NASDAQ, S&P 500, Dow Jones Analysis – Stocks Retreat Amid Profit-Taking

Key Insights

  • S&P 500 declined amid a strong pullback in tech and energy stocks. 
  • The tech-heavy NASDAQ was the biggest loser among major indices today. 
  • Dow Jones’ performance was impacted by the sell-off in Johnson & Johnson shares.

S&P 500

S&P 500
S&P 500 300123 Daily Chart

S&P 500 retreats as traders take some profits off the table ahead of the Fed meeting.

Today, traders focused on Dallas Fed Manufacturing Index report, which exceeded analyst expectations but did not provide any support to stocks.

Today’s pullback is broad, and all market segments are moving lower. Consumer Defensive and Utilities stocks outperform as traders search for safe-haven assets.

The sell-off is led by tech stocks. These stocks showed strong performance in recent trading sessions so it’s not surprising to see that traders want to take some money off the table ahead of the Fed decision, which will be released on Wednesday.

From the technical point of view, S&P 500 failed to settle above the important resistance level at 4100. Most likely, S&P 500 will not be able to get above the key resistance ahead of the Fed decision.

NASDAQ

NASDAQ
NASDAQ 300123 Daily Chart

NASDAQ is under strong pressure today as tech stocks retreat. NVIDIA, which had a great start of the year, is down by 4.5% in today’s trading session.

Other big tech stocks like Microsoft and Meta are also losing ground as traders take profits after the recent moves.

Dow Jones

Dow Jones
Dow Jones 300123 Daily Chart

Dow Jones is also moving lower today. The pullback is led by Johnson & Johnson stock, which is down by more than 3% as the court ruled that the company could not use the bankruptcy of its unit to resolve talc lawsuits.

Meanwhile, Chevron is down by 2.4% as traders continue to take profits near all-time highs and react to the pullback in the oil markets.

For a look at all of today’s economic events, check out our economic calendar.

NASDAQ, S&P 500, Dow Jones Analysis – Markets Gain Ground As Tech Stocks Rally

Key Insights

  • S&P 500 moved towards the 4050 level as tech stocks enjoyed strong support. 
  • The tech-heavy NASDAQ tested the 12,000 level. 
  • Dow Jones underperformed as IBM shares declined by more than 4% after the company’s report missed analyst expectations.

S&P 500 (SPX500)

S&P 500
S&P 500 260123 Daily Chart

S&P 500 moved to new highs as traders reacted to the better-than-expected GDP data. The New Home Sales report also exceeded analyst expectations and provided additional support to stocks.

Tesla was up by more than 9% in today’s trading session after beating earnings estimates. The company’s encouraging production outlook provided additional support to the stock.

Western Digital gained 5% as Bloomberg reported that merger talks with Kioxia Holdings were progressing well.

From the technical point of view, S&P 500 managed to get above the recent resistance level and continues to rebound. The next significant resistance level for S&P 500 is located at 4100.

NASDAQ (NAS100)

NASDAQ
NASDAQ 260123 Daily Chart

NASDAQ gained strong upside momentum as demand for tech stocks remained strong. NASDAQ was the best performer among major U.S. indices today.

Big names like Apple, Microsoft, NVIDIA, Alphabet, and Meta have enjoyed strong support today, so NASDAQ tested multi-week highs.

Dow Jones (US30)

Dow Jones
Dow Jones 260123 Daily Chart

Dow Jones moved higher but failed to gain strong upside momentum due to the sell-off in IBM shares.

IBM stock declined by more than 4% in today’s trading session as traders reacted to the disappointing earnings report, which missed analyst expectations. The company announced that it would cut 3,900 jobs.

Interestingly, job cuts did not provide support to IBM stock. The market remains cautious, and traders do not believe that job cuts will lead to material improvements in the financial performance.

Chevron was up by more than 4% as the company announced a $75 billion buyback. The record buyback plans pushed Chevron stock closer to all-time high levels.

For a look at all of today’s economic events, check out our economic calendar.

Best 5 Dividend Aristocrat Stocks for 2023

Genuine Parts Company (GPC) Analysis

The auto parts distributor Genuine Parts Company was founded in 1928. The business has grown steadily and so has the dividend. The current dividend yield is 2.1% and the 3Y dividend growth rate is 17.4%.

The current P/E is slightly elevated compared to the market at 20.4. But what makes this stock a top dividend aristocrat is the strong buying in the shares. On the chart, you can see green bars that mean each time the stock gained in price as volumes surged (indicative of institutional demand):

Source: www.mapsignals.com

Archer-Daniel-Midland Co. (ADM) Analysis

Rising food costs have kept Archer-Daniels-Midland in demand in 2022 which could continue in 2023.

The current dividend yield is 1.8% and the 3Y dividend growth rate is +14.3%.

The current P/E is 12.2, cheaper than the overall market. Below you’ll notice a healthy uptrend over the last 6-months:

Source: www.mapsignals.com

Chevron Corp. (CVX) Analysis

Oil & gas giant Chevron has been under heavy accumulation in 2022. This growth is indicated on the chart below with the green bars.

The current PE sits at a modest 10.1 times. The dividend yield is 3.2% with a 3Y dividend annual growth rate of 19.3%:

Source: www.mapsignals.com

AbbVie, Inc. (ABBV) Analysis

A drugmaker AbbVie, Inc. has a rich history of growing its dividend.

The current dividend yield is a hefty 3.9%. The 3Y dividend growth rate is 33.4%.

Below you’ll see that since November, the shares have been in demand:

Source: www.mapsignals.com

Walmart Inc. (WMT) Analysis

The discount wholesaler Walmart dominates grocery and other consumer product categories. The PE is elevated at 44.9, however, the next 12 months PE is estimated at a digestible 22.2Xs.

The current dividend yield sits at 1.5% and the 3Y dividend growth rate is +5.7%.

