Dwo Jones futures open Sunday evening, along with S&P 500 futures and Nasdaq futures, with Apple (AAPL) And Nvidia (NVDA) in focus. Bitcoin continued to fall.
Nvidia’s next-generation Blackwell AI chips will reportedly be delayed due to a design flaw that could have consequences Microsoft (MSFT), Google parent Alphabet (GOOGL), Metaplatforms (META) and other major buyers.
Warren Buffetts Berkshire Hathaway (BRKB) reported solid second-quarter earnings on Saturday and announced that it had nearly halved its stake in Apple stock.
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Palantir posts profits as technology stocks remain under pressure
Indices and major stocks are sold
The stock market sold off last week as fears of a recession emerged. On Wednesday, Fed chief Jerome Powell announced that interest rate cuts were on the way. On Friday, markets expected 50 basis points in September and at least 100 basis points of cuts by the end of the year.
The Russell 2000 and the Dow Jones fell to key support points. The S&P 500 and Nasdaq fell below key levels.
Amazon.com (AMZN) fell on earnings, while Nvidia and other chip stocks suffered large or massive losses. Tesla (TSLA) plummeted to key support, wiping out many of its recent gains.
The silver lining? The market fear gauge, a contrarian indicator, spiked to a 52-week high.
Shares of Apple moved higher last week, holding above a key level. Meta Platforms also climbed, but was far off the highs. Ollie’s Bargain Shop (OLLI), Neurocrine biosciences (NBIX) also showed resilience, while MercadoLibre (MELI) plagued buy points on Friday.
But investors should be extremely careful with new purchases and prefer lower exposure as they cut out the losers.
Dow Jones futures today
Dow Jones futures open at 6:00 PM ET, along with S&P 500 futures and Nasdaq 100 futures. The market’s reaction to Buffett’s Apple sales and the delays to Nvidia’s AI chip will be critical.
Bitcoin fell to $59,000, although the intraday low of $57,284 fell. Bitcoin price was $62,573.55 at 4:00 PM ET on Friday, reaching a recent intraday high of $69,990 on July 29.
Remember, overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading during the next regular stock market session.
Important profits in prospect
Palantir Technologies (PLTR), Super micro (SMCI), Caterpillar (CAT), Embraer (ERJ) are notable earnings this week, along with drug giants Eli Lilly (LLY) And Novo Nordisk (NVO).
But all these stocks look damaged. Palantir and Super Micro stocks are important because they involve artificial intelligence. Caterpillar and Embraer will provide further insights into the industrial and aerospace markets, respectively. Eli Lilly and Novo are the leaders in weight loss medications.
Join IBD experts as they analyze leading stocks and the market on IBD Live
Stock market rally
The stock market rally had a terrible week, especially given Wednesday’s bullish gains on AI optimism and the Fed meeting. Thursday’s sell-off was a major blow to market expectations, while heavy losses continued on Friday.
The Dow Jones Industrial Average fell 2.1% during last week’s stock market trading. The small-cap Russell 2000, which hit a 30-month high Wednesday afternoon, ended down 6.7%. Both tested their 50-day lines on Friday but closed above that key level.
The S&P 500 index lost 2.1% and the Nasdaq index lost 3.35%, both falling below the 50-day line and undermining the previous week’s lows. The Nasdaq entered traditional mid-term correction territory.
The Russell 2000 and the Dow Jones, both with more “real economy” components than the tech-heavy Nasdaq, were big winners in July as the market priced in Fed rate cuts. But as the focus shifts to recession fears, these indices are making a comeback. This also applies to banks, industrial companies and aerospace stocks.
Defensive growth in the discount retail, insurance and medical sectors remained strong, along with defensive utilities and consumer staples.
Although the indices closed off Friday’s lows, they still fell sharply. Weekly charts show no real recovery.
Ten-year Treasury yields fell 40 basis points this week to 3.795%, nearly undercutting the low seen in late December. The two-year interest rate fell by 52 basis points to 3.87%. It was the biggest weekly decline for both since March 2023. The yield spread has reversed the least in two years.
U.S. crude futures fell 4.7% to $73.52 a barrel last week, hitting a two-month low on Friday.
Fear in the market is increasing
The CBOE Volatility Index, or VIX, soared Friday to its highest level since March 2023. The market fear gauge surpassed its peaks in October 2023 and April 2024.
Excessive fear can at least indicate a short-term market bottom, but it doesn’t have to happen right away and it doesn’t have to last for long. Moreover, market fears could become much greater if recession concerns continue to grow.
ETFs
Among the growth ETFs is the Innovator IBD 50 ETF (FFTY) plunged 7.8% last week. The iShares Expanded Tech-Software Sector ETF (IGV) fell 5.4%, while Palantir shares were members.
