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 and Nasdaq futures as investors await significant economic and industry conferences, in addition to earnings season heating up.

Last week marked a challenging period for the stock market, culminating in substantial losses. The Nasdaq closed below its 50-day moving average for the first time in many weeks, and Treasury yields surged to a one-year high.

Nvidia (NVDA) experienced a downturn after achieving record highs. The chipmaker Taiwan Semiconductor (TSM) also saw little change in its stock price for the week but remains positioned well due to strong sales.

Tesla (TSLA) faced a decline over the week, yet the stock found critical support by Friday as it introduced the new Model Y.

Delta Air Lines (DAL), FTAI Aviation (FTAI), Globus Medical (GMED), and Constellation Energy (CEG) made notable gains on Friday, while Meta Platforms (META) successfully reclaimed a buy point. In general, energy firms, discount retailers, and medical product companies showed resilience.

However, the overall market has been volatile with a predominately downward trend. Investors should consider reducing their exposure while also preparing for potential future rallies.

Nvidia is featured on IBD Leaderboard, while Tesla is on the Leaderboard watchlist. Both Taiwan Semiconductor and Nvidia are included in the IBD 50.

Current Dow Jones Futures Status

Dow Jones futures showed a slight increase compared to fair value, while S&P 500 futures remained steady and Nasdaq 100 futures ticked up by 0.1%.

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

Crude oil futures experienced a 2% rise.

It is important to remember that the overnight performance of Dow futures and other indices may not directly reflect the trading activity in the following regular stock market session.

Recent Stock Market Trends

The stock market began the week positively, as the S&P 500 regained its 50-day moving average. Nevertheless, it suffered from a sell-off later in the week, with both the S&P 500 and Nasdaq falling below this essential level.

The Dow Jones Industrial Average declined by 1.9% in the past week, reaching its lowest point since November 5. Similarly, the S&P 500 fell by 1.9%, marking its lowest since November 6. The Nasdaq composite dropped 2.3%, descending to levels not seen since late November. The small-cap Russell 2000 fell even more dramatically, down 3.5% to a three-month low.

All major indexes faced significant declines, undercutting their recent range lows.

For a potential recovery, the Nasdaq and S&P 500 would need to reclaim their 50-day moving averages as a critical first step. The intraday highs from January 6 represent another significant barrier to overcome, with the all-time highs from late 2024 looming just above. Significant resistance may present itself along this path.

A rally on Friday met resistance in the afternoon, as the Nasdaq fell just short of its 50-day line.

Unfortunately, there is limited downward support for both the Nasdaq and S&P 500. The ailing Russell 2000 is testing its 200-day moving average, and a decisive drop below Friday's lows would indicate the beginning of a more severe market correction.

Last week, the 10-year Treasury yield surged by 17.5 basis points to reach a level of 4.77%, marking the highest yield since November 2023.

U.S. crude oil futures rose by 3.5% last week, largely on Friday due to sweeping new sanctions on Russia's oil sector imposed by the Biden administration.

Growth ETFs Performance

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

ARK Innovation ETF (ARKK) saw a 4% decline last week, and ARK Genomics ETF (ARKG) retreated by 3.7%. Tesla continues to be a prominent holding in Ark Invest's ETFs, which also includes a substantial investment in Nvidia.

SPDR S&P Metals & Mining ETF (XME) fell by 0.4% last week. However, the U.S. Global Jets ETF (JETS) increased by 4.3%, benefiting from strong performance by Delta stock. The SPDR S&P Homebuilders ETF (XHB) decreased by 2.3%. Conversely, the Energy Select SPDR ETF (XLE) increased by 1%, and the Health Care Select Sector SPDR Fund (XLV) rose by 0.5%.

The Industrial Select Sector SPDR Fund (XLI) saw a decline of 1.05%, while the Financial Select SPDR ETF (XLF) decreased by 2.6%.

Nvidia Stock Analysis

Nvidia stock dropped by 5.9% for the week, closing at 135.91 and falling below its 50-day line. This decline followed a record high of 153.13 reached shortly after Tuesday's opening. The pullback came despite favorable reviews of CEO Jensen Huang's speech at CES, with concerns arising over potential new restrictions on AI and other advanced chips.

Taiwan Semiconductor reached a record price of 222.20 on Monday but ended the week slightly down at 208.46, maintaining a buy point of 205.63 due to a Friday recovery.

On Friday, Taiwan Semiconductor reported a significant sales increase of 58% compared to the previous year, driven mainly by the demand for AI chips from Nvidia and others, exceeding analyst expectations.

Tesla Stock Overview

Tesla stock decreased by 3.8% this past week, closing at 394.74 and dropping below its 21-day line. On Friday, shares rebounded from their 10-week line, only dropping by 20 cents by the end of the day.

Friday also marked the launch of the redesigned Model Y, featuring enhanced range and a higher price than its predecessor. The new "Juniper" Model Y has a more distinctive look compared to previous updates to the Model S, X, and 3.

Reports indicate that the new Model Y has already racked up over 50,000 pre-orders, with deliveries to China expected to start in March, followed by those in Europe and the U.S.

Currently, all major indexes are experiencing downward trends, with the Nasdaq below its 50-day line.

While leading stocks showed some resilience, many were flashing buy signals, and it appears they may struggle to maintain these levels without a broader index rally. Others, like Nvidia, have recently broken lower.

If investing now, maintaining a nimble, swing trader mindset is crucial.

In general, investors are advised to reduce their exposure in the market during this period.

Despite recent challenges, the stock market will eventually recover, whether that happens this coming week, next month, or later. Avoid trying to predict the exact timing of this turn and refrain from rushing in at the first sign of an uptick; instead, wait for true momentum before acting. Stay active and build watchlists focused on stocks that maintain key levels and exhibit relative strength.

The upcoming week will see earnings reports from major companies, including JPMorgan Chase (JPM), UnitedHealth (UNH), and Taiwan Semiconductor (TSM). The JPMorgan Healthcare Conference and the ICR Conference are expected to showcase preliminary results and announcements from the medical, retail, and consumer sectors. Additionally, inflation data and other economic reports are likely to dominate the news cycle.

To keep up with market trends and leading stocks, regularly reading market analysis is essential.

Dow, Futures, Market