Dow Heads for Third Weekly Loss While Nasdaq Holds the AI Bid
The 10-year yield climbed more than four basis points to 4.996% Friday and that is enough to tell you which side of the market is in trouble and which side is not.
The Dow is headed for its third straight weekly loss, down more than 1% for the week. The S&P 500 is also lower. The Nasdaq is on track for a weekly gain of about 0.5%.
The market is not selling everything on higher yields. It is selling what needs lower rates and holding onto the part that is still promising earnings growth. That split has been the trade all week and Friday is confirming it.
At 14:04 GMT, the Dow Jones Industrial Average is trading 51,543.17, down 234.87 or 0.45%. The S&P 500 is trading 7,622.04, down 15.72 or 0.21%. The Nasdaq Composite is trading 26,410.87, down 7.43 or 0.03%.
Daily S&P 500 Index (SPX) Technical Analysis
The S&P 500 Index is edging lower shortly after the opening after giving back earlier gains. The main trend is down according to the daily swing chart. A trade through 7756.76 will change the main trend to up. A move through 7507.77 will signal a resumption of the downtrend.
The minor trend is up. This is fueling the two-day momentum shift. A trade through 7677.02 will reaffirm the uptrend.
The index opened on the strong side of the 50-day moving average at 7616.64, however, it is now within striking distance of it after establishing an intraday low at 7618.44.
The rally started on Wednesday after a successful test of the short-term retracement zone at 7565.31 to 7505.98. The actual low was 7507.77. On the upside, the resistance zone is 7662.24 to 7698.69. The rally stopped earlier in the session at 7657.17, just short of the area.
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See all Dow Jones forecastsThursday’s Rebound Did Not Fix the Problem
The Dow gained 316 points Thursday. The S&P 500 rallied 1.1%. The Nasdaq jumped 1.7%. Friday’s pullback tells you that bounce was not broad enough to hold through another push in yields. Technology did the heavy lifting Thursday because buyers were willing to look past the Fed and stay in the AI spending story. The Dow and the rate-sensitive names did not earn the same kind of conviction.
The Fed raised rates 25 basis points Wednesday to 3.75%-4.00% and left room for at least one more increase before year-end. Thursday’s response was a relief rally. Friday’s response is the yield market reminding stocks that the hike did not fix inflation and the 10-year is right back where it started the week.
The Industrials Are Cracking While Tech Holds
Steel Dynamics and Nucor fell more than 1.5% after disappointing guidance. That is the cyclical side of the market feeling the yield pressure directly. Industrials and value stocks need lower borrowing costs and stronger forward demand to hold up. They are not getting either one right now.
The Nasdaq is absorbing the same yield environment and barely down on the day. Macom Technology Solutions gained after an upgrade tied to its lower valuation and data-center, industrial and defense fundamentals. Cryptocurrency-linked stocks moved higher after bitcoin climbed back above $78,000. Those are not defensive trades. Traders are still willing to own growth and risk assets when the individual story supports it.
The divergence between Nucor getting sold on guidance and Macom getting bought on an upgrade in the same session is the market in one frame. Yield-sensitive names are paying for higher rates. AI-adjacent names are still getting the benefit of the doubt.
Stocks in the News
Netflix fell more than 3% after a downgrade tied to engagement concerns and weaker expected content. Xenon Pharmaceuticals sank 25% after pausing enrollment in depression studies over neuropsychiatric side effects. Both moves are sharp but they are stock-specific. The selling did not spread. The market can absorb a Netflix downgrade and a biotech collapse as long as money keeps rotating into technology and selective growth. The problem starts when that rotation stops. It has not stopped.
What to Watch
Governor Michelle Bowman and Kansas City Fed President Jeff Schmid speak Friday. The market will listen for any signal that Wednesday’s hike was the start of a steady tightening campaign instead of a limited response. The 10-year at 4.996% is one tick from the 5% level that pressured the entire market earlier this week. Whether it breaks above that level again and holds will matter more to the S&P 500 and Dow than anything Bowman or Schmid say. The Nasdaq has proven this week that it can hold up on the other side of a rate hike as long as the AI spending story stays intact. The Dow has proven it cannot.
The bias leans bearish on the S&P 500 with the main trend down on the daily swing chart. The minor trend flipped to up on Thursday’s rally and that has weakened the bearish case. The 50-day moving average at 7616.64 is the pivot Friday with the index sitting right on top of it. The resistance zone at 7662.24 to 7698.69 capped Friday’s early push. A sustained move through that zone puts the main top at 7756.76 in play and that is where the trend changes. On the downside, the retracement zone at 7565.31 to 7505.98 held Wednesday’s low at 7507.77 and that remains the floor. A break through it resumes the downtrend.
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