Notably, the stock has seen 6 Big Money buy signals in the last 6-months:

Source: www.mapsignals.com

Bottom Line and Explanatory Video

GPC, ADM, CVX, ABBV, & WMT represent top dividend aristocrat stocks for 2023 in my opinion. Strong dividend growth and historical Big Money buy signals make these stocks worthy of extra attention.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: As of the time of this writing, the author holds long positions in ABBV in personal and managed accounts and WMT in personal accounts. He holds no positions in GPC, ADM, or CVX at the time of this writing.

NASDAQ, S&P 500, Dow Jones Analysis – Stocks Pull Back From Session Highs After Hawkish FOMC Minutes

Key Insights

  • S&P 500 failed to settle above the resistance at 3860 and pulled back towards the 3840 level after the release of FOMC Minutes. 
  • NASDAQ has also found itself under pressure amid a strong sell-off in Microsoft shares, which was triggered by a downgrade from UBS. 
  • Dow Jones swung between gains and losses. Microsoft’s performance has also put pressure on the index. 

S&P 500

S&P 500

S&P 500 moved away from session highs after the release of the hawkish FOMC Minutes.

FOMC Minutes indicated that Fed members remained focused on the central bank’s fight against inflation. According to the FOMC Minutes, “No participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023. Participants generally observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2 percent, which was likely to take some time.”

At this point, it looks that some traders do not believe that the Fed will be able to push the interest rate above the 5.00% level as the economic data will force the central bank to drop its aggressive plans. Today’s ISM Manufacturing PMI report, which showed that factory activity contracted, showed that higher interest rates have already started to put material pressure on the economy.

NASDAQ

NASDAQ

The hawkish FOMC Minutes have also put pressure on NASDAQ, which is sensitive to the interest rate outlook.

The weak performance of Microsoft stock, which is down by more than 5% in today’s trading session, has also hurt NASDAQ’s performance. The stock gained downside momentum after UBS downgraded Microsoft amid worries about slowing growth of its cloud services and Office.

Alphabet and Amazon have also moved lower today as traders focused on the potential obstacles for growth of these mega cap companies.

Dow Jones

Dow Jones

Dow Jones moved back towards the negative territory after the release of the FOMC Minutes. The weak performance of Microsoft, UnitedHealth Group, and Honeywell put material pressure on the index.

Interestingly, the losses of the only energy stock in the Dow Jones, Chervon, were limited despite the major pullback in the oil markets which pushed WTI oil towards the $73 level.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Gains Ground As Exxon Mobil Tests All-Time Highs

Key Insights

  • S&P 500 gained upside momentum at the start of the week as leading energy stocks tested new highs. 
  • NASDAQ Composite was mostly flat in a choppy trading session, although some leading tech stocks were trying to rebound. 
  • A move above 3805 will push S&P 500 towards the resistance at 3835.

S&P 500 Moves Higher Ahead Of Midterm Elections

S&P 500 gained ground at the start of the week as energy stocks moved higher. The tech-heavy NASDAQ Composite was mostly flat in today’s trading session. Apple, Amazon, and Tesla remained under pressure, while Meta continued to rebound from yearly lows.

Today’s trading has been choppy as market participants were somewhat nervous ahead of the U.S. midterm elections.

From a big picture point of view, the market is slowly rebounding after the recent sell-off. It remains to be seen whether election results will have a significant impact on market mood as Fed’s policy remains the key catalyst for S&P 500.

The relative weakness of tech stocks is alarming as it shows that the market is not ready for a sustainable rebound. In the last three months, energy stocks were the only group that managed to move higher. Other market segments have been under pressure.

If tech remains weak while energy stocks enjoy support, the choppy market behavior will continue. For example, leading oil companies like Exxon Mobil and Chevron are testing all-time highs today, while Tesla is trading at multi-month lows.

S&P 500 Is Moving Towards The Resistance At 3805

S&P 500

S&P 500 settled above the resistance at 3760 and is moving towards the next resistance level at 3805. RSI remains in the moderate territory, and there is plenty of room gain additional upside momentum in case the right catalysts emerge.

If S&P 500 settles above the resistance at 3805, it will head towards the next resistance level at 3835. A successful test of this level will open the way to the test of the resistance at 3885.

On the support side, the previous resistance level at 3760 will serve as the first support level for S&P 500. In case S&P 500 declines below this level, it will head towards the support at 3725. A move below the 3725 level will push S&P 500 towards the support at 3690.

For a look at all of today’s economic events, check out our economic calendar.

Biden May Raise The Idea Of A Windfall Tax On Energy Producers

Key Insights

  • The U.S. administration continues to battle against high gas prices.
  • The U.S. President Joe Biden is reportedly ready to raise the idea of a windfall tax on the profits of energy producers. 
  • The reports had little impact on commodity prices, while energy stocks have found themselves under some pressure. 

U.S. Administration Remains Focused On High Gas Prices

According to recent reports, U.S. President Joe Biden may soon discuss the possibility of imposing a windfall tax on the profits of energy companies. If the reports are correct, the idea will be floated just days ahead of U.S. midterm elections.

The U.S. administration wants to put pressure on the prices at the pump that fuel inflation, which has settled above the 8.00% level.

Any additional taxes will have to be approved by the Congress, so the future of the idea may depend on the results of the upcoming elections.

Energy Stocks Pull Back From Highs

Typically, higher taxes discourage higher production levels as energy companies’ investments decline.

However, the news did not provide any material support to WTI oil, which continued its attempts to settle below the support level at $86.20. Natural gas gained 9% today, but this move was triggered by higher LNG demand.

Not surprisingly, the news had a bigger impact on energy stocks. Exxon Mobil, Chevron, ConocoPhillips, and other stocks in this market segment moved away from daily highs. Traders worry that higher taxes will cut the profits of energy companies. In addition, the continued focus on energy companies’ dividends may lead to unfavorable legislative moves in the future.

While the market’s worries are understandable, it remains to be seen whether the current administration will have enough time to push the idea through the Congress, especially if Democrats lose their control of the House or the Senate. However, energy stocks may remain under some pressure if the windfall tax idea gains some traction.

