Dow Jones futures will open on Sunday evening, along with S&P 500 and Nasdaq futures, with Microsoft (MSFT), parent company of Google Alphabet (Google T Metaplatforms (META) headlining a huge earnings week as the Federal Reserve prepares to raise rates again.
The stock market rally has seen big weekly gains for the Dow Jones, which is enjoying its longest winning streak in nearly six years. The S&P 500 also saw solid progress. But the Nasdaq reversed lower after a big selloff on Thursday led by You’re here (TSLA). Growth stocks have suffered losses, often significant, but generally still look healthy.
Bank stocks, meanwhile, are on the rise again. Industries, travel and some drug stocks showed strong or resilient action.
The market could use a break and there are not many setups at the moment. So now is not the right time to add exposure.
Earnings from Microsoft, Google and Meta are weighing heavily on the market recovery. Not only do these three tech titans boast a market capitalization of nearly $5 trillion, but their earnings, advice, spending plans, and commentary will be important for cloud computing, artificial intelligence, digital advertising, and more.
This will have a big impact on the tastes of Amazon.co.uk (AMZN), which reports May 3, with Nvidia (NVDA) and other vendors as well as cloud software games.
In the meantime, ServiceNow (NOW), General Electric (GE), Visa (V), Chipotle Mexican Grill (GCM), Boeing (BA), General Engines (GM) are just a few of the other major companies on tap.
Tesla, Nvidia and Meta stocks are on the IBD ranking, with CMG stocks on the ranking watchlist. The Microsoft stock is on the IBD Long-Term Leader list. Tesla and NOW stocks are on the IBD 50. TSLA stocks are on the IBD Big Cap 20.
The video embedded in the article discussed weekly market action and analyzed stocks of Dow giants Microsoft, Boeing and Visa.
The Fed meets for two days next week with a policy announcement scheduled for Wednesday at 2 p.m. ET. After a pause in June, the Fed is expected to raise rates by a quarter of a point for the most part. But the real question is the rate hike outlook for the rest of the year. Fed policymakers in June forecast two more rate hikes this year, but subdued inflation reports bolstered investor expectations that there is only a modest chance of another move after Wednesday.
Comments from Fed Chief Jerome Powell at 2:30 p.m. ET will likely offer clues to the rate outlook.
Dow Jones Futures Today
Dow Jones futures open Sunday at 6 p.m. ET, along with S&P 500 and Nasdaq 100 futures.
Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally started the week with great strength, but then diverged.
The Dow Jones Industrial Average jumped 2.1% in stock trading last week, finally topping 2023 highs. The Dow Jones is riding a 10-day winning streak, its longest since August 2017. The S&P 500 index rose 0.8% but pared gains. The Nasdaq composite fell 0.6%, thanks to Thursday’s 2.05% drop. The small-cap Russell 2000 climbed 1.5%, also closing in on 2023 highs.
The Invesco S&P 500 Equal Weight (RSP) ETF climbed 1.35%, nearly double the gain of the S&P 500 and just below 2023 highs,
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 0.9%, mirroring the Nasdaq 100’s 0.9% decline.
The 10-year Treasury yield climbed 2 basis points to 3.84%, but with some large daily moves.
U.S. crude oil futures rose 2.3% to $77.07 a barrel, the fourth straight weekly gain.
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Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.35% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.1%, trimming weekly gains. Microsoft and ServiceNow stocks are big IGV holdings. ETF VanEck Vectors Semiconductor (SMH) fell 2% after peaking 5.4% the previous week.
The SPDR S&P Metals & Mining ETF (XME) rose 0.2% last week. The Global X US Infrastructure Development ETF (PAVE) rose 0.4%, just to all-time highs. 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) jumped 3.5% and the Health Care Select Sector SPDR Fund (XLV) jumped 3.45% to the best levels since early January. The Industrial Select Sector SPDR Fund (XLI) rose 0.9% to a new high.
The Financial Select SPDR ETF (XLF) jumped almost 3% and the SPDR S&P Regional Banking ETF (KRE) jumped 7.5%.
Reflecting more speculative history stocks, ARK Innovation ETF (ARKK) fell 1.3% last week and ARK Genomics ETF (ARKG) climbed. The Tesla share is the first holding among Ark Invest’s ETFs. TSLA stock fell 7.6% in a big week outside and lower in higher volume, but remains comfortably above the 10-week line.
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Microsoft, Google, Meta Earnings
Microsoft earnings are expected on Tuesday evening, Google earnings on Wednesday evening and Meta earnings on Thursday evening.
Microsoft and Google will give an overview of cloud computing. Google and Meta will offer clues on online advertising and social media, with parent Snapchat Snap (SNAP) also available next week.
All three will bring color to artificial intelligence. Microsoft will be particularly important as it is considered a leader in AI and has just announced pricing for various AI features for businesses. How long will “AI” be a real growth driver for Microsoft? If Mr. Softy doesn’t see meaningful revenue for a while, it could largely chill “AI stocks”, especially the more speculative names.
Cloud-related insights from these three titans will be key for Amazon, which relies on Amazon Web Services for the bulk of its profits. In addition to ServiceNow revenue, they could rock top-tier software games such as Datadog (DDOG), Dynatrace (DT), Cloudy (NET) and MongoDB (MDB).
Meanwhile, advice on megacaps, especially on spending, will be essential for vendors such as Nvidia, Broadcom (AVGO), Arista Networks (ANET) and more.
Market rally analysis
The stock market rally still looks strong, with major indexes at 52-week highs with robust momentum and diverse leadership. The Nasdaq’s selloff on Thursday was fierce, but it ended the week finding support at the 10-day line.
The Nasdaq and S&P 500 are about to be extended, so a pause or an orderly pullback would be healthy.
A break in the market would create new buying opportunities. Many leading stocks are extended. A number of others appear to be doing well after heavy losses on Thursday, but may need a few days or weeks to recover.
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What to do now
This is not the right time to add exposure. The Nasdaq took a hit but is also not far from another extension. Few stocks are in position. And this week’s earnings, along with the Fed meeting, could shake up individual stocks, sectors and the market rally.
Investors should review their portfolio and note which securities are generating profits and which major results of related companies are expected. Consider whether to hold various stocks during earnings season or take full or partial profits.
The stock market recovery remains strong. Investors should look for how stocks are reacting to earnings and other news this week. It wouldn’t take much for a number of names to become interesting again.
Special rebalancing of the Nasdaq 100
Ahead of Monday’s market open, a special rebalancing of the Nasdaq 100 will take place, reducing the dominance of the “Magnificent Seven” from Microsoft, Apple, Nvidia, Google, Amazon, Meta Platforms and Tesla. MSFT and Nvidia stocks will see the largest weighting drops in the index.
The special rebalancing probably won’t have a big impact on these titans. The news has been out for two weeks.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
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