Dow Jones futures rose modestly Monday morning, along with S&P 500 futures and Nasdaq futures. Earnings from Microsoft, Meta Platforms and many more are on deck. Tesla, which reports Tuesday, slashed EV and FSD prices over the weekend.
The stock market suffered sharp losses in the past week. The Dow Jones actually rose a fraction. But the S&P 500 and Nasdaq composite plunged below their respective 50-day moving averages, suffering their worst week in more than a year.
Most of all, leading stocks were the biggest losers. Nvidia, the ultimate AI stock and company, dived below key support. Chip and AI stocks sold off on cautious comments from ASML and Taiwan Semiconductor Manufacturing. AI server maker Super Micro Computer crashed Friday after not releasing preliminary results, raising fears about AI demand overall.
AI stocks were mixed early Monday, shifting from modest gains earlier.
The market environment is decidedly weak. Investors should be largely in cash, waiting for renewed signs of strength in the major indexes and leading stocks.
Tesla Price Cuts
On Saturday, Tesla cut Model Y, S and X prices in the U.S. by $2,000, while also cutting Full Self-Driving to $8,000 from $12,000.
On Sunday, Tesla cut China prices for the Model 3 and Y by nearly $2,000 while slashing Model S and X prices by up to 22%. Tesla also cut Model 3 prices in key European markets by roughly $2,100-$3,200.
Tesla stock fell 4% early Monday after diving 14% last week to a 52-week low.
Dow Jones Futures Today
Dow Jones futures rose 0.5% vs. fair value. S&P 500 futures advanced 0.4% and Nasdaq 100 futures climbed 0.4%.
The 10-year Treasury yield rose to 4.66%.
Crude oil futures fell slightly.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Key Earnings Ahead
Microsoft, Meta Platforms, Google parent Alphabet and Tesla headline a huge week of earnings. General Electric, ServiceNow, Chipotle Mexican Grill, Dexcom and Caterpillar are among the many other notable reports on tap.
Google stock is in a buy zone. Meta stock, Chipotle and Caterpillar could be setting up, while Dexcom has retreated slightly below a buy point. GE is greatly extended while Microsoft and ServiceNow are starting to crack. Tesla stock has plunged to 52-week lows amid a host of bad news.
These reports and guidance will have a huge impact on their sectors and overall market. Microsoft, Google, Meta and ServiceNow will offer insights into artificial intelligence, as well as cloud computing, online advertising and business software.
For Tesla, there are huge questions regarding the EV giant's growth strategy. Most of all, is Elon Musk shelving a next-generation Model 2?
Meta stock is on IBD Leaderboard. Microsoft stock is on the IBD Long-Term Leaders list. Meta, Dexcom and Google stock are on the IBD 50. Meta Platforms, Google and ServiceNow stock are on the IBD Big Cap 20.
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Stock Market Suffers Big Losses
The stock market suffered heavy losses this past week, especially the Nasdaq and leading growth plays.
The Dow Jones Industrial Average edged up 0.01% in last week's stock market trading. The S&P 500 index tumbled 3.05%, its biggest weekly decline since March 2023. The Nasdaq composite plunged 5.5%, its worst week since November 2022. The small-cap Russell 2000 gave up 2.8%.
The market's power trend, in force since November, is over as the Nasdaq's 21-day exponential moving average undercut the 50-day line.
Some stocks are holding support, with a few making encouraging moves. But generally leading stocks are looking damaged or broken.
AI and chip stocks had been holding up reasonably well. But they led the downside this past week, with Nvidia and especially Super Micro plunging on Friday.
The CBOE Volatility index, or VIX, briefly spiked Friday to the market fear gauge's highest levels since late October. Meanwhile, various indicators suggest the market is significantly oversold. But it's been oversold for some time.
The 10-year Treasury yield jumped 11 basis points to 4.61%, hitting a five-month intraday high of nearly 4.7% on Tuesday. Markets now expect just one Fed rate cut in 2024.
U.S. crude oil futures fell 2.9% to $83.14 a barrel for the week.
Tesla Plunges With One Big Question For The Earnings Call
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF plunged 5.1%. Microsoft is a huge IGV holding, with ServiceNow stock a key component. The VanEck Vectors Semiconductor ETF dived 9.7%. Nvidia stock is the No. 1 holding in SMH, with Taiwan Semi and ASML key members.
SPDR S&P Metals & Mining ETF dipped 0.8% last week. The Global X U.S. Infrastructure Development ETF retreated 2.8%. U.S. Global Jets ETF jumped 4.7%. The SPDR S&P Homebuilders ETF skidded 3.9%.
The Energy Select SPDR ETF fell 1.25% and the Health Care Select Sector SPDR Fund closed fractionally higher. The Industrial Select Sector SPDR Fund gave up 2%, with Caterpillar and GE stock the top two holdings.
The Financial Select SPDR ETF advanced 0.85% and the SPDR S&P Regional Banking ETF climbed 1.8%.
Reflecting more-speculative story stocks, ARK Innovation ETF sold off 9.6% last week and ARK Genomics ETF 10%. Tesla stock is a huge holding across Ark Invest's ETFs.
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AI Hardware Stocks Plunge
AI chip and hardware stocks, the driving force of the market rally from late October to early March, were the big losers last week.
ASML plunged 10.6% for the week on weak Q1 sales and guidance. That also dragged down other chip-equipment makers.
Taiwan Semiconductor stock dived 10.4% despite beating views and guiding higher, fueled by AI chip demand. But the foundry giant was cautious about demand for chips overall.
Nvidia tumbled 13.6%, including Friday's 10% dive to knife through the 50-day. It's now given up over two-thirds of its gains following the fiscal Q1 earnings on Feb. 21.
Arm Holdings crashed 31% for the week
SMCI stock dived 20.6% for the week even with Tuesday's 10.6% spike. Shares dived 23.1% on Friday, literally on no news. Disappointing investors, Super Micro didn't give preliminary results as the AI server maker announced its upcoming Q1 earnings date. That might have also raised concerns about AI chip demand.
All of these stocks flashed sell signals last week.
SMCI and Nvidia have been the two biggest winners on the S&P 500 in 2024, but they were the S&P 500's biggest losers Friday.
Nvidia edged higher early Monday along with ASML and Arm Holdings, recouping just a sliver of what they lost last week. Super Micro and Taiwan Semiconductor fell modestly.
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What To Do Now
The stock market is in bad shape. The major indexes are all well below their 50-day moving averages. Nvidia and other tech standouts are no longer resisting the selling but instead starting to lead the slide.
It's not a time to be buying stocks. Investors should have slim-to-modest exposure, generally only keeping winners with a hefty cushion.
This is a time to build watchlists. You want to look for stocks finding support and showing relative strength.
There are some names holding up, including GE, Google, Meta, Chipotle, Glaukos, Martin Marietta and Allstate.
Remember that in a downtrend, resilient stocks today may not stay that way tomorrow, as Nvidia, Super Micro and ServiceNow showed.
And relative winners can be absolute losers.
Earnings season could provide a positive catalyst for stocks. But, as investors saw this past week, they could trigger fresh selling.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