Meanwhile, the impact on oil and natural gas prices will likely stay minimal in the near term. Energy projects take months and years to develop so the potential tax will have minimal impact on energy production in the near term, although energy companies may cut their investment plans in response to the tax.

For a look at all of today’s economic events, check out our economic calendar.

Investors Are On Edge Ahead of the US Federal Reserve’s Two-day Meeting

Fed in Details

Most on Wall Street expect the Fed will lift rates by 75-basis points this week but the bigger question is what happens at the December meeting and beyond.

Bulls are hoping the Fed will signal lower rate hikes starting in December. Bears continue to argue that inflation data has not provided any justification for a less aggressive Fed.

The latest PCE Prices Index was unchanged in September at an annualized rate of +6.2%. The report, released on Friday, also showed that the so-called “core rate”, which strips out food and energy, actually climbed higher to +5.1% versus +4.9% in August, another sign that inflationary pressures are still being felt across nearly every corner of the economy.

Inflation has of course been bolstered by oil, fuel, and other commodity price shocks, pandemic-related residuals (China lockdowns, etc.), and global supply chain issues that have been exacerbated by Russia’s invasion of Ukraine.

These issues have made the inflation fight even tougher for the US Fed and other central banks that have hoped to rein in prices before they become embedded.

Labor Market

The most direct route for inflation to become embedded is via wages, which in the US have been rising at an annual rate of more than +5% for the past year. However, that is substantially below the rate of inflation, providing strong motivation for employees to continue seeking higher wages and a key reason why some are worried about a potential “wage spiral.” That’s also why the Federal Reserve is so keen to cool the job market a bit.

There have been a lot of announcements of hiring slowdowns and even outright job cuts by big companies but US employment data has not reflected anything resembling a pullback in the labor market. It’s worth noting that while big businesses may be looking to cut payrolls, nearly half of small businesses still say they are struggling to hire enough workers, and nearly a quarter are still planning to create new jobs in the last quarter of 2022.

Keep in mind, “small businesses” of 500 employees or fewer make up 99.9% of all US businesses and account for nearly half the US workforce.

It’s also worth keeping in mind that the services sector accounts for more than three-quarters of the US job market. If anything, service sector hiring is expected to accelerate in the last quarter of the year as retail, restaurant, and travel businesses add seasonal employees.

The US Labor Department does try to smooth out these seasonal trends in its official data but the bump in seasonal hiring nonetheless tends to help buoy the numbers in the last few months of the year. Meaning the pullback in the labor market that many are expecting, I argue may not be in the near-term cards.

The October Employment Report on Friday is expected to show job gains around +250,000 following a higher-than-expected increase of +263,000 in September. Importantly, Wall Street is looking for a decline in average hourly earnings to +4.7% from +5%.

Data to Watch

The economic data highlight today is the Dallas Fed Manufacturing Survey.

On the earnings front, bulls are hoping for strong earnings from energy sector companies this week will help lift some of the gloom left by mostly disappointing tech earnings last week. Exxon and Chevron, the two biggest US oil companies, both got things off to a solid start on Friday. Exxon’s profit of nearly $20 billion was a new record for any quarter, and +10% higher than the previous record set in Q2. Chevron’s Q3 profit of $11.2 billion was just slightly weaker than last quarter’s record.

Results from key energy companies this week include BP and Phillips 66 on Tuesday; ConocoPhillips on Thursday; and Dominion Energy and Duke Energy on Friday.

Today’s earnings highlights are Aflac, NXP Semiconductors, and Stryker.

There’s a chance the Fed might sound a bit less hawkish or at least leave a small window open for the bulls in its commentary this week. At the same time, next week, we have the mid-term elections finally moving behind us which might also offer the market a bit less uncertainty.

New Lockdowns in China Creating Worry: The Chinese economy is already struggling because of the nation’s “Zero-Covid”, now there are even more shutdowns in the major gambling city of Macau and in Zhengzhou, the home of Apple‘s largest iPhone assembly plants. Keep in mind, Foxconn, which acts as a supplier to US-based Apple, has hundreds of thousands of workers at its Zhengzhou complex.

Also, new lockdowns have surfaced in Wuhan, where the Covid virus is suspected of originating. Also, Guangzhou’s schools and restaurants have been suspended, while Beijing and Shanghai have seen certain districts targeted for lockdowns. Japanese bank Nomura puts the number of Chinese under restrictions at around 232 million, up from 225 million last week. Some 31 cities there are under some form of lockdown as of Oct. 27, restricting one in six people in China and covering 24.5% of its gross domestic product, the Nomura analysis found.

Key Oil Company And PCE Prices Index To Set a Tone Today

Earnings Season

Wall Street is again digesting somewhat disappointing big tech earnings, this time from Amazon and Apple. While Amazon’s Q3 earnings and sales were in line with Wall Street expectations, the company disappointed with less-than-expected growth in its Amazon Web Services cloud business.

Maybe more importantly, Amazon’s projected sales growth for Q4 came in far below analyst expectations. Apple’s Q3 earnings and revenue results topped analyst estimates but Wall Street is worried about slower growth in its business services category as well as iPhone sales, both of which missed estimates.

It’s worth noting that Apple CEO Time Cook said supply issues had no significant impact on the company’s Q3 results, a turnaround from recent quarters and a welcome sign that supply chain headwinds are mostly in the rearview.

Analysts that are bearish on the tech sector believe growth will continue to deteriorate, however, because a lot of demand for big tech products and services was pulled forward by the pandemic. Meaning the loss of pandemic-fueled demand and stimulus dollars will now leave a “demand vacuum” that could weigh on the sector in the quarters ahead.

Today, big oil giants Exxon and Chevron are expected to post outstanding Q3 results, though weaker than Q2 due to the retreat in oil prices. Still, both companies are expected to deliver their second-highest profits ever, behind only Q2 2022.

