Dow Jones Futures Rise: What To Do After Today’s Stock Market Plunge; Powell Speech Ahead

Dow Jones futures were higher after Monday’s stock market plunge ahead of Federal Reserve Chairman Jerome Powell’s speech from Jackson Hole on Friday.

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Palo Alto Networks (PANW) and Zoom Video (ZM) were key earnings movers after the close Monday. Palo Alto shares jumped more than 7% on better-than-expected results, while Zoom stock dived more than 7% in extended trade after cutting its earnings and sales outlook for the year.

Stock Market Today

On Monday, the Dow Jones Industrial Average declined 1.9%, while the S&P 500 lost 2.1%. The tech-heavy Nasdaq composite sold off 2.55%. And the small-cap Russell 2000 dropped 2.1%.

Among exchange traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) dropped 2.1%, and SPDR S&P 500 (SPY) fell 1.7%.

EV giant Tesla (TSLA) skidded 2.3% Monday. Among Dow Jones leaders, Apple (AAPL) and Microsoft (MSFT) slid 2.3% and 2.9%, respectively, in today’s stock market.

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In the ongoing stock market pullback, Albemarle (ALB), Arista Networks (ANET), Axcelis Technologies (ACLS) and Costco (COST) — as well as Dow Jones stocks Coca-Cola (KO), Merck (MRK) and McDonald’s (MCD) — are among the top stocks to buy and watch.

Albemarle is an IBD Leaderboard stock. Arista and Axcelis were featured in this week’s Stocks Near A Buy Zone column.

Dow Jones Futures Today: Treasury Yields, Oil Prices, Powell Speech

Ahead of Tuesday’s open, Dow Jones futures, along with S&P 500 futures, rose 0.1% each vs. fair value, while Nasdaq 100 futures gained 0.15%. Remember that overnight action in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

The 10-year Treasury yield rose to 3.03% Monday, extending last week’s jump. The 10-year Treasury yield is above the 3% level for the first time since July 21. Meanwhile, U.S. oil prices inched higher, with West Texas Intermediate futures trading near $91 per barrel.

Fed chief Powell will give a speech Friday on the central bank’s economic outlook from Jackson Hole, Wyo. The Fed has raised interest rates this year in an attempt to bring down inflation and has signaled more increases are coming.

Last week’s Fed minutes seemed to push back against market expectations for a dovish pivot, which had already helped spark a six-week stock market rally following the June 14-15 meeting. Markets place a roughly 56% chance of a 75-basis-point rate hike on Sept 21. One week ago, there was a 39% chance.

What To Do In The Current Stock Market Pullback

The stock market pullback continued Monday, as the major stock indexes sold off sharply, ending near session lows.

With the market showing more signs of continued weakness, investors should be playing more defense with existing positions. That doesn’t mean you should flee entirely to cash, but make sure your gains don’t evaporate and be quick to drop losing positions.

Still, the overall trend remains upward, so stay on the lookout for stocks that are holding up best during the current stock market weakness. An easy way to identify stock market leadership is to use the relative strength line. A strong RS line while the stock market struggles is a strong technical indicator.

Monday’s The Big Picture column commented, “Sellers came back from the weekend with a big appetite, sending the stock market indexes to a second straight day of sharp losses. After the two-session rout, investors have reason to make some defensive adjustments.”

If you’re new to IBD, consider taking a look at its stock trading system and CAN SLIM basics. Recognizing chart patterns is one key to the investment guidelines. IBD offers a broad range of growth-stock lists, such as Leaderboard and SwingTrader.

Investors also can create watchlists, find companies nearing a buy point, or develop custom screens at IBD MarketSmith.

Five Dow Jones Stocks To Watch Now

Dow Jones Stocks To Watch: Coca-Cola, McDonald’s, Merck

Dow Jones soda giant Coca Cola is building a flat base that has a 67.30 buy point. A handle entry at 65.14 is also in play. Shares fell below their early entry during Monday’s 1.5% decline.

McDonald’s shares are trading back below a 265.56 cup-with-handle entry following Monday’s 1.35% fall.

Merck is building a flat base, a pattern that shows a 95.82 buy point. Shares remain above their 50-day line amid Monday’s 1% decline, according to IBD MarketSmith chart analysis.

MRK stock shows a solid 94 out of a perfect 99 IBD Composite Rating, per the IBD Stock Checkup. Investors can use the IBD Composite Rating to easily gauge the quality of a stock’s fundamental and technical metrics.

4 Top Growth Stocks To Watch In The Current Stock Market Rally

Top Stocks To Watch: Albemarle, Arista, Axcelis, Costco

IBD Leaderboard stock and lithium producer Albemarle is in buy range following Monday’s retake of a large cup with handle’s 273.78 buy point. The 5% buy zone goes up to 287.47. In previous weeks, shares topped a smaller cup with handle’s 250.25 buy point.

Arista Networks, one of last week’s IBD 50 Stocks To Watch picks, continues to plod up the right side of a double-bottom base that offers a 143.67 buy point. With the stock about 11% away from the current entry, look for a handle to offer a more risk-optimal buy point. Arista’s RS line has been trending higher and is approaching a new high. ANET shares dropped 2.2% Monday.

Retail giant Costco surrendered its cup with handle’s 552.81 buy point Monday, declining 1.6%. Wait for a bullish retake of the entry before buying shares.

Chip-equipment maker Axcelis Technologies continues to build a cup with handle that offers a 79.93 buy point, according to IBD MarketSmith chart analysis. The stock tumbled 4.8% Monday.

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Tesla Stock

Tesla stock lost 2.3% Friday, extending a losing streak to five sessions. Shares of the EV giant are finding stout resistance around their 200-day line.

Tesla stock is about 30% off its 52-week high. Its 3-for-1 stock split is set for Wednesday.

Dow Jones Leaders: Apple, Microsoft

Among Dow Jones stocks, Apple shares sold off 2.3% Monday, as the stock continues to build the right side of a cup base that has a 179.71 buy point. Another interpretation could be a large double bottom that spans back to January. Either way, the buy point is identical. The last three days of losses could be the early part of a potential handle, which would offer a lower entry.

Bullishly, the stock’s relative strength line is holding at new highs, indicating big stock market outperformance.

Microsoft fell 2.9% Friday, extending a losing streak to five sessions and falling further away from its 200-day line.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.

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