Dow Jones futures fell slightly overnight, with S&P 500 futures and especially Nasdaq futures losing more ground. Meta Platforms (META) and ServiceNow (NOW) headlined earnings reports, with Amazon due Thursday night. Several key economic reports are on tap.
X
Ford Motor (F) and UAW negotiators reached a tentative labor deal Wednesday night, according to multiple reports. Ford stock rose modestly overnight. The United Auto Workers has been on strike vs. Ford, General Motors (GM) and Chrysler parent Stellantis (STLA) since Sept. 14.
The stock market suffered sharp losses Wednesday, with the S&P 500 and Nasdaq undercutting recent lows, ending their rally attempts. The small-cap Russell 2000 set a fresh 52-week low. The 10-year Treasury yield rose several basis points, while earnings reactions were generally poor.
Microsoft (MSFT) rose modestly on its results and guidance. But Google parent Alphabet (GOOGL) plunged on cloud weakness. Most techs followed Google, dragging down Meta stock, a bunch of software plays and Amazon.com (AMZN), which reports Thursday night.
Meta stock turned lower overnight, on warnings of advertising weakness. Chip-equipment maker KLA Corp. (KLAC) was little changed. Software giant ServiceNow rose solidly.
Meta stock is on IBD Leaderboard, with ServiceNow on the Leaderboard watchlist. Microsoft stock is on IBD Long-Term Leaders. META is on the IBD 50 list. The video embedded in this article reviews Wednesday’s ugly market action and analyzes Google stock, Vertiv (VRT) and CME Group (CME).
Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures sank 0.55%. Nasdaq 100 futures declined 1%. Meta stock, ServiceNow and KLA are S&P 500 and Nasdaq 100 components. Google and Amazon extended losses late while Microsoft edged lower.
The 10-year Treasury yield edged up to 4.97%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Economic Data
At 8:30 a.m. ET, the Commerce Department will release its first estimate of third-quarter GDP growth, which will include a quarterly version of the PCE price index. The September PCE price index will be out Friday.
Commerce also will announce September durable goods orders at 8:30 a.m. ET Thursday, with the Labor Department disclosing weekly jobless claims.
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Stock Market
The stock market sold off on disappointing earnings and the 10-year Treasury yield spiking higher.
MSFT stock climbed 3.1%, but Google stock dived 9.5% to a three-month low. Most other earnings reactions were negative, and other techs in particular followed suit. Amazon stock tumbled 5.6% on Google’s cloud worries.
The Dow Jones Industrial Average dipped 0.3% in Wednesday’s stock market trading. The S&P 500 index sank 1.4%, with Google stock leading the downside. The Nasdaq composite tumbled 2.4%.
The Nasdaq and S&P 500 undercut their recent lows, which means their short-lived rally attempts are over. The S&P 500 is now noticeably below its 200-day line. The Nasdaq is closing in on the long-term support level.
Nasdaq futures suggest the composite will break below the 200-day on Thursday.
The Dow Jones has not undercut Monday’s lows, so technically its rally attempt continues. But the overall trend is bleak.
That includes market breadth.
The small-cap Russell 2000 skidded 1.7% to the lowest since October 2022.
The Invesco S&P 500 Equal Weight ETF (RSP) fell 1.1%, undercutting recent lows to its worst levels since early November 2022.
The 10-year Treasury yield surged 11 basis points to 4.95%. While below Monday’s brief push above 5%, the 10-year Treasury bond yield is higher for the week.
U.S. crude oil prices climbed 2% to $85.39 a barrel.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) skidded 2.25%. The iShares Expanded Tech-Software Sector ETF (IGV) gave up 2.7%, with Microsoft and NOW stock both notable holdings. The VanEck Vectors Semiconductor ETF (SMH) sold off 3.9%. KLAC stock is a key component in SMH.
Reflecting stocks with more speculative stories, the ARK Innovation ETF (ARKK) plunged 5.25% and ARK Genomics (ARKG) tumbled 5.4%.
The SPDR S&P Metals & Mining ETF (XME) slipped 0.7%. The SPDR S&P Homebuilders ETF (XHB) stepped down 2.2%. The Energy Select SPDR ETF (XLE) dipped 0.2%, and the Health Care Select Sector SPDR Fund (XLV) retreated 0.9%.
The Industrial Select Sector SPDR Fund (XLI) sank 1.3%. The Financial Select SPDR ETF (XLF) dipped 0.4%.
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Meta Earnings
Meta earnings surged 168% vs. a year earlier. Revenue rose 23% vs. a year earlier, slightly beating, while costs fell 7% vs. a year earlier. The Facebook and Instagram parent slightly trimmed the high end of its capital spending forecast for 2023. It sees a capex bump in 2024, but not as much as the Street expected. That’s potential bad news for suppliers such as Arista Networks (ANET).
Meta stock initially rose after hours, but reversed lower, trading down over 3% after the CFO warned of weaker advertising trends in Q4.
Shares fell 4.2% to 299.53 in Wednesday’s trading, knifing through their 50-day line. Investors could still use 326.50 as a buy point. Aggressive traders could use Tuesday’s high of 318.35 as an early entry, but market conditions significantly raise the risks.
ServiceNow Earnings
ServiceNow earnings jumped 49% with revenue up 25%, both topping views. The business software giant also guided up on subscription revenue
NOW stock rose nearly 5% in overnight action. Shares skidded 4.4% to 530.17 on Wednesday, reversing lower from the 21-day line, which is below the 50-day. ServiceNow stock undercut the low of its flat base, hitting a four-month low. The official buy point is 607.90 from a squished double-bottom pattern. There could be early entries above the 50-day line, though market conditions are not favorable.
Other Key Earnings
KLA earnings beat while sales edged past fiscal Q1 views, despite falling vs. a year earlier. The chip equipment giant guided up on Q2.
KLAC stock was little changed in extended trade. Shares fell 3.3% on Wednesday to 454.84, backing off resistance at the 21-day line, which is below the 50-day. KLAC stock has a cup-with-handle base with a 506.92 buy point.
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What To Do Now
It’s not too complicated. The market is in a correction. The indexes are breaking lower, with most leading stocks heavily damaged.
Investors should be very cautious and be largely, if not entirely, in cash.
Definitely wait for real signs that the market downtrend is turning into a market uptrend. A solid open or even a strong day or two simply isn’t enough.
If you feel compelled to make buys, make them small, don’t buy right at the open and be ready to exit quickly.
The market could revive relatively quickly, especially if earnings and Treasury yields become tailwinds instead of headwinds. Admittedly, “if” is really carrying the load on that bullish thesis.
The silver lining from techs selling off on Google’s dark cloud? Some of the potential bad news is priced in, lowering the bar for earnings from Amazon stock and others. But that doesn’t mean stocks can’t fall a lot further.
Keep watching stocks that are holding up reasonably well and showing relative strength. Those could be the leaders in the next market rally. Remember, amid a market correction and a massive earnings wave, resilient stocks can suddenly buckle. That includes names such as Google and VRT stock.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on X/Twitter at @IBD_ECarson, Threads at @edcarson1971 and Bluesky at @edcarson.bsky.social for stock market updates and more.
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