There is some concern on Wall Street that big profits might attract unwelcome attention, however. The UK has slapped windfall taxes on energy companies and the EU is working on a similar plan, which has raised fears the US might follow suit.

AbbVie, Colgate Palmolive, Mobil, and NextEra Energy also report results today. On the data front, investors have all eyes on the PCE Prices Index due out this morning and expected to show year-over-year gains for both headline and “core” inflation (strips out food and energy).

Data to Watch

Wall Street is looking for a headline PCE Prices read of +6.3%, and a “core” rate of +5.2%. If the numbers come in lower than expected, that will obviously boost the bulls’ belief that the Federal Reserve is preparing to ease up on its rate hikes.

At its two-day meeting next week on November 1-2, the Fed is widely expected to lift its benchmark rate by +75-basis points. The big debate is what the Fed will do in December and bulls have high hopes that officials will signal a less aggressive hike of perhaps 50-basis points.

The European Central Bank delivered its second straight 75 basis point interest rate hike yesterday. However, many are interpreting ECB President Christine Lagarde’s follow-up comments as “dovish” because she put a lot of stress on the importance of upcoming data which many expect will show the EU economy is in or near recession.

Next week, the economic data highlight will be the October Employment Situation on Friday.

Inflation reads from ISM Manufacturing on Tuesday and ISM Non-Manufacturing on Thursday will also be in the spotlight. Q3 earnings continue next week with a wide range of sectors represented. Key results include Aflac, NXP Semiconductors, and Stryker on Monday; Advanced Micro Devices, Airbnb, BP, Eli Lilly, Pfizer, Phillips 66, and Uber on Tuesday; Allstate, CVS, Humana, Novo Nordisk, Nutrien, Qualcomm, Trane, and Yum Brands on Wednesday; Amgen, Cigna, ConocoPhillips, Corteva, Moderna, Monster Beverage, Nintendo, PayPal, Starbucks, and Zoetis on Thursday; and Berkshire Hathaway, Dominion Energy, Duke Energy, and Hershey on Friday.

S&P 500 (SPY) Gains Ground As Rebound Continues

Key Insights

  • S&P 500 moved higher as traders continued to buy beaten stocks.  
  • The strong report from Netflix provided additional support to S&P 500 in the post-market session. 
  • A move above 3730 will push S&P 500 back towards the recent highs near 3760.

S&P 500 Gained More Than 1% In Broad Rebound

S&P 500 lost momentum after testing the resistance level at 3760 and pulled back towards the 3720 level. However, stocks were still able to record healthy gains for the day.

Industrial Production report, which indicated that Industrial Production increased by 0.4% month-over-month in September, provided material support to stocks. However, it looks that continuation of the technical rebound was the main driver for the stock market today.

Cruise stocks were among the biggest gainers today. Carnival Corporation, Norwegian Cruise Line Holdings, and Royal Caribbean Cruises were up by 7-11% today.

Lockheed Martin gained 8% after beating analyst estimates on earnings and increasing stock buyback. Salesforce was up by more than 4% after Starboard Value acquired a stake in the company.

Interestingly, leading energy stocks like Exxon Mobil and Chevron did not move lower despite the strong sell-off in the oil markets.

From a big picture point of view, the rebound was broad, and all market segments moved higher. Traders continued to hunt for bargains and bought beaten stocks.

In the post-market session, Netflix stock rallied towards $275 after releasing its earnings report. The company reported revenue of $7.48 billion and earnings of $3.19 per share, exceeding analyst expectations on both earnings and revenue. Talking about the fourth-quarter guidance, Netflix noted that strong dollar remained a significant headwind. In the last quarter of this year, Netflix expects to report revenue of $7.8 billion.

United Airlines report beat analyst estimates, pushing the stock towards $40 in the post-market session. The company noted that strong COVID recovery trends would continue to overcome the recessionary pressures. Previously, traders were worried that recession fears may hurt consumer activity, but it looks that demand for air travel remains strong.

S&P 500 Moves Higher After Netflix Beats Expectations

S&P 500

The strong report from Netflix provided support to S&P 500 futures and pushed them above the resistance at 3730. RSI remains in the moderate territory, so S&P 500 has plenty of room to gain additional upside momentum in the upcoming trading sessions.

In case S&P 500 manages to settle above 3730, it will move towards the next resistance, which is located near the recent highs at 3760. A move above this level will open the way to the test of the resistance at the highs of the previous rebound at 3805.

On the support side, a move below 3730 will push S&P 500 towards the support at 3700. In case S&P 500 declines below this level, it will head towards the next support at 3675. A successful test of the support at 3675 will open the way to the test of the support at 3640.

For a look at all of today’s economic events, check out our economic calendar.

Hurricane Ian Spells Trouble for the Fed and Its Inflation Goals

Today, the US State of Florida woke up to the devastation of Hurricane Ian. As residents of the worst-hit parts make the journey home, residents and businesses will begin to assess the financial impact of a storm that peaked at a category four before heading back out to sea.

With parts of the State of Florida still under water and facing high winds and heavy rain, news media outlets report that more than two and a half million are without electricity.

President Joe Biden declared a major disaster, releasing federal-level disaster relief funds to help the State tackle the destruction.

While businesses in the path of Hurricane Ian will face the battle of rebuilding, there will be the indirect effects of the storm on some of the country’s largest multinationals.

Supply Chain Disruption, Fuel Prices, and Inflation

One immediate effect of Hurricane Ian will be on supply chains in and out of Florida.

Across the State, fuel terminals are closed, with oil companies evacuating employees ahead of the storm’s arrival. As reported by Reuters, BP Plc (BP), Chevron Corp (CVX), Occidental Petroleum Corp. (OXY), and Hess Corp (HES) shut down operations in the State.

In the aftermath of the storm, infrastructure is an issue. Reportedly, fuel trucks can’t reach affected parts of the State, with lengthy waiting times likely to impact businesses reliant upon diesel-fueled generators. Shortage concerns were significant enough for the White House to issue a warning to Oil Companies. President Biden reportedly said,

“Do not – let me repeat, do not, do not – use this as an excuse to raise gasoline prices in America.”

