Dow Jones fell Friday morning, along with the S&P 500 and Nasdaq composite, with struggling stock market rally on the brink. Apple stock fell on earnings while coronavirus cases hit record highs in the U.S. just before Election Day. Amazon.com (AMZN) and Facebook (FB) sank on results while Google parent Alphabet (GOOGL) jumped.
Apple earnings topped views while sales edged higher, but iPhone revenue missed as Greater China sales tumbled 29%. Apple (AAPL) also didn’t gave guidance. AAPL stock fell 5%. Amazon crushed views, but gave mixed guidance. AMZN stock sank 4%. Facebook also easily beat, but North America users fell slightly. FB stock was down 5%.
There were some notable winners. Google stock is up 5%, clearing an early entry on its strong results. Software makers BlackLine (BL), Zendesk (ZEN) and Five9 (FIVN) rallied on earnings. But there were other losers too: Atlassian (TEAM), Digital Turbine (APPS), Activision (ATVI) and especially Twitter (TWTR).
Dow Jones Today
The Dow Jones Industrial Average fell 0.7%, while the S&P 500 index sank 0.9% and the Nasdaq composite 1.7%.
Investors have been getting scared, according to the market fear gauge, which is good news.
Coronavirus cases worldwide reached 45.49 million. Covid-19 deaths topped 1.18 million.
Coronavirus cases in the U.S. have hit 9.21 million, with deaths above 234,000.
U.S. coronavirus cases topped 91,000 on Thursday, by far a record level. Hospitalizations are soaring in the U.S. The death toll is rising, but far below the spring peak.
France begins its partial lockdown today, followed by Germany closing restaurants and bars on Monday.
Stock Market Rally
The stock market rally had solid-to-strong gains Thursday, despite closing off their best levels.
The Dow Jones Industrial Average rose 0.5% in Thursday’s stock market trading, after finding support from just above its 200-day line. The S&P 500 index advanced 1.2%. The Nasdaq composite rose 1.6%.
The stock market rally is in a significant pullback, with the market uptrend under increasing pressure. The Dow Jones, S&P 500 index and Nasdaq composite are all below their 50-day moving averages.
The Amazon stock retreat in the premarket isn’t severe, but is the latest U.S. e-commerce leader to fall on earnings. Shopify (SHOP), Etsy (ETSY) and eBay (EBAY) have all retreated this week following results, with SHOP and Etsy sinking below buy points.
Meanwhile, Zoom Video (ZM) and Peloton (PTON) have retreated on no particular news, with sharp losses on Thursday. Covid-19 fears have fueled these ultimate stay-at-home plays in 2020, but the new surge in coronavirus cases hasn’t boost the stocks lately.
Great Market Rallies Create Bad Habits
It’s one thing to know that you should listen to the market and not try to predict where it’s going. But it’s hard not to try to be “brave” and “clever” by jumping into a leader that’s making a bullish move even when market conditions are shaky.
During the April-September stock market rally, cheating on breakouts, buying on short-term pullbacks and just about every aggressive move paid off. But that market rally was unusually strong. Great markets can develop bad habits.
Even at Thursday’s peak, the Nasdaq never broke above its steep downtrend since Oct. 12. The few up days in the past few weeks have encouraged investors to buy leading stocks flashing early entries or buy points, but those generally haven’t lasted. Promising breakouts from early October have roundtripped.
So while there are plenty of stocks that still look promising, this isn’t a good environment to be buying stocks.
Halloween Stock Market Treat?
It’s almost Halloween, when people enjoy scaring and being scared, with candy at the end. While trick-or-treating may be subdued and haunted houses boarded up this year amid soaring coronavirus cases, investors do love a good scare.
The CBOE Volatility Index, or VIX, is known as the market’s fear gauge. The CBOE Volatility Index rose to a four-month high intraday Thursday, though nowhere near the panic levels at the coronavirus market crash lows. Assuming that Dow futures and Apple stock do foreshadow losses at the market open, the VIX could jump again.
Excessive bearishness can signal at least a short-term market bottom. But that bottom doesn’t have to happen right away and the rebound doesn’t have to last.
With earnings season still heavy over the next couple of weeks, Election Day just around the corner and soaring coronavirus cases spurring lockdowns, investors may be reluctant to make big bets on the stock market rally.
Wait until the stock market rally shows real strength, not just a good day or a reversal off intraday lows. If a market rally has legs, you’ll have plenty of time to run with the bulls.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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