Stocks are on the verge of dripping back into negative territory Tuesday, with the hype surrounding the Spotify Technology S.A. (NYSE:SPOT) initial public offering not enough to stem the slow drip of fear and selling.
There are too many headwinds — from the threat of regulation to systemic worries about Federal Reserve tightening — mixed with the fact investors were too aggressively positioned in key Big Tech stocks.
The S&P 500’s dead lurch below its 200-day moving average will have a lasting impact if history is any guide. Jason Goepfert at Sundial Capital Research notes that when the S&P lost its 200-day moving average on Monday, it “did so with extreme prejudice” of the type seen before the 1929, 1987 and 2007 market collapses.
Amid the selloff, every single stock in the tech-heavy Nasdaq 100 index fell, something that has only been seen 10 other times in the past 22 years.
With the selloff set to deepen, these four Dow Jones Industrial components look ready for a nasty breakdown. Here are four to watch:
Dow Stocks Breaking Down: JPMorgan (JPM)
JPMorgan Chase & Co. (NYSE:JPM) shares are at risk of crash through critical support near $107.50, setting up a decline all the way back to the November lows near $95. That would be worth a fall of more than 11% from current levels.
Bank stocks have been under pressure lately on a combination of worries about rising inter-bank lending rates and a decline in net interest margin hopes.
The company will next report results on April 13 before the bell. Analysts are looking for earnings of $2.28 per share on revenues of $27.6 billion. When the company last reported on Jan. 12, earnings of seven cents per share beat estimates by seven cents on a 3.3% rise in revenues.
Dow Stocks Breaking Down: Merck (MRK)
Merck & Co., Inc. (NYSE:MRK) shares are testing critical support near $53, setting up a decline back to levels not seen since early 2016.
Shares are down nearly 20% from the highs seen back in September amid a focus from both political parties in high drug prices and the threat retailers like Amazon.com, Inc. (NASDAQ:AMZN) and Walmart Inc. (NYSE:WMT) move in an effort to lower the cost of care for consumers.
The company will next report results on May 1 before the bell. Analysts are looking for earnings of 99 cents per share on revenues of $10.1 billion.
When the company last reported on Feb. 2, earnings of 98 cents per share beat estimates by four cents on a 3.1% rise in revenues.
Dow Stocks Break Down: Caterpillar (CAT)
Caterpillar Inc. (NYSE:CAT) shares are threatening to drop below multi-month support near $145, setting up a decline back to the October-November trading range near $135.
Shares are already down nearly 20% amid concerns the simmering trade war between China and the United States could hurt foreign sales for Caterpillar — something that will be disappointing for the company, since it was looking to cash in on Beijing’s Silk Road initiative.
The company will next report results on April 24 before the bell. Analysts are looking for earnings of $2.07 per share on revenues of $11.9 billion. When the company last reported on Jan. 25, earnings of $2.16 per share beat estimates by 38 cents on a 34.7% rise in revenues.
Dow Stocks Breaking Down: International Business Machines Corporation (IBM)
International Business Machines Corporation (NYSE:IBM) shares are threatening to fall below their early February lows near $147.50, setting up a potential drop to the August lows near $137.50, which would be worth a decline of roughly 7% from current levels.
Management has done its best to talk up new high-growth initiatives in areas like quantum computing and blockchain — but Stifel analysts note that these are long-run catalysts.
The company will next report results on April 17 after the close. Analysts are looking for earnings of $2.41 per share on revenues of $18.77 billion. When the company last reported on Jan. 18, earnings of $5.18 beat estimates by a penny on a 3.6% rise in revenues.
Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
