Dow Jones Futures: Stock market shatters expectations as fears of Iran spike; What do we do now

Photo of author

By journalsofus.com


Dow Jones futures will open Sunday evening along with S&P 500 futures and Nasdaq futures.




x



The stock market’s rally during the week sent mixed messages, but it ended with a downturn. Nasdaq set a record on Thursday NVIDIA (NVDA) and other megacap and AI stocks rose. But the S&P 500, Dow Jones and Russell 2000 were struggling with hot inflation and Mideast tensions, with the Dow and small-cap Russell below their 50-day lines. Nasdaq recently posted weekly gains

The CBOE Volatility Index, an index measuring market fear, hit its highest level since late October on Friday amid concerns that Iran would directly attack Israel, raising the possibility of a much larger Mideast conflict. gloomy JPMorgan Chase (JPM) guidance, a big Arista Networks (ANET) Selling and trouble for China intel (INTC) and Advanced Micro Devices (AMD) was also affected.

All of this prompted a risk-off shift, especially over the weekend.

Investors need to recognize the factors that shattered market expectations on Friday and react accordingly.

Main earnings ahead

Goldman Sachs (GS) and charles schwab (SCHW) report early Monday morning. Goldman’s stock fell below its 50-day line on Friday, while Schwab remains in buy zone.

chip-equipment giant asml (ASML) and Nvidia Chipmaker Taiwan Semiconductor (TSM) may have two most important earnings in the coming week. Their results and guidance will have a major impact on the chip sector, including Nvidia. broadcom (AVGO), Lam Research (LRCX), applied material (AMAT) and KLA Corp. (KLAC).

All of these chip stocks have new grounds or potential entries.

Nvidia stock is on the IBD Leaderboard, SwingTrader and the IBD 50. KLA stock is on the IBD Long-Term Leaders List. Nvidia, ASML and Broadcom stocks are on the IBD Big Cap 20.

Dow Jones Futures Today

Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.

Remember that overnight action on Dow futures and elsewhere will not necessarily translate into actual trading in the next regular stock market session.


Join IBD experts as they analyze leading stocks and markets on IBD Live


stock market rally

The stock market rally had a tough week on the back of a warm CPI inflation report and Middle East fears, with Friday’s losses erasing Thursday’s bullish signals.

The Nasdaq, which hit a record high on Thursday, fell 1.6% in Friday stock market trading and ended the week with a loss of 0.45%. The composite finished below the 21-day line but just above the 50-day and 10-week lines. It is still trading with a big reversal day of April 4th.

The rest of the market looked even worse.

The S&P 500 index fell 1.55% for the week, down 21 days. The benchmark index closed just above its 50-day line but below its 10-week.

The Dow Jones Industrial Average fell 2.4% to its lowest since late January, while the small-cap Russell 2000 fell 2.9% to its lowest since late February. Both are clearly below the 50-day.

The Invesco S&P 500 Equal Weight ETF (RSP) fell 2.6% on Friday, crossing the 50-day line. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 1.7% and fell below the 50-day line to its worst level since late February.

Crude oil fell 1.4% for the week to $85.66 a barrel, off Friday’s intraday high of $87.67. Gold rose 1.3% to $2,356.20 an ounce, well above Friday’s high.

The 10-year Treasury yield rose 12 basis points to 4.5%, Thursday’s peak of 4.59% a five-month high. Investors see only a slight possibility of a Fed rate cut in June and are leaning towards a move only in July.

Stock market fear gauge went up

The CBOE Volatility Index rose 16.1% to 17.31 on Friday, its highest since late October at a session high of 19.20. Excessive fear may foreshadow at least a short-term decline. But the market’s fear gauge is still a long way from its October peak, let alone its Covid high.

Another sentiment gauge, specifically the bull vs. bear reading, was near extremely bullish levels over the past week.

If tensions ease in the Middle East, stocks could suddenly rise. But a direct Iran-Israel conflict could lead to a much bigger scare and a bigger pullback from equities.

etf

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) fell 1.7% for the week. The VanEck Vectors Semiconductor ETF (SMH) slipped 0.9%. Nvidia and Taiwan Semiconductor are the largest SMH holdings, with ASML, Lam Research, KLA and AMAT stock also being members.

