The Dow Jones Industrial Common fell 2.4% final week in a transfer that pushes this index additional under its key 50-day easy transferring common. Whereas not probably the most broadly adopted index, the Dow has continued to evolve in order that its 30 parts extra carefully symbolize the present economic system. Amazon’s (AMZN) inclusion on the finish of February is the newest modification, the place it joins Apple (AAPL), Microsoft (MSFT), and Salesforce (CRM) to call only a few of the heavier-weighted names.
Every day Chart of Dow Jones Industrial Common
Main this index decrease final week was a 7.4% decline in J.P. Morgan Chase (JPM), which fell following the discharge of their first quarter earnings on Friday. Whereas the corporate’s outcomes had been robust, CEO Dimon’s tepid outlook for development going ahead pushed the inventory decrease. Among the many dangers cited by administration had been excessive inflation and the potential for the Federal Reserve to tighten financial coverage. Geopolitical dangers had been additionally talked about.
Most notable on JPM’s chart, nonetheless, was the truth that it was buying and selling at a brand new excessive in value previous to the discharge of their report. In different phrases, the inventory was priced for perfection, such that any trace of a doable slowing of development pushed the inventory sharply decrease.
At the moment, we’re on the very starting of earnings season and, ought to we see an analogous response to well-known corporations reporting outcomes whereas their inventory is priced at a near-term excessive, we may very well be in for some robust sledding. Netflix (NFLX) is the following well-known firm as a result of report subsequent week, adopted by Microsoft (MSFT), Alphabet (GOOGL), and Meta Platforms (META) the next week. Every of those shares are buying and selling at near-term highs and are inclined to weak point amid any speak of an increase in rates of interest.
Comparative Chart of Dow, S&P 500 and NASDAQ – June 2023-Present
Above is a comparative chart of the Dow Jones Industrial Common versus the S&P 500 and the NASDAQ Composite. As highlighted, the Dow led the markets into a brand new uptrend, which started in early November. Extra just lately, lots of these profitable shares from the Dow are actually in downtrends, after closing under their key 50-day easy transferring common.
These winners had been from a broad cross-section of sectors, equivalent to Industrials, Financials, and Shopper Discretionary, and embrace Residence Depot (HD) and J.P. Morgan (JPM), to call simply two. My screening confirmed the weak point that had been spreading in these sectors, as I eliminated a number of Retailers from my MEM Edge Report Steered Holdings Record over the previous a number of weeks and took off Financial institution shares earlier this week. The deterioration amongst these Discretionary, Monetary, and Healthcare shares from the Nasdaq and the S&P 500 could also be tougher to identify, given the massive variety of names of their index; nonetheless, my MEM Edge Report has been detailing the weak point for weeks now.
Most vital presently is the truth that each the Nasdaq and S&P 500 are hovering above key help, and you may wish to protect earnings ought to we see a downtrend develop. Whereas rates of interest are a key determinant of investor sentiment, earnings reviews have been confirmed to be extra impactful. If you would like to be stored updated on the situation of the broader markets, in addition to methods to deal with shares relying in your funding horizon, use this hyperlink right here to entry my twice weekly report for 4 weeks for a nominal charge.
Warmly,
Mary Ellen McGonagle
MEM Funding Analysis
Mary Ellen McGonagle is an expert investing guide and the president of MEM Funding Analysis. After eight years of engaged on Wall Avenue, Ms. McGonagle left to develop into a talented inventory analyst, working with William O’Neill in figuring out wholesome shares with potential to take off. She has labored with shoppers that span the globe, together with huge names like Constancy Asset Administration, Morgan Stanley, Merrill Lynch and Oppenheimer.
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