Dow Jones Futures Rise After Damaging Losses in the Stock Market; Guidance for Investors

Dow Jones futures showed minimal changes Sunday evening, similar to the S&P 500 and Nasdaq futures. As earnings season heats up, important economic and industry conferences are also approaching.

The stock market faced significant losses over the past week, with the Nasdaq index closing below its 50-day moving average as Treasury yields surged to 52-week highs.

Nvidia (NVDA) experienced a sell-off after reaching record highs. Meanwhile, Nvidia's primary chip supplier, Taiwan Semiconductor (TSM), remained stable throughout the week, holding a viable buy point due to strong sales performance.

Tesla (TSLA) also declined during the week but found crucial support on Friday after launching its new Model Y vehicle.

Stocks such as Delta Air Lines (DAL), FTAI Aviation (FTAI), Globus Medical (GMED), and Constellation Energy (CEG) broke out on Friday, while Meta Platforms (META) reclaimed a buy point. More generally, energy sectors, discount retailers, and medical product companies exhibited strength.

However, the market atmosphere has been volatile with an underlying downward trend. Investors are advised to reduce their exposure while preparing for potential rallies.

Nvidia appears on IBD Leaderboard, with Tesla included on the watchlist. Both Taiwan Semiconductor and Nvidia are also featured in the IBD 50.

Current Dow Jones Futures Outlook

As of today, Dow Jones futures are slightly higher compared to fair value, with S&P 500 futures remaining unchanged and Nasdaq 100 futures seeing a 0.1% increase.

The 10-year Treasury yield has decreased to 4.76%, while crude oil futures have risen by 2%.

It is important to note that overnight movements in Dow futures and other indices do not necessarily indicate trends for the following trading session.

Participate in expert market analysis with IBD Live

Review of the Recent Stock Market Rally

The stock market began the week on a high note, with the S&P 500 recovering its 50-day moving average. However, this was followed by a downturn, causing both the S&P 500 and the Nasdaq composite to fall below this pivotal level.

Last week, the Dow Jones Industrial Average saw a decline of 1.9%, reaching its lowest point since election day on November 5. The S&P 500 also dropped 1.9%, marking its lowest level since November 6. The Nasdaq composite fell 2.3%, with a drop on Friday reaching its lowest point since late November. Meanwhile, the small-cap Russell 2000 index fell 3.5%, hitting a three-month low.

All major indexes experienced substantial downward weeks, breaking below their recent range lows.

For a positive trend, both the Nasdaq and S&P 500 need to reclaim their 50-day moving averages. The January 6 intraday highs represent a significant resistance point, with late 2024 all-time highs located just above that. There may be considerable resistance ahead.

A brief rally on Friday failed to gain momentum during mid-afternoon, leaving the Nasdaq just below its 50-day line.

Currently, the Nasdaq and S&P 500 show a lack of support on the downside, although the Russell 2000 is testing its 200-day moving average. If major indexes drop decisively below Friday’s lows, it could indicate the onset of a significant correction.

The 10-year Treasury yield increased by 17.5 basis points to 4.77%, the highest level since November 2023.

U.S. crude oil prices surged by 3.5% to $76.57 a barrel last week, largely driven by new sanctions imposed by the Biden administration on the Russian oil industry.

ETFs Performance Analysis

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) declined by 3.1% last week. The iShares Expanded Tech-Software Sector ETF (IGV) fell by 4.2%, while the VanEck Vectors Semiconductor ETF (SMH) dropped by 1.9%. Nvidia and Taiwan Semiconductor are significant components of the SMH ETF.

The ARK Innovation ETF (ARKK) lost 4% last week, while the ARK Genomics ETF (ARKG) fell by 3.7%. Tesla remains a major holding in many of Ark Invest's ETFs, along with a substantial stake in Nvidia.

The SPDR S&P Metals & Mining ETF (XME) slipped 0.4%, but the U.S. Global Jets ETF (JETS) rose 4.3%, benefiting from holdings like Delta stock. Other ETFs like the SPDR S&P Homebuilders ETF (XHB) decreased 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.

Conversely, the Industrial Select Sector SPDR Fund (XLI) saw a decrease of 1.05%, and the Financial Select SPDR ETF (XLF) fell back by 2.6%.

Utilize IBD's ETF Market Strategy to Time Investments

Nvidia Stock Performance

NVDA shares dipped 5.9% last week, closing at 135.91 and falling below the 50-day moving average. This occurred after a peak at a record 153.13 shortly after Tuesday's opening. Despite positive analyst reviews following CEO Jensen Huang's speech at CES, shares declined after news of impending U.S. restrictions on advanced AI and chip technologies.

Taiwan Semiconductor reached a record high of 222.20 on Monday but closed the week slightly lower at 208.46. Nevertheless, TSM shares maintained a cup-with-handle buy point with slight gains on Friday.

On Friday, Taiwan Semiconductor reported a staggering 58% surge in December sales compared to the previous year, primarily driven by AI chip demands from Nvidia and others, exceeding expectations.

Tesla Stock Update

Tesla's stock fell by 3.8% to 394.74, dropping below the 21-day moving average. Despite this, shares rebounded from the 10-week line by the end of the day on Friday.

On Friday, Tesla officially launched the refreshed Model Y, featuring both a longer range and a higher price compared to its predecessor. The new “Juniper” Model Y presents distinct front and rear designs, differing from the minor updates on previous models.

Reports indicate that this new Tesla Y has already received over 50,000 pre-orders. Deliveries in China are scheduled to start in March, with European and U.S. deliveries expected soon after.

Currently, all major indexes are in a downward trend, with even the Nasdaq falling below its 50-day moving average.

Leading stocks appeared to show slightly better performance, with several flashing buy signals on Friday and many finding support. However, their ability to hold these gains will depend on overall index recoveries, with stocks like Nvidia experiencing downward pressure.

Investors considering purchases must adopt an agile trading mindset. Generally, it’s a good time to lower exposure given recent market conditions.

The stock market is likely to see a rebound, whether that occurs in the upcoming week, the following month, or later. It’s important not to attempt to predict this market turnaround or rush in at the first sign of a gain. Instead, look for substantial strength before acting, while actively building watchlists focused on stocks at key levels and demonstrating relative strength.

With earnings season ramping up, notable companies such as JPMorgan Chase (JPM), UnitedHealth (UNH), and of course, Taiwan Semiconductor (TSM) will be in focus next week. The JPMorgan Healthcare Conference and the ICR Conference are expected to feature many preliminary results and announcements from the healthcare and retail sectors. Economic reports, including inflation data, are anticipated to keep the news cycle active.

For ongoing market direction and insights on leading stocks and sectors, consider reading The Big Picture daily.

For stock market updates and more, follow on social media platforms.

Related Topics:

Discover strategies for identifying the next winning stock with MarketSurge. Consider SwingTrader for quick profits and to avoid substantial losses. Explore the best growth stocks to buy and monitor.

Stocks, Market, Investors