The SPDR S&P Metals & Mining ETF (XME) declined 1% last week. The Global X US Infrastructure Development ETF (PAVE) fell 3.4%. The US Global Jets ETF (JETS) fell 2.6%. The SPDR S&P Homebuilders ETF (XHB) declined 4%. The Energy Select SPDR ETF (XLE) retreated 2% and the Health Care Select Sector SPDR Fund (XLV) fell 3%. The Industrial Select Sector SPDR Fund (XLI) gave up 2.2%.

The Financial Select SPDR ETF (XLF) fell 3.6%, with JPMorgan a major component. The SPDR S&P Regional Banking ETF (KRE) lagged behind 3.5%.

Reflecting stocks with a more speculative story, the ARK Innovation ETF (ARKK) declined 1.25% last week and the ARK Genomics ETF (ARKG) declined 3%.


Time the Market with IBD’s ETF Market Strategy


ASML, Taiwan Semi Income

A report from Dutch chip-equipment giant ASML came Wednesday morning and chip foundry giant Taiwan Semiconductor is due Thursday morning.

Analysts expect ASML’s earnings to decline in the first quarter, but to see improvement in the second half. Taiwan’s semi-earnings are expected to be flat, although unofficial targets may be higher after the foundry giant reported better-than-expected Q1 sales on April 10.

Taiwan Semi is benefiting from strong demand for AI and other advanced chips. TSMC’s guidance on earnings and capex will be important for the industry.

ASML stock fell 1.8% last week to 961.84, closing at the 50-day and 10-week lines. It now has a flat base with a 1,056.34 buy point. Investors can use a trendline entry around 1000 to initiate positions at the 10-week or April 1 high of 1002.66.

TSM stock rose 0.85% to 142.56 for the week. Shares have been strong for a few weeks now, but need another week for a proper base. Investors could use the April 10 high of 148.43 as an entry if Taiwan Semi Stock’s earnings pick up.

chip stock

Nvidia stock rose 0.2% this week to 881.86. Shares bounced back from the 10-week line on Wednesday-Thursday, still holding the 21-day level, before paring gains on Friday. NVDA stock now has a flat base with a 974 buy point. At this point, investors can use Thursday’s high of 907.39 as an initial entry.

Broadcom stock rose 0.35% for the week to 1,344.07, finding support at the 21-day and 10-week lines, amid continued tight closes but resistance near the 1,400 level. AVGO stock is now in a consolidation, with the April 4 high of 1,403.98 serving as a handle buy point.

Finding support at the 10-week line, Lam Research stock fell 1.2% for the week to 957.04. Shares have a 1,007.39 flat-base buy point, according to MarketSurge. Lam’s own earnings are due on April 24.

Applied Materials stock was unchanged for the week at 207.86, trading firmly around the 21-day line. Investors can consider the recent consolidation as a true flat base with a 214.91 buy point. The three-week tight pattern gives a slightly lower entry of 213.33 based on the April 11 high.

KLAC stock fell 0.3% to 680.78, right around the 50-day and 10-week lines. KLA has a 729.15 flat-base buy point. A decisive move above the 50-day line could offer early entry. KLA’s earnings are scheduled for April 25.

What do we do now

After Thursday’s strong action, there were expectations that the market would continue to rise, especially among leaders like Nasdaq and Nvidia.

Instead a major retreat took place on Friday. The direct Iran-Israel conflict is a wild card, while JPMorgan and Arista didn’t help.

But whatever the reason, it’s still a sideways market for the Nasdaq, and it’s a tough one to handle. For the Dow and Russell 2000 – and probably the S&P 500 – it’s looking more and more like a pullback or looming correction.

Investors will have to reassess after Friday and last week. If you took new positions on Wednesday-Thursday, you may have to cut back on them or exit altogether.

There’s still time to work on watch lists. If the war noise fades and earnings reactions are positive, you’ll want to be prepared. But you also have to be prepared to move more aggressively.

With earnings season upon us, find out when your holdings are reported. You also need to know when your major competitors, customers and suppliers are in contact.

Read The Big Picture every day to keep up with market direction and leading stocks and sectors.

Please follow Ed Carson on threads @edcarson1971 and X/Twitter @ibd_ecarson For stock market updates and more.

You might also like:

Why This IBD Tool Simplifies Finding Top Stocks

Best Growth Stocks to Buy and Watch

IBD Digital: Unlock IBD’s premium stock lists, tools, and analysis today

Tesla FSD subscription price reduced to $99 per month

Salesforce in late talks to buy Informatica: WSJ



Leave a comment