) fell by 4% last week, with ARK Genomics ETF (ARKG) retreating by 3.7%. Tesla remains a prominent holding in Ark Invest's ETFs, alongside substantial investments in Nvidia.

The SPDR S&P Metals & Mining ETF (XME) saw a 0.4% decrease last week. Conversely, the U.S. Global Jets ETF (JETS) increased by 4.3%, primarily due to strong performance from Delta. The SPDR S&P Homebuilders ETF (XHB) declined by 2.3%, while the Energy Select SPDR ETF (XLE) and the Health Care Select Sector SPDR Fund (XLV) saw gains of 1% and 0.5%, respectively.

Meanwhile, the Industrial Select Sector SPDR Fund (XLI) fell by 1.05%, and the Financial Select SPDR ETF (XLF) dropped by 2.6%.

Nvidia Stock Analysis

Nvidia (NVDA) stock dropped by 5.9% last week, closing at 135.91 and falling below its 50-day line after reaching a record high of 153.13 early Tuesday. The decline followed CEO Jensen Huang's presentation at CES, despite strong reviews from analysts. Additionally, reports indicated that the U.S. plans to impose further restrictions on advanced chips, adding to investor concerns.

Taiwan Semiconductor (TSM) reached a record high of 222.20 on Monday but closed the week only slightly down at 208.46. Nonetheless, TSM holds a cup-with-handle buy point at 205.63, aided by some upswing on Friday.

On Friday, Taiwan Semiconductor reported a remarkable 58% increase in sales in December compared to the previous year, driven by growing AI chip demand from Nvidia and other companies, outperforming analyst predictions.

Tesla Stock Performance

Tesla's stock lost 3.8% over the week, closing at 394.74 and dropping below the 21-day line. However, shares rebounded slightly on Friday, closing off by only 20 cents.

On Friday, Tesla rolled out the updated Model Y, which features a longer range and an increased price compared to the previous version. This new Model Y, dubbed "Juniper," exhibits distinct front and back designs, unlike the subtle changes seen in the latest versions of Model S, X, and 3.

Reports indicate that the refreshed Model Y has already received over 50,000 pre-orders, with deliveries in China slated to begin in March, followed closely by launches in Europe and the U.S.

Currently, all major indexes are in a downtrend, with the Nasdaq below its 50-day line. Leading stocks show some improvement, as several indicated buy signals on Friday with many finding support. However, these could struggle to maintain gains if the market indexes do not rally, particularly those like Nvidia that are trending downwards.

If investors are considering purchasing stocks, a very nimble approach with a swing trader's mindset is essential. Generally, it is advisable to reduce exposure during recent market movements.

It is expected that the stock market will eventually recover, whether that occurs in the coming week, next month, or later. Instead of attempting to hastily predict a market turnaround, investors should wait for clear indicators of strength before seizing opportunities. Staying informed and curating watchlists with stocks holding essential levels and demonstrating relative strength is vital.

The upcoming week will see earnings season pick up speed, featuring notable companies such as JPMorgan Chase (JPM), UnitedHealth (UNH), and Taiwan Semiconductor (TSM). Key conferences, including the JPMorgan Healthcare Conference, will likely reveal numerous preliminary results and announcements, particularly from medical and retail/consumer sectors. Additionally, inflation reports and other economic data will continue to keep the news cycle active.

To remain aligned with market trends and leading stocks, regular engagement with current market analyses is recommended.

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