Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures, with Microsoft (MSFT), parent of Google Alphabet (GOOGL) and Meta Platform (META) headlined a big earnings week, with the Federal Reserve set to raise rates again.
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The stock market rally saw big weekly gains for the Dow Jones, which is on its longest winning streak in nearly six years. The S&P 500 also had strong gains. But the Nasdaq returned lower after a large sale on Thursday led by Tesla (TSLA). Growth stocks suffer losses, often large, but generally look healthy.
Bank stocks, meanwhile, roared. Industrials, travel and some drug stocks showed strong or strong action.
The market could use a breather and there aren’t many setups at the moment. So this is not a good time to increase exposure.
Microsoft, Google and Meta’s earnings were huge in the market’s rally. Not only do these three tech titans boast nearly $5 trillion in market cap combined, but their results, guidance, spending plans and comments will be important for cloud computing, artificial intelligence, digital advertising and more.
That has a big impact on the likes of Amazon.com (AMZN), which reported on August 3, with Nvidia (NVDA) and other suppliers as well as cloud software games.
Meanwhile, ServiceNow (NOW), General Electric (GE), Visayan (V), Chipotle Mexican Grill (CMG), Boeing (BA), General Motors (GM) are just a few of the other important faucet companies.
Tesla, Nvidia and Meta stocks are on the IBD Leaderboard, with CMG stock on the Leaderboard watchlist. Microsoft stock is on the IBD Long-Term Leader list. Tesla and NOW stock are in the IBD 50. TSLA stock is in the IBD Big Cap 20.
The video embedded in the article discusses weekly market action and analyzes Dow giants Microsoft, Boeing and Visa stock.
The Fed meets for two days this coming week with a policy announcement due at 2 pm ET on Wednesday. After a pause in June, the Fed is expected to raise rates by a quarter point. But the real question is how to see rate hikes for the rest of the year. Fed policymakers in June predicted two more rate hikes this year, but poor inflation reports bolstered investors’ expectations that there was little chance of a move after Wednesday.
Fed chief Jerome Powell’s comments at 2:30 pm ET are likely to provide clues about the rate outlook.
Dow Jones futures open at 6 pm ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in the Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD’s experts as they analyze stock market rally action on IBD Live
The stock market rally started the week with broad momentum, but then fell apart.
The Dow Jones Industrial Average jumped 2.1% in stock market trading last week, finally hitting a 2023 high. The Dow is riding a 10-day winning streak, its longest since August 2017. The S&P 500 index rose 0.8%, but there were gains. The Nasdaq composite fell 0.6%, thanks to Thursday’s 2.05% fall. The small-cap Russell 2000 rose 1.5%, also closing at a 2023 high.
The Invesco S&P 500 Equal Weight ETF (RSP) rose 1.35%, nearly double the S&P 500’s gain and just shy of its 2023 high,
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 0.9%, the mirror image of the Nasdaq 100’s 0.9% slide.
The 10-year Treasury yield rose 2 basis points to 3.84%, but there were some big daily moves.
US crude oil futures rose 2.3% to $77.07 a barrel, the fourth straight weekly gain.
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Among the growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.35% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 0.1%, snapping a weekly gain. Microsoft stock and ServiceNow are major IGV holdings. The VanEck Vectors Semiconductor ETF (SMH) fell 2% after a 5.4% spike last week.
The SPDR S&P Metals & Mining ETF (XME) slipped 0.2% higher last week. The Global X US Infrastructure Development ETF (PAVE) rose 0.4%, to an all-time high. The US Global Jets ETF (JETS) rose 1.9%. The SPDR S&P Homebuilders ETF (XHB) fell 1.5%. The Energy Select SPDR ETF (XLE) popped 3.5% and the Health Care Select Sector SPDR Fund (XLV) jumped 3.45% to its best level since early January. The Industrial Select Sector SPDR Fund (XLI) rose 0.9%, hitting a new high.
The Financial Select SPDR ETF ( XLF ) jumped nearly 3% and the SPDR S&P Regional Banking ETF ( KRE ) rose 7.5%.
Reflecting more speculative stocks in the story, the ARK Innovation ETF (ARKK) fell 1.3% last week and the ARK Genomics ETF (ARKG) rose. Tesla stock is No. 1 holding of Ark Invest ETFs. TSLA stock fell 7.6% in a big outside, downside week on higher volume, but is still comfortably above the 10-week line.
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Microsoft earnings and Google earnings are Tuesday night with Meta earnings Wednesday night.
Microsoft and Google will provide insight into cloud computing. Google and Meta will offer clues about online advertising and social media, along with parent Snapchat Snap (SNAP) again next week.
The three will give color to the artificial intelligence. Microsoft is especially important because it is seen as a leader in AI and has recently announced pricing for various AI features in businesses. How soon will “AI” become a real growth driver for Microsoft? If Mr. Softy doesn’t see meaningful profits for a long time, that will cool the “AI stocks” in general, especially the more speculative names.
Cloud-related comments from these three titans will be key for Amazon, which relies on Amazon Web Services for most of its revenue. With the earnings of ServiceNow, they can swing the leading software games like Datadog (DDOG), Dynatrace (DT), Cloudflare (NET) and MongoDB (MDB).
Meanwhile, megacap guidance, especially on spending, will be key for suppliers like Nvidia, Broadcom (AVGO), Arista Networks (ANET) and others.
The stock market rally still looks strong, with the major indexes at 52-week highs with a broad range of strong and mixed leads. Trading on the Nasdaq Thursday was wild, but it closed the week finding support at the 10-day line.
Both the Nasdaq and S&P 500 are on the verge of an extension, so a smooth stop or pullback would be healthy.
A market break creates new buying opportunities. Many leading stocks are extended. A number of others look OK after Thursday’s big losses but may need a few days or weeks to set up again.
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This is not a good time to increase exposure. The Nasdaq took a hit but is not far from rebounding. Not many stocks are in the position. And this week’s earnings, along with the Fed meeting, could derail individual stocks, sectors and market rallies.
Investors need to look at their portfolio and see which assets have income on tap – and which big results from related companies are due. Consider whether to hold a variety of stocks during earnings, or take full or partial earnings.
The stock market rally remains strong. Investors should look to see how stocks react to earnings and other news this week. It won’t take much for many names to look interesting again.
Before the market opens on Monday, a special rebalance of the Nasdaq 100 will take place, reducing the dominance of the “Magnificent Seven” of Microsoft, Apple, Nvidia, Google, Amazon, Meta Platforms and Tesla stock. MSFT stock and Nvidia will see the biggest weight reductions in the index.
Special balancing probably won’t have much of an effect on these titans. The news basically came out within two weeks.
Read the Big Picture every day to stay in tune with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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