According to the US Joint Economic Committee, gasoline prices surged by 46 cents a gallon immediately after Katrina. The JEC noted that ‘some consumers paid almost twice what they paid the year before.’ Higher gasoline prices would spell more trouble for the US economy and the FED grappling with inflation.

Elevated prices would extend beyond the pump, with businesses having to pass on running costs to consumers. The JEC report noted that ‘fuel prices increased quickly after the supply disruption. However, the JEC also observed that prices decreased more slowly after capacity was restored.’

One other area of interest is the Sunshine State’s citrus industry. According to a CNN report, Ian threatened 75% of the citrus belt with heavy rain and floods. With citrus production reportedly under pressure ahead of the storm, supply shortages would lead to higher food prices, another headache for consumers and for the Fed.

Retailers and the Services Sector Likely to Bear the Brunt of the Pain

Reuters reported that Amazon.com (AMZN) paused operations in some sites, with Walmart (WMT) and Sam Clubs closing down more than 100 stores. Walt Disney (DIS) also shut down theme and water parks on Wednesday and Thursday.

With food and fuel prices keeping US inflation at four-decade highs, retailers will likely add to the inflation problem. As water levels decline, supply issues, and strong demand, will drive prices higher.

While the global equity markets may not have reacted to news updates from the State of Florida, the impact may be evident in the months ahead. Florida is among the top five US states by GDP, with a GDP equivalent to Mexico.

US Equity Markets Tumble as Inflation and Economic Woes Hit Sentiment

At the time of writing, the Dow and the S&P 500 were down 1.64% and 1.88%, respectively, with the NASDAQ 100 sliding by 3.01%.

Amazon.com was down 3.34%, with Disney and Walmart seeing losses of 1.73% and 0.50%, respectively. Oil companies were also in the red, with Chevron down 1.41% and BP PLC falling by 1.28%.

S&P 500 Poised to Break into Bear Market Territory; Weaker Dollar Key to Turning Stockmarket Around

U.S. stock index futures are edging lower on Monday, shortly before the cash market opening as traders brace for more selling pressure. The weakness is being fueled by worries that the Federal Reserve’s aggressive push to curb inflation may tip the American economy into recession.

At 12:23 GMT, the blue chip Dow Jones Industrial Average is trading 29462.00, down 207.00 or -0.70%. The benchmark S&P 500 Index is at 3678.15, down 30.25 or -0.82% and the tech-heavy NASDAQ Composite is at 11296.15, down 80.00 or -0.70%.

Weakening investor sentiment is being fueled by surging global interest rates and turmoil in the foreign currency markets.

S&P 500 Breathing on Bear Market Low

In the cash market, investors will be closely watching the S&P 500 for any break below its bear market low. The S&P’s low close for the year in June was 3,666.77. It closed Friday at 3,693.23 after trading briefly below that close. The benchmark’s intraday low for the year is 3636.87. Any trade below those levels could drive more selling in the market.

Tumultuous Forex Trade Could Create Havoc for Stocks

The British Pound plunged to a record low on Monday against the U.S. Dollar. Sterling at one point fell to an all-time low of $1.0382. The move is being fueled by a combination of the Federal Reserve’s aggressive hiking campaign and last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth.

The consensus doesn’t believe there will be a currency intervention on the Sterling, but the onus is now on the central bank to do more to tight policies to stabilize the British Pound.

Unless there is severe financial distress due to the weakening currency, the Bank of England will wait until its next meeting to show decisive action to raise rates aggressively in the next couple of meetings.

Cyclical Stocks Trading Lower on Worries Over Fed-Driven Recession

In premarket trading on Monday, cyclical stocks traded convincingly lower on worries that a series of sharp interest rate hikes by the Fed could rattle the economy.

Boeing Co, Chevron Corp, Caterpillar Inc and JPMorgan Chase & Co fell more than 1% each, while growth stocks including Apple Inc, Microsoft Corp, Amazon.com Inc and Tesla Inc shed between 0.4% and 0.5%.

Short-Term Outlook

Going into today’s trading session, I believe investors should be focused on the U.S. Dollar. It’s hard not to have concerns about long-term stock market performance with the dollar accelerating, global yields soaring and the breakdowns across the global FX.

However, a concerted effort by the major central banks to bring the U.S. Dollar could trigger a dramatic reversal in equity prices.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Tests Support At 3850

Key Insights

  • S&P 500 is moving lower as Treasury yields are testing new highs. 
  • Traders remain nervous ahead of the Fed Interest Rate Decision. 
  • A move below the support at 3850 will push S&P 500 towards the next support level at 3825.

Ford Retreats As Traders Fear That Guidance Will Be Cut

S&P 500 declined towards the 3850 level as traders sold stocks ahead of the Fed Interest Rate Decision, which will be released tomorrow.

Ford declined by more than 10% in today’s trading session after the company revealed that it faced parts shortages. According to Ford, the company “expects to have about 40,000 to 45,000 vehicles in inventory at end of third quarter lacking certain parts presently in short supply”. Ford reaffirmed its full-year adjusted EBIT guidance of $11.5 billion – $12.5 billion. However, the market is worried that the company will be forced to cut its guidance in the upcoming months.

Gold stocks have found themselves under material pressure as gold markets moved closer to yearly lows. One of the leading gold stocks, Newmont Corporation, declined by more than 4% in today’s trading.

Energy stocks are also moving lower as WTI oil managed to get below the $84 level. Exxon Mobil, Chevron, and Schlumberger are down by more than 1%.

Leading tech stocks are mostly moving lower. However, Apple and Tesla are up by more than 1%.

From a big picture point of view, the current pullback is broad, and all market segments are under pressure. Traders reduce their risks ahead of the Fed Interest Rate Decision as they are worried that a 75 bps rate hike may be accompanied by hawkish commentary from Fed Chair Jerome Powell. Bond traders also fear that Powell will be hawkish, so Treasury yields test new highs.

