Dow Jones futures plunged Monday morning, along with S&P 500 futures and Nasdaq futures, with fears of a massive Chinese property default rippling through global markets. It also comes ahead of a critical Federal Reserve meeting this week.
The stock market rally saw modest losses last week, but a Wednesday rebound fizzled Friday. The S&P 500 index fell below its 50-day moving average. Apple (AAPL) also broke through the 50-day line, but industrials, including fellow Dow Jones giant Caterpillar (CAT), as well as miners, steelmakers, and materials firms, were big losers.
But growth stocks had a solid week overall. Microsoft (MSFT), unlike fellow tech titan Apple stock, rallied from its 10-week line. Small caps held vital support.
Oil and gas stocks had a big week, with Devon Energy (DVN) clearing an early entry and flirting with an outright breakout. Specialty footwear plays Crocs (CROX), Deckers Outdoor (DECK), and Boot Barn (BOOT) rallied, with the latter two actionable. Chipotle Mexican Grill (CMG) is among several restaurant chains trying to get back on the investing menu.
Chip stocks were mixed overall, but Entegris (ENTG) broke out while Advanced Micro Devices (AMD) is teasing a possible entry if the market rally cooperates.
But there’s the rub. Will the stock market rally find support at current levels, or will the pullback turn into an outright correction?
Microsoft stock, Devon Energy, and Deckers are on IBD Leaderboard. Microsoft and ENTG stock are on IBD Long-Term Leaders. Crocs and DECK stock are on the IBD 50.
Five Stocks Setting Up Buy Opportunities From Key Level
China Property Default Risk
Major property developer Evergrande is in danger of default, with payments due on Sept. 23 and 29. Investors fear that Beijing will let the massively indebted firm go under. Property firms have plunged in Chinese markets, with Hong Kong’s Hang Seng tumbling to its lowest level since last October. The Evergrande collapse raises fears about the Chinese economy, already slowing from a Beijing crackdown and renewed coronavirus restrictions, and beyond.
The Federal Reserve will hold a two-day policy meeting starting Tuesday. Fed policymakers have signaled that they will vote in favor of tapering bond buys, starting sometime before the end of the year. How will financial markets respond if Wednesday’s Fed meeting announcement and Fed chief Jerome Powell’s press conference confirmed that the central bank will scale back asset purchases?
The stock market rally may be searching for direction until the Fed meeting announcement.
When It’s Time To Sell Your Favorite Stock
Dow Jones Futures Today
Dow Jones futures tumbled 1.85% vs. fair value. S&P 500 futures skidded 1.6% and Nasdaq 100 futures retreated 1.4%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 229.38 million. Covid-19 deaths topped 4.70 million. Coronavirus cases in the U.S. have hit 42.90 million, with deaths above 691,000.
The seven-day average of new cases in the U.S. continues to trend lower. Some northern states such as Pennsylvania are seeing a delta wave, while southern states like Florida continue to see rapid declines.
On Friday, an FDA advisory panel overwhelmingly voted not to recommend booster shots for adults 16-64. But it unanimously backed booster shots for adults 65 and up, as well as adults at high risk of developing Covid. The FDA and CDC will now decide, but the panel’s vote suggests that booster shots are not available for most adults.
But Pfizer said Monday that its vaccine is safe and highly effective for children aged 5-11. It’ll seek FDA approval, raising hopes that millions of young kids will be vaccinated by the end of October.
The Biden administration reportedly is negotiating to buy 500 million Pfizer doses to donate to poor countries, with an announcement likely in a few days.
Still, Moderna (MRNA), Pfizer (PFE), and its partner BioNTech (BNTX) all declined modestly early Monday after retreating Friday.
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Stock Market Rally
The stock market rally had a solid middle of the week but started poorly and ended that way.
The Dow Jones Industrial Average edged down 0.1% in last week’s stock market trading after already falling below its 50-day line. The S&P 500 index sank 0.6%. The Nasdaq composite gave up 0.5%, thanks to Friday’s 0.9% retreat. The small-cap Russell 2000 edged up 0.4%.