Dow Jones futures tumbled 425 points Friday morning ahead of Fed chief Jerome Powell’s comments at a Federal Reserve event in Washington D.C. The early action threatened to extend the stock market’s three-day losing streak, putting the Nasdaq and S&P 500 on track for their sixth weekly drop in the past seven weeks.
European indexes were also knocked down Friday after business surveys showed that economic activity in Europe declined sharply in September, raising the risk of recession.
“A Eurozone recession is in the cards as companies report worsening business conditions and intensifying price pressures linked to soaring energy costs,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. Williamson was quoted in an S&P Global news release.
London’s FTSE 100 declined 2.2%, while Frankfurt’s DAX sold off 2.7%. The CAC 40 in Paris dropped 2.2% in afternoon trade.
Costco Wholesale (COST) was a key earnings mover Friday morning. Costco reported better-than-expected fiscal fourth-quarter earnings and matched sales results late Thursday, Still, COST stock dropped more than 2% in morning trade. In early September, Costco shares triggered the 7%-8% loss-cutting rule from a 552.81 buy point out of a cup with handle.
Electric-vehicle leader Tesla (TSLA) traded more than 2% lower Friday. Among the Dow Jones industrials, tech titans Apple (AAPL) and Microsoft (MSFT) were sharply lower ahead of today’s stock market open.
Top stocks to watch amid the market’s recent weakness include Continental Resources (CLR), DoubleVerify (DV), Neurocrine Biosciences (NBIX) and Vertex Pharmaceuticals (VRTX) — as well as Dow Jones stock Chevron (CVX). Keep in mind the new stock market correction is a good reason for investors to be mostly, if not entirely, on the sidelines.
DoubleVerify is an IBD Leaderboard stock, but its position size was trimmed during last week’s losses. Tesla was featured in this week’s Stocks Near A Buy Zone column. Neurocrine was Wednesday’s IBD 50 Stocks To Watch pick.
Dow Jones Today: Treasury Yields, Oil Prices
Ahead of Friday’s opening bell, Dow Jones futures traded down 1% vs. fair value, while S&P 500 futures fell 1.05%. Nasdaq 100 futures pared losses to 0.9% in morning action. Remember that overnight activity in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Among exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) was down 1.25%, and the SPDR S&P 500 ETF (SPY) fell 1.2%.
The 10-year Treasury yield surged to 3.76% Friday, hitting its highest level since April 2010. Meanwhile, fears of demand loss due to the European data helped send U.S. oil prices more than 3% lower. West Texas Intermediate futures sank to near $80 a barrel, their lowest level since February.
Stock Market Correction
On Thursday, the Dow Jones Industrial Average declined 0.4%, testing the 30,000 level, about where the index bounced in June and July. Dow futures pointed to a break of that support in premarket trade. The S&P 500 closed 0.8% lower on Thursday. The Nasdaq composite declined 1.4%. The small-cap Russell 2000 lagged, sliding 2.3%.
All four major stock indexes hit new lows since IBD’s market outlook changed to “market in correction” on Sept. 16.
Thursday’s The Big Picture column commented, “Top growth stocks underperformed Thursday, as the Innovator IBD 50 ETF (FFTY) slid 3.1%, hitting a new 52-week low. In fact, the ETF is now at the lowest since March 2020, nearing the lows of the Covid bear market.”
To prepare for a new stock market rally, investors should be watching for two things: a rally attempt, then a follow-through 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 doesn’t undercut its latest low. If that low is undercut, the rally try is done and the market needs to try again. Thursday’s action hit more correction lows, so we’re back to looking for a day 1.
On day 4 and later, you are looking for the Nasdaq or S&P 500 to rise sharply in higher volume than the previous session. That’s a follow-through day. It gives investors the green light to start buying leading stocks breaking out past correct buy points. It should put your portfolio and mindset in sync with the stock market action by gradually committing capital to leading stocks.
During stock market correction, don’t tune out. Instead, create watchlists to find emerging stock market leadership by using the relative strength line. The RS line measures a stock’s price performance vs. the S&P 500. If the stock is outperforming the broader market, the RS line angles upward. If a stock lags 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 inched lower Thursday, still barely holding at crucial support around its 50-day line. Shares are trading about 6% away from their latest buy point at 166.93 out of a cup with handle — according to IBD MarketSmith chart analysis — amid a strong performance by energy stocks so far this year. The stock sold off more than 2% as oil prices tumbled early Friday.
CVX stock shows a strong 98 out of a perfect 99 IBD Composite Rating, per the IBD Stock Checkup. Investors can use the IBD Composite Rating to easily gauge the quality of a stock’s fundamental and technical metrics.
3 Top Growth Stocks To Buy And Watch In The Current Stock Market Correction
Top Stocks To Watch: Continental, DoubleVerify, Neurocrine, Vertex
Oil explorer and producer Continental Resources is building a cup with handle with a 72.80 buy point, according to IBD MarketSmith chart analysis. The relative strength line touched a recent high last week, but remains a bit off its 52-week high. CLR shares traded down nearly 3% early Friday.
IBD Leaderboard stock DoubleVerify remains below its 28.07 buy point in a bottoming base following Thursday’s 1.6% loss. The stock is just above its 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 that has a 109.36 buy point. The stock’s RS line hit a new high Wednesday, signifying big stock market outperformance. Shares were unchanged Friday.
Vertex Pharmaceuticals is close to recapturing its 50-day line after Thursday’s 2.1% rally. The stock has been holding up well during the ongoing market weakness, as indicated by a relative strength line that is approaching new highs. A new flat base has a 306.05 buy point, and the stock’s resilience makes it a top idea to watch. Vertex shares were flat Friday.
Join IBD experts as they analyze leading stocks in the current stock market correction on IBD Live
Tesla stock traded down 4.1% Thursday, testing support around the 50-day line. Shares continue shape a short base that has a 314.74 buy point. Meanwhile, keep an eye out for additional buy points if the stock is able to climb further up the right side of its larger consolidation, which spans back to January. Shares moved down another 2.1% Friday morning.
Bullishly, the stock’s relative strength line reached its highest level since April this week. Shares are about 30% of their 52-week high.
Dow Jones Leaders: Apple, Microsoft
Among Dow Jones stocks, Apple shares dropped 0.6% Thursday, adding to Wednesday’s 2% fall. The stock is trading near recent lows. Apple stock lost 1.6% Friday morning.
Microsoft gained 0.85% Thursday, reversing higher after hitting another 52-week low. The software giant is about 32% off its 52-week high. Microsoft shares dropped 1.1% early Friday.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.
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