Another Test Of The Key Support At 3850

S&P 500

S&P 500 continues its attempts to settle below the strong support level at 3850. If S&P 500 settles below this level, it will move towards the next support at 3825. A move below the support at 3825 will push S&P 500 towards the support at 3800. In case S&P 500 declines below 3800, it will head towards the next support level, which is located at 3780.

On the upside, S&P 500 needs to settle above the resistance at 3885 to have a chance to gain upside momentum in the near term. The next resistance level is located at 3900. A successful test of this level will open the way to the test of the next resistance at 3920.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Remains Mixed In Choppy Trading

Key Insights

  • Stocks are swinging between gains and losses at the start of the week. 
  • Healthcare stocks got hit after Joe Biden declared that pandemic was over. 
  • Energy stocks rebound from session lows as oil markets recover after sell-off. 

Healthcare Stocks Dive After Biden’s Comments On The Pandemic

S&P 500 continues its attempts to settle below 3850 as Treasury yields keep moving higher ahead of the Fed Interest Rate Decision. Traders prepare for an aggressive Fed, and the yield of 2-year Treasuries is trying to settle above the 3.95% level.

It should be noted that today’s pullback is not broad. Healthcare stocks are the worst performers today as U.S. President Joe Biden said that pandemic was over. Moderna stock was down by almost 10% while Pfizer lost 2% in today’s trading.

Big tech stocks show mixed performance. Apple rebounds after the recent setll-off, while Microsoft is testing new lows.

Energy stocks rebounded from session lows together with oil markets. However, leading energy stocks like Exxon Mobil and Chevron have not managed to get back to the positive territory.

Trading will likely remain nervous ahead of the Fed decision. Markets have probably priced in a 75 bps rate hike, and the key question is whether Fed Chair Jerome Powell sends a hawkish signal.

At this point, traders are worried that aggressive rate hikes will push the economy into a real recession, which is accompanied by job losses and reduced profits for corporations. In this light, the market will be extremely sensitive to Powell’s comments.

Support At 3850 Stays Strong

S&P 500

S&P 500 settled below the 3885 level and continues to test the support at 3850. RSI remains in the positive territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

If S&P 500 mananges to settle below 3850, it will head towards the next support level at 3825. A successful test of this level will open the way to the test of the next support at 3800.

On the upside, the nearest resistance level for S&P 500 is located at 3885. If S&P 500 climbs back above this level, it will head towards the next resistance at 3900. A move above 3900 will push S&P 500 towards the resistance at 3920.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Declines Towards 3900 As Treasury Yields Rise

Key Insights

  • Higher Treasury yields put material pressure on stocks today. 
  • Energy stocks declined amid a strong sell-off in the oil and natural gas markets. 
  • A move below 3900 will push S&P 500 towards the support at 3885.

S&P 500 Is Moving Towards September Lows

S&P 500 is losing ground today as Treasury yields continue to move higher ahead of the Fed Interest Rate Decision, which will be released on September 21.

Energy stocks have found themselves under pressure amid sell-offs in the natural gas and oil markets. As a result, leading energy stocks like Exxon Mobil and Chevron are down by about 2% in today’s trading.

Leading tech stocks, including Apple, Microsoft, Alphabet, and Amazon, are also down by 1-2% today. NVIDIA is testing new lows. Higher interest rates are bearish for tech stocks.

From a big picture point of view, traders remain worried that Fed will hurt economic growth by raising rates aggressively. The FedWatch Tool indicates that there is a 60.2% probability that Fed’s target rate will reach 375-400 bps in November, up from the current 225 – 250 bps.

Aggressive rate hikes may put significant pressure on economic activity and hurt companies’ profits, so it’s not surprising to see that traders are worried about this scenario.

S&P 500 Is Ready To Test The Support Level At 3900

S&P 500

S&P 500 managed to get below the support level at 3920 and is trying to get to the test of the next support, which is located at 3900. If S&P 500 manages to settle below this level, it will head towards the support at the recent lows at 3885. A successful test of the support at 3885 will push S&P 500 towards the support at 3850.

On the upside, the previous support level at 3920 will serve as the first resistance level for S&P 500. In case S&P 500 manages to settle above this level, it will head towards the resistance at 3950. A move above the resistance at 3950 will open the way to the test of the next resistance level at 3980.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Rebounds As Tech Stocks Move Higher

Key Insights

  • Lower Treasury yields provided support to tech stocks. 
  • The rebound in leading tech stocks pushed S&P 500 towards the 3950 level. 
  • Energy stocks found themselves under strong pressure amid sell-off in oil markets. 

Tech Stocks Rebound After Recent Pullback

S&P 500 gained upside momentum and moved towards the 3950 level as leading tech stocks rebounded.

Treasury yields declined, while the U.S. dollar pulled back from yearly highs, which served as an additional positive catalyst for tech stocks. It should be noted that some tech stocks, like Apple, Meta, and NVIDIA, lack positive momentum today.

Meanwhile, energy stocks were among the worst performers as WTI oil broke through the key support level and moved towards $83. Major energy stocks like Exxon Mobil, Chervon, and Schlumberger are down by about 2% in today’s trading.

Previously, we have discussed that a rebound in tech stocks was needed to push the market higher. Today’s market action indicates that S&P 500 may gain strong upside momentum even when the previous leader (energy stocks) is under pressure, in case leading tech stocks enjoy strong support. In this light, the continuation of the current rebound will depend on the dynamics of leading tech stocks, which remain the key catalyst for S&P 500.

S&P 500 Tests Resistance At 3950

S&P 500

 

S&P 500 found support near 3885 and moved above the resistance level at 3915. Currently, S&P 500 is trying to settle above the resistance at 3950.

In case this attempt is successful, S&P 500 will move towards the next resistance level, which is located at 3980. A move above this level will open the way to the test of the resistance at 4000. If S&P 500 climbs above 4000, it will head towards the resistance at 4015.

