U.S. stock futures signaled a mixed open Friday as investors digested Apple’s disappointing earnings report and braced for the October jobs numbers before the bell.
Dow Jones futures rose 0.15%, while S&P 500 futures dipped 0.1% and tech-heavy Nasdaq 100 futures fell 0.2% in premarket trading. Apple stock weighed on futures after the tech giant’s revenue declined for the fourth straight quarter. Investors now look ahead to the U.S. October jobs report, expected out at 8:30 a.m. ET.
Economists forecast 179,000 jobs added last month, slowing from September’s 336,000 gain, partly due to the now-ended UAW strike. The unemployment rate likely held at 3.8% as wage growth potentially cooled to 4% annually. Strong job growth could spark a negative stock market reaction by driving Treasury yields and rate hike bets higher.
On Thursday, the Dow Jones Industrial Average jumped 1.7%, the S&P 500 rose 1.9%, and the Nasdaq composite climbed 1.8%. Both the Dow and S&P 500 staged follow-through days, confirming the new uptrend after the Nasdaq signaled it Wednesday.
Oil prices extended gains with U.S. crude topping $82 per barrel. But the 10-year Treasury yield declined 12 basis points to 4.67% as bond prices rebounded. Falling yields boosted stocks, especially growth names.
Apple Earnings Fall Short, Stock Sinks After-Hours
After Thursday’s close, Apple reported fiscal fourth-quarter results that beat on earnings but fell short on revenue as China iPhone sales disappointed. Overall revenue dropped 5% annually for a fourth straight decline.
Apple’s Q1 guidance also underwhelmed, projected around the $123 billion in sales it generated in Q4 versus estimates nearer $130 billion. Apple stock sank over 3% on the news, signaling more weakness when the market opens Friday.
Still, shares found support at the 50-day moving average Thursday after retaking the 200-day line Wednesday. Apple remains in buy range from a downward-sloping trendline entry or 182.34 short-term high. But Friday’s drop may undercut recent technical progress.
S&P 500 Nears Key Barrier; Nasdaq Recaptures 21-Day Line
All three major indexes extended their rally off last week’s lows with solid gains Thursday. Both the S&P 500 and Dow Jones are approaching their 50-day moving averages, seen as the next resistance area.
The S&P 500 and Dow confirmed the new uptrend with follow-through days Thursday. The Nasdaq already signaled it Wednesday with its own follow-through, marking successive days of bullish confirmation.
The Nasdaq moved back above its 21-day line as the S&P 500 reclaimed its 200-day average. Breaching the 50-day lines decisively would strengthen the bull case. The small-cap Russell 2000 popped 2.7% to also clear its 21-day line.
Strong market breadth saw advancers lead decliners nearly 5-to-1 on the NYSE and 4-to-1 on the Nasdaq. Growth areas like software and chips rebounded as bond yields retreated.
The 10-year Treasury yield’s 12-point drop boosted sentiment, especially for tech and growth stocks. Lower yields reduce the discount rate used to value future earnings. The benchmark yield remains above its 21-day average but comfortably below 5%.
U.S. October Jobs Data On Tap
All eyes turn to the U.S. October jobs report Friday morning, the week’s biggest economic data point. Job growth likely cooled from September’s robust pace, weighed on by the now-over General Motors strike. But the labor market remains historically tight.
The October unemployment rate should hold at 3.8% near 50-year lows. However, average hourly earnings may moderate slightly to 4% annual growth as more moderate-wage positions were filled.
While a goldilocks report could support stocks, an overwhelmingly strong jobs number may reignite recession and rate hike fears. The Federal Reserve has been aggressively raising interest rates to cool demand and curb high inflation.
Tame wage figures could hint the Fed’s actions are having the desired effect of moderating price increases. More modest job additions may relieve pressure on the Fed to continue outsized hikes.
On Wednesday, the Fed delivered a fourth straight 75-basis point increase but hinted smaller rises could be coming. Markets cheered the less-hawkish outlook as the overtightening risk appeared to ease.
Dow Stocks: Merck, Goldman Sachs, UnitedHealth Rally
It was a bullish day for Dow Jones stocks. Pharmaceutical giant Merck (MRK) popped 6% in huge volume, retaking its 200-day line. Investment bank Goldman Sachs (GS) surged 7%, rebounding from recent losses to top its 21-day.
UnitedHealth Group (UNH) rallied 5%, moving closer toward a possible flat base entry at 549.60. Walgreens Boots (WBA) spiked 7% as it bounces back above its 200-day average.
But Disney (DIS) slid 1.4%, failing to hold its 200-day line after Wednesday’s breakout. JPMorgan (JPM) fell 1.5%, giving up early gains as it pulls back from recent highs.
IPO Market Stages Comeback As Market Sentiment Brightens
The U.S. IPO market is showing signs of renewed life after a historically slow third quarter. Companies raised over $1 billion via initial public offerings last week, the most since August, according to Refinitiv.
Sentiment is improving as stocks rebound off October lows. Monday.com (MNDY) jumped over 20% in its first day of trading Thursday. The Israeli work management software firm raised nearly $574 million.
Corebridge Financial (CRBG), the life insurance spin off from GE, and cemetery operator Service Corp. (SCI) also had well-received offerings this week.
Improving conditions bode well for a pickup in IPOs after new offerings dried up for most of 2022. A stock market bottoming and stabilization in rates could draw more firms to tap public markets.
Market Rally Still Faces Hurdles, But Outlook Brightens
While confirmation of a new uptrend is bullish, the market rally still faces overhead resistance and macroeconomic challenges. Earnings warnings from Apple and Amazon weighed heavily on tech earlier this week.
Ongoing inflation and higher rates remain threats as the Fed keeps tightening financial conditions. But moderating economic data and stable bond yields point to a soft landing being possible.
With risks still elevated, investors should be prudent and wait for strength to emerge before committing too much new capital. At the same time, it’s important to stay engaged and build up watchlists.
As leading stocks flash renewed buy signals, solid setups are emerging across sectors like software, energy, defense, and medicals. The best time to go shopping is when others are fearful.
As the dust settles from the October shakeout, the market outlook appears to be steadily improving. While more choppy action is likely, stocks seem to be building a foundation for future gains. Patience and discipline will be key to capitalize in the weeks ahead.
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