The Dow Jones Industrial Average rallied over 250 points Monday as technology giants like Facebook, Amazon, Neftlix, and Google parent company Alphabet recouped losses in the early session of what’s been a volatile month for U.S. equities. Through last Friday’s trading session, the Dow is down 6.7% thus far in October, while the S&P 500 and Nasdaq Composite are both down 8.8% and 10.9, respectively.
Amid third-quarter earnings reports, the Dow experienced four out of five losing sessions last week as technology stocks continued to sell off, signaling a sign that the decade-long bull run could finally be coming to a close. The S&P 500 followed the Nasdaq into a market correction phase, dropping 3.9% to almost match the Nasdaq’s 3.8% drop.
This week could be more of the same after the Dow shed 3% last week.
“It’s likely we see some lows get retested once again, once again we can’t assume a v-bounce as many were calling for back in early October,” said Andrew Thrasher, portfolio manager for The Financial Enhancement Group and founder of Thrasher Analytics.
“Typically, v-bottoms show themselves when the market declines on news, as in a single event that rocks the market but that wasn’t the case this time,” said Thrasher. “Instead we saw a slow bleed in market participation that finally broke the dam of selling and sent stocks across the board lower.”
In addition to the familiar tech giant names, companies like Merck & Co Inc, JP Morgan Chase and Goldman Sachs helped to propel the Dow into the green. The markets also got propped up with news that technology firm IBM agreed to purchase software company Red Hat as part of a $34 billion deal, sending its shares up almost 50% while IBM shares fell over 5%.
“While it will take some time to see the merits of this deal manifest and the impact on enterprise hybrid cloud competitive deployments in the field … we believe the combination of Red Hat and its Linux cloud platform with IBM could represent a formidable cloud behemoth for the coming years,” said Dan Ives, an analyst at Wedbush Securities, in a note to clients.
This week, earnings reports for the third quarter will continue with Apple being on of the heavy hitters that could help rally technology stocks further.
“Apple is scheduled to report quarterly earnings on Thursday and analysts who track the company predict— surprise —that the good times are likely to continue for Apple, the world’s most valuable public company,” said Jack Nicas of the New York Times. “Sales of iPhones have leveled off in recent quarters but people have been paying more for each device, sustaining a steady growth rate for the $1 trillion company.”
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