On the support side, the previous resistance level at 3915 will serve as the first support level for S&P 500. In case S&P 500 declines below this level, it will head towards the next support at the recent lows at 3885. A successful test of this level will push S&P 500 towards the support at 3830.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Futures Show No Reaction To OPEC+ Oil Production Cut

Key Insights

  • S&P 500 futures are swinging between gains and losses while markets are closed in observation of the Labor Day. 
  • WTI oil is gaining ground as OPEC+ decided to cut production targets by 100,000 bpd in October. 
  • A move below 3915 will push S&P 500 towards the 3875 level. 

S&P 500 Futures Stay Close To The Support At 3915

S&P 500 futures are mostly flat in electronic trading while the U.S. markets are closed for the Labor Day holiday.

On Friday, S&P 500 suffered another sell-off as tech stocks remained weak. The FedWatch Tool indicates that there is a 60% probability of a 75 bps rate hike at the next Fed meeting, so traders prepare for the hawkish Fed.

S&P 500

From a technical point of view, S&P 500 found support near the 3915 level. This level has been tested several times and proved its strength. To gain additional downside momentum, S&P 500 must settle below 3915. In this scenario, it will head towards the next support level at 3875.

On the upside, the nearest resistance level for S&P 500 is located at 3950. In case S&P 500 manages to settle above this level, it will head towards the resistance level at 3980. A move above 3980 will open the way to the test of the resistance at 4000.

Energy Stocks May Be In Focus Tomorrow

WTI oil is up by more than 2% today as OPEC+ members agreed to cut production targets by 100,000 bpd in October. This is a symbolic cut as OPEC+ is currently producing below its quotas as some members have production problems.

However, the decision sends an important signal to the market. OPEC+ is worried about the slowdown of the world economy and is ready to act if necessary.

Major oil stocks like Exxon Mobil, Chevron, and Schlumberger have enjoyed support in recent weeks. These stocks may continue to move higher if OPEC’s attempts to put a floor under oil prices are successful.

It should be noted that a sustainable rebound of S&P 500 will be impossible without a broad rebound of tech stocks. Apple, Microsoft, Amazon and other big names have been under significant pressure in recent trading sessions.

The dynamics of tech stocks will remain dependent on the market’s evaluation of Fed’s next steps. If markets believe that the Fed will be hawkish, and Treasury yields continue to move higher, tech stocks will likely move lower. In this scenario, S&P 500 will likely settle below the 3900 level and develop additional downside momentum.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Dives Below The 4000 Level

Key Insights

  • S&P 500 is moving lower as traders focus on potential aggressive moves from the Fed. 
  • The strong pullback in commodity markets has led to a sell-off in energy and basic materials stocks. 
  • The current pullback is broad, and there are no market segments that can move against the selling wave. 

S&P 500 Remains Under Strong Pressure

S&P 500 gained additional downside momentum and moved below the 4000 level after CB Consumer Confidence report beat analyst expectations.

Good news is bad news for markets right now as healthy consumer activity increases chances for an aggressive rate hike at the next Fed meeting.

There is another catalyst that must be watched closely. In September, the Fed will ramp up its quantitative tightening program. Each month, the Fed will reduce the size of its balance sheet by $60 billion of Treasuries and $35 billion of mortgage-backed securities. Instead of selling them, the Fed will let them mature.

The reduction of Fed’s balance sheet has already begun. However, the pace of this reduction was modest. Starting from September, markets will face tighter liquidity, which may serve as an additional bearish catalyst for stocks.

S&P 500

S&P 500 has recently managed to get below the 4000 level and is trying to develop additional downside momentum. Interestingly, RSI remains in the moderate territory, so there is plenty of room to gain additional momentum in case the right catalysts emerge. Traders should expect significant volatility as S&P 500 moved from 4200 to 4000 in just three trading sessions.

Energy Stocks Lead The Sell-Off

Energy stocks have suffered a strong sell-off today as WTI oil is down by about 6%. Exxon Mobil, Chevron, Schlumberger and other leading energy stocks are down by 3-4% today.

Basic materials stocks are also under strong pressure amid a broad sell-off in commodity markets. For example, the leading copper producer Freeport-McMoRan is down by about 6% today.

Tech stocks are also moving lower. All leading tech names, like Apple, Microsoft, and Alphabet are losing ground today. There is nowhere to hide, as all market segments are under pressure.

However, there are some bright spots in the market. The discount retailer Big Lots is up by more than 7% after a better-than-expected earnings report. It should be noted that Big Lots stock has been under pressure for months, so the reaction to the report is a typical relief rally as the company’s performance was not as bad as expected.

Avid Technology is up by roughly 12% as the stock joined the S&P 500 SmallCap 600 index. The inclusion in an index is always a positive catalyst as it forces index funds to buy the stock.

From a big picture point of view, traders are worried that aggressive Fed will hurt economic growth. If these worries persist, stocks will remain under pressure.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Rebounds From Session Lows As Energy Stocks Rally

Key Insights

  • Tech stocks are losing ground as Treasury yields are moving higher. 
  • Energy stocks stay strong as WTI oil rallies amid protests in Iraq. 
  • The strong rally in energy stocks may provide more support to the broader market.

Stocks Remain Under Some Pressure

S&P 500 declined below the 4050 level as traders remained focused on Powell’s hawkish comments.

The yield of 10-year Treasuries has climbed back above the 3.10% level, so it was not surprising to see that tech stocks were the worst performers today. Apple, Microsoft, Tesla, NVIDIA, Meta and other big tech names remained under significant pressure.

In Dow Jones, 3M Company was the main laggard. The stock remains under significant pressure as traders are worried that the company may face up to $100 billion of losses from combat earplug lawsuits. On Friday, a judge ruled that bankruptcy of 3M Company’s subsidiary could not prevent lawsuits against the parent company.

Energy stocks is the leading market segment today. WTI oil rallied amid violent protests in Iraq, providing additional support to leading energy stocks like Exxon Mobil and Chevron. The rally in the energy segment may push S&P 500 to higher levels at the end of today’s trading session.