The VanEck Vectors Semiconductor ETF (SMH) fell 9.1%, with Nvidia stock leading the charge.
SPDR S&P Metals & Mining ETF (XME) slipped 7.7% last week. The Global X US Infrastructure Development ETF (PAVE) lost 4.9%. SPDR S&P Home Builders ETF (XHB) has stepped down by 4.7%. The Energy Select SPDR ETF (XLE) had to give up 4.1% and the Health Care Select Sector SPDR Fund (XLV) rose 0.6%, while Eli Lilly stock held a large stake.
The Industrial Select Sector SPDR fund (XLI) fell 2.8%, with Caterpillar stock a major member. The Financial Select SPDR ETF (XLF) fell 3% and the SPDR S&P Regional Banking ETF (KRE) sold 9.2%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) plummeted 9.9% last week to its worst level since last November. ARK Genomics ETF (ARKG) fell by 9.7%. Tesla shares are a major stock in Ark Invest’s ETFs.
Time the market with IBD’s ETF market strategy
Nvidia AI chips delayed
Nvidia told Microsoft and another key cloud customer that its Blackwell artificial intelligence chips will be delayed by at least three months due to design flaws, The Information reported Saturday, citing a Microsoft employee and another source. That could impact the AI efforts of Microsoft, Google, Meta and more.
A delay in Nvidia’s next-generation chip could have a significant impact on revenue in the coming months. It could also give a boost Advanced micro devices (AMD), which would once again be behind the performance of the Nvidia chip.
NVDA shares tumbled 5.1% to 107.27 last week, with multiple reports late in the week that the Justice Department is investigating the chip giant for its AI dominance. Shares bounced back from Friday’s lows.
Nvidia is reportedly delaying next-generation chip; Major consequences for the AI sector
Warren Buffett’s Berkshire Hathaway
Berkshire Hathaway’s after-tax operating profit rose 15.5% to $11.6 billion, mainly thanks to insurance contracts and interest income from the company’s massive cash positions.
Warren Buffett sold nearly half of his massive stake in Apple stock amid rumors he may trim his positions after some AAPL cuts in the previous two quarters.
BRKB stock fell 2.1% to 428.51 last week and fell below the 430 buy point on Friday.
TSLA shares fell 5.5% last week to 207.67, between the 50-day and 200-day lines. Shares have fallen 23% since hitting a 10-month high of 271 on July 11.
On Friday, the Delaware Chancery Court held a hearing on Elon Musk’s 2017 pay deal, which was rejected earlier this year. Shareholders reapproved the pay agreement in June, but it is unclear whether the court will give it legal weight.
Stocks to watch
Apple shares rose 0.9% this week to 219.86. Shares closed just below the 21-day moving average after nearly touching the 10-week line. The relative strength line, which tracks a stock’s performance against the S&P 500 index, is at its 2024 high.
It will be interesting to see how AAPL stock reacts to Warren Buffett cutting his stake in the iPhone giant.
Meta shares fell 4.8% to 488.14 this week, but closed below the 50-day line after initially peaking in gains on Thursday.
Neurocrine shares rose 4.3% to 153.14 for the week, recovering from the 10-week line and rising 8.2% on Thursday’s earnings data, in a buy zone, according to MarketSurge Analysis. Shares held steady Friday.
Ollie’s stock plunged Friday morning, but recovered losses after testing the 50-day and 10-week lines. Shares rose 0.4% to 96.41 this week. Ollie’s is under the 21 day and longer limit before it may be actioned. A new base would be nice.
MercadoLibre stock rose 7.5% to 1,776.14 this week, recovering from the 40-week line and resuming the 50-day line. Friday’s 10.6% spike on the big gains pushed MELI stock above a trendline entry, as well as an early entry of 1,764.50. The Latin American e-commerce and payments giant has an official buy point for cups with handles of 1,792.05. Keep in mind that it is common for stocks to grow in a bad market, but then fall back.
What to do now?
The stock market rally has suffered serious damage in the past week. The key indexes all look corrupted. Breakouts and setups fail or are under heavy pressure.
Investors should have reduced their exposure, especially late in the week, especially if they bought on Wednesday.
The market fear gauge indicates we are heading for a bottom, but the VIX and other psychological indicators are at best inferior to the major indexes and leading stocks.
In any case, don’t get excited about a strong open market or even a good day or two. The indices and leading stocks need repairs, apart from some names in defensive sectors or defensive growth sectors.
Spend some time reworking watchlists, which may have been shortened after the last few days.
Nvidia stock is on Scoreboard. MercadoLibre is on the flagship IBD50 list.
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