Dow Jones futures as well as S&P 500 futures and Nasdaq futures will open Sunday evening. Stocks rebounded strongly last week, breaking some key resistance levels. Tech stocks pulled back Friday on Snap (SNAP) and other poor earnings.
Apple (AAPL), Microsoft (MSFT), Google parent Alphabet (GOOGL), Amazon (AMZN) and Facebook parent Meta Platforms (META) headlined the week’s surge in earnings.
META stock and Google tumbled Friday on Snap results and a lack of guidance. Microsoft shares fell back to the 50-day line. Amazon just pared its big weekly gains. But Apple stock is one of five stocks that is even close to its 200-day line, and there’s no clear buying point in sight.
Meanwhile, the Federal Reserve meets and is likely to raise interest rates by another sharp 75 basis points on Wednesday. Guidance on future action will be key. Investors have already started to scale back the September rate hike, with further tightening limited thereafter. Much of this is due to a rapid slowdown in the economy, possibly even a recession. A recession and still-high inflation are not a good combination for corporate profits.
A Fed recession may have arrived; what it means for the S&P 500
While recent moves in the major stock indexes have been encouraging, investors should remain cautious when increasing their exposure.
Not many leading stocks have been flashing buy signals. Meanwhile, several promising stocks including Dollar Tree (DLTR), Lawrence (LNTH), Agilon Health (AGL) and Li Auto (LI) saw a sudden sell-off, forcing investors to make tough decisions .
LNTH stock was on the IBD leaderboard, while Agilon exited Friday. Ideal Auto Stock and Agilon are on the IBD 50. Microsoft stock and Google are among the long-term IBD leaders.
The video embedded in the article reviews key market behavior, while also analyzing Cross Country Healthcare (CCRN), Li Auto, and DLTR stocks.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. Sunday, with S&P 500 futures and Nasdaq 100 futures open.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading on the next regular stock market day.
Analyse actionable stocks in a stock market rally with an IBD expert on IBD Live
stock market rebound
Even with Friday’s pullback, the stock market rally had strong weekly gains.
The Dow Jones Industrial Average rose 2% in stock market trading last week. The S&P 500 rose 2.6%. The Nasdaq Composite rose 3.3%. The small-cap Russell 2000 rose 3.7%.
The 10-year U.S. Treasury yield fell 15 basis points to 2.78% after plunging 25 basis points Thursday through Friday. The U.S. Treasury yield curve inverted from one-year to ten-year maturity. The yield on the 6-month Treasury bill was 2.94%, well above the yield on the 10-year Treasury bill. All of this reflects growing recession risks.
U.S. crude futures fell nearly 3 percent last week to $97.59 a barrel.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) lost 0.6% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 0.45%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 5.4%, with MSFT stock a major component. The VanEck Vectors Semiconductor ETF (SMH) rose 5.6%.
The SPDR S&P Metals & Mining ETF (XME) rebounded 1.9% last week. The Global X US Infrastructure Development ETF (PAVE) rose 5%. The U.S. Global Jets ETF (JETS) rose 0.9%. The SPDR S&P Homebuilders ETF (XHB) surged 6%. The Energy Select SPDR ETF (XLE) gained 3.7% and the Financial Select SPDR ETF (XLF) gained 3%. The Healthcare Select Sector SPDR Fund (XLV) fell 0.3%.
Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) gained 4.85% last week and the ARK Genomics ETF (ARKG) gained 1.2%, although both gave up more than half their weekly gains on Friday.
The five best Chinese stocks to watch right now
stock shock, shock
When leading stocks sell off at or below buy points, investors face a tough decision: hold, exit or trim their positions. There is not necessarily a “correct” answer. Sometimes stocks rebound immediately, and others continue to fall—perhaps after a brief rally. In the current volatile market, a more cautious approach may make more sense. Buying near the entrance also provides more cushion.
DLTR stock has been gradually rising in buy territory this week, before abruptly plunging nearly 5% intraday Thursday. Shares traded just below the 166.45 buy point but found support at the 21-day line, according to MarketSmith analysis. Shares of DLTR were down less than 1% by the close. Dollar Tree stock briefly exited buy territory on Friday before closing little changed.
LNTH shares hit an all-time high on Wednesday, having just broken out from the bottom of the cup, but closed nearly 14% above the 50-day line. Shares of Lantheus fell 7.8% on Thursday, but pared losses to 3.1%. Rapid shock? Maybe not. LNTH shares fell 4.5% on Friday.
Agilon stock bottomed out from a 27.12 buy point on Thursday. But shares fell 8.3 percent to 25.18 on Friday.
Li Auto’s stock rebounded from its 21-day line on July 13 and made a strong move on Monday, July 18. But shares traded below their 21-day line on Tuesday, even as they closed back above that key level, down 4.7%. On Wednesday, LI shares fell 3.7% and were at Tuesday’s lows. Li Auto almost recovered its 21-day production line on Thursday, but sold off convincingly on Friday. Ultimately, it’s been a bearish downside reversal week for the Chinese EV maker.
Market rebound analysis
The stock market rebound made significant progress last week. The major indexes broke above their 50-day and 10-week moving averages, a major stumbling block in recent months.
Weak results from Snap, Verizon (VZ), Seagate Technology (STX) and Intuitive Surgical (ISRG) provided catalysts for Friday’s pullback.
But arguably the market should pull back, especially the Nasdaq and growth stocks. It’s better to get a pullback before earnings completely collapse.
If everyone is bullish on earnings, that will lead to a massive sell-off in actual results. This may be especially true this time around, with guidance especially unclear as the economy deteriorates rapidly.
Friday’s retreat underscores how dangerous earnings season can be, not just for companies. Snap’s earnings report slammed Meta and Google shares, as well as other companies that rely on online advertising and the broader market.
Friday’s pullback also showed the risk of bottom-hunting, buying beaten growth stocks as they hit back.
The market may have bottomed in mid-June, but that doesn’t necessarily mean it can reach all-time highs or even higher quickly and easily. The market bottomed in late 2002 and late 2008, but it did not rise consistently for several months.
In addition to tech giants Apple, Microsoft, Meta, Google and Amazon, other notable results this week include Exxon Mobil (XOM), Chevron (CVX), Merck (MRK), Pfizer (PFE), General Motors (GM) and Qualcomm (Qualcomm).
Apple, Microsoft, Merck and XOM stocks are all Dow constituents.
Use IBD’s ETF Market Strategy to Time the Market
what to do now
Investors should still have moderate exposure at best. There aren’t many good stocks to buy, and it’s easy to sell off suddenly. Earnings season and the Fed meeting could bring various directions to markets, sectors and individual stocks.
So be extra careful over the next few days. If you do make a new purchase, look for early buying opportunities and try to buy as close to those entries as possible.
Continue working on your watchlist. The market rally showed some strength. You want to be ready to take advantage.
Read the big picture every day to stay abreast of market direction and leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson for stock market updates and more.
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