Will The Sell-Off Continue?

Traders fear that Fed’s aggressive rate hikes will put significant pressure on the economy. Tech stocks remain sensitive to Treasury yield dynamics as many shares in this market segment are trading at high valuation levels. For example, NVIDIA, which is down by about 45% year-to-date, is still trading at 35 forward P/E.

While Fed’s potential rate hikes and rising Treasury yields are strong bearish catalysts, it would be naive to expect that S&P 500 will move lower day after day. There are no signs of serious liquidity problems in the world, and there should be a sufficient number of buyers who are waiting for pullbacks to establish their positions in U.S. stocks. The rally in energy stocks may provide additional support to the broader market.

S&P 500

S&P 500 failed to settle below the 4000 level and is trying to get back above the resistance at 4040. In case this attempt is successful, S&P 500 will move towards the 50 EMA, which is located near the 4080 level. A move above the resistance at the 50 EMA will open the way to the test of the resistance at 4115.

On the support side, S&P 500 needs to settle back below 4040 to have a chance to gain additional downside momentum. The next support level for S&P 500 is located at 4000. If S&P 500 manages to settle below this level, it will head towards the support at 3975. A move below 3975 will push S&P 500 towards the support level at 3945.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Rebounds Towards The 4,150 Level

Key Insights

  • Stock traders enjoyed a technical rebound today. 
  • It was a rather slow day as traders were waiting for the Jackson Hole Symposium, which starts tomorrow. 
  • Peloton stock jumped after the company launched products in Amazon’s U.S. stores. 

S&P 500 Moves Higher Ahead Of The Jackson Hole Symposium

S&P 500 gained some ground and moved towards the 4,150 level as traders scooped up shares after the recent strong sell-off. The rebound was broad, and most market segments moved higher today.

The breadth of the upside move highlights the technical nature of this rebound. There were no specific catalysts for the move.

The rebound was not strong as traders were not ready to make big moves ahead of the Jackson Hole Symposium, which starts tomorrow.

The news from Jackson Hole will have a significant impact on markets, so traders should be prepared for volatility in the remaining trading sessions of the week.

S&P 500

From a technical point of view, S&P 500 has once again failed to settle above the 20 EMA, which remains a significant resistance level. S&P 500 must get above this level to have a chance to gain sustainable upside momentum.

On the support side, the 50 EMA at 4080 should serve as the main support level for S&P 500. A move below this level will signal that S&P 500 may be ready to start a new downside trend.

Energy Stocks Stay Strong As WTI Oil Moves To New Highs

WTI oil rebounded from session lows and gained upside momentum, which was bullish for leading energy stocks like Exxon Mobil and Chevron.

Peloton stock gained 20% today after the company announced that it would launch products, apparel and accessories in Amazon’s U.S. stores. Peloton is scheduled to report earnings on August 25, before market open, so the stock will remain volatile tomorrow.

Bed Bath & Beyond stock was up by 18% as a WSJ report indicated that it had secured a loan deal. There are many traders who are underwater in this stock after its fast rally to the $30 level and the subsequent pullback towards the $8.50 level, so such traders may use the rebound to get out of their positions. Thus, it remains to be seen whether Bed Bath & Beyond will be able to gain additional upside momentum in the upcoming trading sessions.

Among losers, Nordstrom stock was down by 20% after the company released a disappointing quarterly report and lowered its guidance.

Generally, it was a rather slow day. The market behaviour will likely change tomorrow, when traders will react to the first news from Jackson Hole.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Moves Lower As Traders Focus On Weak Economic Data

Key Insights

  • Weak Services PMI report and disappointing New Home Sales data pushed S&P 500 to new lows. 
  • Energy stocks enjoyed healthy demand amid strong rally in the oil markets. 
  • Twitter retreated as a whistleblower suggested that the company misled regulators about spam accounts. 

S&P 500 Remains Under Pressure

S&P 500 moved lower today as traders reacted to the disappointing Services PMI report and weak New Home Sales data. Dow Jones finished the day below the 33,000 level.

Interestingly, the market made an attempt to gain upside momentum after the release of the Services PMI report as some traders were ready to bet that the Fed would be more dovish due to problems in the services sector.

However, Treasury yields have quickly started to move higher, putting additional pressure on stocks. At this point, traders are not ready to increase purchases of stocks. Most likely, trading will stay choppy and volatile ahead of the Jackson Hole Symposium, which starts on August 25.

S&P 500

S&P 500 managed to settle below the 20 EMA at 4160. Today’s attempt to get back above this level was not successful, which is a bearish sign.

The nearest support level for S&P 500 is located at the recent lows at 4115. In case S&P 500 declines below this level, it will head towards the 50 EMA at 4080. A move below the 50 EMA will open the way to the test of the support at 4040.

On the upside, a successful test of the resistance at the 20 EMA will push S&P 500 towards the next resistance level at 4190. If S&P 500 manages to settle back above this level, it will head towards the resistance at 4220.

Energy Stocks Outperform As Oil Moves To New Highs

It’s a good day for energy stocks, which were led by big names like Exxon Mobil, Chevron, and Occidental Petroleum. Traders look ready to bet that WTI oil has bottomed, so they increase purchases of leading energy stocks.

The basic materials sector also moved higher today. Strong copper markets provided significant support to shares of copper producers like Freeport-McMoRan, Teck Resources, and Hudbay Minerals.

Tech stocks had a mixed session. However, it looks that market sentiment towards tech stocks remains bearish due to higher yields and disappointing news from Zoom and Twitter.

Zoom released an earnings report which indicated that the company’s growth was slowing down. The market was merciless, and the stock lost more than 15% of its value.

Twitter found itself under significant pressure after a whistleblower complained that the company misled regulators about spam accounts and defenses against hackers. The news is great for Elon Musk who is using the topic of spam accounts as he tries to walk away from his deal to buy Twitter.

For a look at all of today’s economic events, check out our economic calendar.