Dow Jones futures fell 425 points Friday morning, ahead of comments made by Fed chief Jerome Powell at a Federal Reserve event in Washington DC. decline in the past seven weeks.
European indices also fell on Friday after business surveys showed that economic activity in Europe declined sharply in September, raising the risk of a recession.
“A recession is looming in the eurozone as companies report worsening business conditions and mounting price pressures due to rising energy costs,” said Chris Williamson, chief economist at S&P Global Market Intelligence. Williamson was quoted in an S&P Global press release.
London’s FTSE 100 fell 2.2%, while Frankfurt’s DAX sold 2.7%. The CAC 40 in Paris fell 2.2% in afternoon trading.
Costco Wholesale (COST) was a major source of income Friday morning. Costco reported better-than-expected fiscal revenue for the fourth quarter and matched its sales results late Thursday. Still, COST shares fell more than 2% in morning trading. In early September, Costco stock activated the 7%-8% loss control rule of a 552.81 buy point from a handle cup.
Electric driving leader Tesla (TSLA) was down more than 2% on Friday. Among the industrialists of Dow Jones, technical titans Apple (AAPL) and Microsoft (MSFT) were sharply lower ahead of today’s stock market opening.
Top stocks to watch amid recent market weakness include: Continental sources (CLR), Double Verify (DV), Neurocrine Life Sciences (NBIX) and Vertex Pharmaceuticals (VRTX) — as well as Dow Jones stock Chevron (CVX). Keep in mind that the new stock market correction is a good reason for investors to be largely, if not entirely, on the sidelines.
DoubleVerify is an IBD Leaderboard stock, but the position size has been trimmed during last week’s losses. Tesla was featured in the Stocks column near a buy zone this week. Neurocrine was the IBD 50 Stocks To Watch pick on Wednesday.
Dow Jones Today: Treasury Yields, Oil Prices
Ahead of Friday’s opening bell, Dow Jones futures fell 1% against fair value, while S&P 500 futures fell 1.05%. Nasdaq 100 futures cut losses to 0.9% in morning action. Remember that overnight activity in Dow Jones futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.
Of the exchange-traded funds, the Nasdaq 100-tracker Invesco QQQ Trust (QQQ) fell 1.25% and the SPDR S&P 500 ETF (SPY) fell 1.2%.
10-Year Treasury yields rose to 3.76% on Friday, reaching their highest level since April 2010. Meanwhile, fears of a loss of demand from European data caused US oil prices to fall more than 3%. West Texas Intermediate futures fell to nearly $80 a barrel, their lowest level since February.
Stock Market Correction
On Thursday, the Dow Jones Industrial Average fell 0.4%, testing the 30,000 level, roughly where the index bounced in June and July. Dow futures pointed to a break in that support in premarket trading. The S&P 500 closed 0.8% lower on Thursday. The Nasdaq composite fell 1.4%. The small-cap Russell 2000 lagged at 2.3%.
All four major stock indices hit new lows since IBD’s market outlook changed to “market in correction” on Sept. 16.
Thursday’s The Big Picture column noted, “Top growth stocks underperformed on Thursday as the Innovator IBD 50 ETF (FFTY) fell 3.1% and hit a new 52-week low. In fact, the ETF is now at the lowest point since March 2020 and approaching the lows of the Covid bear market.”
To prepare for another stock market rally, investors should pay attention to two things: a rally attempt and then a follow-up day.
In a market correction, the first day the index closes higher counts as day 1 of its attempted rally. The action on Day 2 and Day 3 is irrelevant as long as the index does not fall below its latest low. If that low is undercut, the rally attempt is over and the market must try again. Thursday’s action hit more correction lows, so we’re looking for a day 1 again.
On Day 4 and beyond, you’re looking for a Nasdaq or S&P 500 that will rise sharply in volume higher than the previous session. That’s a follow-up day. It gives investors the green light to buy leading stocks that are past the appropriate buying points. It should align your portfolio and mindset with the stock market action by gradually allocating capital to leading stocks.
During the stock market correction, don’t hold back. Instead, create watchlists to find emerging stock market leadership by using the relative strength line. The RS line measures a stock’s price performance relative to the S&P 500. If the stock outperforms the broader market, the RS line slopes upward. If a stock falls short of the broad market, the line will point lower.
Five Dow Jones Stocks to Watch Now
Dow Jones Stocks to Watch: Chevron
Dow Jones stock Chevron moved slightly lower on Thursday, still barely holding onto crucial support around its 50-day line. Stocks are trading about 6% off their last buy point at 166.93 off a handle cup – according to the IBD MarketSmith chart analysis – amid strong performance from energy stocks so far this year. The stock sold more than 2% as oil prices plunged early Friday.
CVX stocks show a strong 98 out of a perfect 99 IBD Composite Rating, according to the IBD Stock Checkup. Investors can use the IBD Composite Rating to easily measure the quality of a stock’s fundamental and technical statistics.
3 top growth stocks to buy and watchrent Stock Market Correction
Top stocks to watch: Continental, DoubleVerify, Neurocrine, Vertex
Oil explorer and producer Continental Resources is building a handle cup with a buy point of 72.80, according to IBD MarketSmith chart analysis. The relative strength line hit a recent high last week, but remains slightly outside its 52-week high. CLR shares traded nearly 3% lower early Friday.
IBD Leaderboard share DoubleVerify remains below the 28.07 buy point in a low after Thursday’s 1.6% loss. The stock is just above the 50-day line. DV shares lost 0.9% Friday morning.
Wednesday’s IBD 50 Stocks To Watch pick, Neurocrine Biosciences, is building a flat base with a buy point of 109.36. The stock’s RS line hit a new high on Wednesday, pointing to a major outperformance of the stock market. Shares were unchanged Friday.
Vertex Pharmaceuticals is close to regaining its 50-day line after Thursday’s 2.1% rally. The stock held up well during continued market weakness as evidenced by a relative strength line approaching new highs. A new flat base has a buy point of 306.05 and the stock’s resilience makes it a great idea to watch. Vertex shares were flat on Friday.
Join IBD experts as they analyze leading stocks in the current stock market correction on IBD Live
Tesla shares traded 4.1% lower on Thursday, testing support around the 50-day line. Shares continue to form a short base with a buy point of 314.74. In the meantime, keep an eye out for additional buying points if the stock could rise further to the right of its larger consolidation, which stretches back to January. Shares fell another 2.1% on Friday morning.
Bullish, the stock’s relative strength line hit its highest level since April this week. Shares are about 30% off their 52-week high.
Dow Jones Leaders: Apple, Microsoft
Among Dow Jones stocks, Apple shares fell 0.6% on Thursday, contributing to Wednesday’s 2% drop. The stock is trading near recent lows. Shares of Apple lost 1.6% on Friday morning.
Microsoft gained 0.85% on Thursday, higher after hitting a new 52-week low. The software giant is down about 32% from its 52-week high. Microsoft shares fell 1.1% on Friday.
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more information on growth stocks and the Dow Jones Industrial Average.
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