Dow Jones Futures Fall: Nasdaq Bounces as AI, Cloud News Lift Amazon; Is the market pullback over?

Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. The Nasdaq Composite and the S&P 500 rose on Thursday, but it was a mixed session for the stock market rally, with weak breadth.

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Megacaps were strong. Amazon.com (AMZN) took the lead as Amazon Web Services announced new artificial intelligence efforts. AMZN shares hit a nine-month high after the AWS cloud unit unveiled a $100 million investment in generative AI to help customers. Loop Capital expects AWS growth to “bottom out” soon. That feeling could also be good news for sky rivals Microsoft (MSFT), Google parent Alphabet (GOOGL), both of which had solid sessions.

MongoDB (MDB), Super micro computer (SMCI) and Lamb Research (LRCX) made a bullish bounce on Thursday. The trio offered aggressive contributions, although they came from peaks during the day.

A number of software and chip games made solid moves on Thursday.

C3.ai (AI) and Samsara (IOT), two AI stocks, held investor day events. AI stock fell 4.1% on Thursday, testing its 21-day line. IOT shares rose 1.2% after a four-day slide. But it is unclear whether the investor day’s events had a significant impact on any of the stocks. Analyst reaction may move C3.ai and IOT stocks on Friday.

Bank shares were noticeably weak, from PacWest Bancorp (PACW) to JPMorgan Chase (JPM). There was no clear trigger or obvious signs of renewed deposit flight, but banks face long-term problems that could dampen profitability in the long term.

Don’t overthink it. Thursday was likely a modest, mixed rally within a modest pullback with solid, technology-led stock market gains.

MDB stock was added to the IBD Leaderboard on Thursday and is at the IBD Big Cap 20. LRCX stock joined SwingTrader. MongoDB and IOT stocks are on the IBD 50. Lam Research was Thursday’s IBD Stock Of The Day.

Dow Jones Futures today

Dow Jones futures fell 0.25% vs. fair value, even with 3M (MMM) appears on a larger settlement about chemicals in drinking water. S&P 500 futures fell 0.3% and Nasdaq 100 futures fell 0.3%.

Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Stock market rally

The stock market rally had a mixed session as the tech giants and AI plays rebounded. The Dow Jones Industrial Average closed a fraction lower in Thursday’s trading. The S&P 500 index rose 0.4 percent. The Nasdaq composite rose 0.95 percent. The small-cap Russell 2000 fell 0.8%.

Amazon shares fell 4.3% to 130.15.

apple (AAPL), Microsoft, Google, Tesla (TSLA), Taiwan Semiconductor (TSM) and Salesforce.com (CRM) all rose 1.5% to just over 2%.

The US crude oil price fell 4.2% to $69.51 a barrel. The 10-year government yield fell 8 basis points to 3.8%.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) climbed 0.4%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 0.55%. VanEck Vectors Semiconductor ETF ( SMH ) rose 0.55%. LRCX stock is a notable SMH holding.

Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) closed just above break-even and the ARK Genomics ETF ( ARKG ) fell 1%.

The SPDR S&P Metals & Mining ETF ( XME ) and the Global X US Infrastructure Development ETF ( PAVE ) both fell 0.6%. The US Global Jets ETF (JETS) maintained its highs. The SPDR S&P Homebuilders ETF ( XHB ) fell 0.5%. The Energy Select SPDR ETF (XLE) retreated 1.3% and the Health Care Select Sector SPDR Fund (XLV) rose 0.7%.

The Financial Select SPDR ETF ( XLF ) fell 0.8%. JPM stock gave up 1.9%, near its 50-day line after testing a buy point on Wednesday. The SPDR S&P Regional Banking ETF ( KRE ) fell 3.2%, falling back below its 50-day line. PACW shares fell 5.9%.

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Stocks to watch

MDB shares rose 4.1% to 388.36 on heavy volume Thursday, breaking a trendline in a three-week tight pattern in what could be a high-tight flag. It offered an early entry around 385 or perhaps 389. That is after first testing the low of the recent range since the huge earnings gap up on June 2nd. MongoDB stock hit as high as 396.84. The database software maker announced an expanded relationship with Google Cloud as well as several AI initiatives. MongoDB also works with, among other things, Amazon Web Services.

SMCI shares jumped 3% to 226.46, moving off their 21-day moving average in strong trade. An aggressive trader could have used a move above Wednesday’s high of 227 as an early entry. However, shares hit resistance at the 10-day line, well supported by highs of 241.97 and closed just below the aggressive buy point.

LRCX shares rose 2.3% to 619.87 after first breaking below the 21-day line and the 600 level. Investors could have used a move above Wednesday’s high of 615.80 as an entry point. Shares supported by intraday highs of 624.48, right around a short-term trend line. LRCX stock, like MongoDB, is working on a three-week tight with an official buy point of 644.60. Some other chip-gear giants jumped off their 21-day lines.

Market rally analysis

The stock rally stopped the latest decline with a narrow setback on Thursday. The Nasdaq and S&P 500 both bounced off their 10-day lines, led by Amazon and other growth giants.

So is the pullback to the Nasdaq over after three days? If so, it will quickly be expanded again, raising expectations for another pullback. The Nasdaq closed Thursday 7.8% above its 50-day line, with the Nasdaq 100 up 9.1%.

The breadth was noticeably weak given the solid Nasdaq spike. Losers trumped winners by 2-to-1 on the NYSE and 8-to-5 on the Nasdaq.

The Dow Jones and Russell 2000 tested their 21-day lines on Thursday.

The Invesco S&P 500 Equal Weight ETF (RSP) fell 0.4%, just above its 21-day, although the S&P 500 had a modest gain. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) climbed 0.25%, well behind the Nasdaq 100’s 1.2% pop.

Hot tech stocks returned the support levels, including MDB stocks and SMCI. That’s what you want to see when the Nasdaq rises. If the Nasdaq resumes a slide, you want these names to withstand the selling pressure.

Several stocks are consolidating around traditional buying points, such as Monday.com (MNDY) and Parker-Hannifin (PH).

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What to do now

If you are an aggressive trader, you could have bought MongoDB, Lam Research, SMCI shares or a few other returning stocks on Thursday. Adding a few shares to an existing bet is much less risky than starting a new position. If a pullback from the Nasdaq resumes, many of these leaders could fall back. If you buy a bounce near tops during the day, it doesn’t take much to be underwater.

A swing trader mindset makes sense for new or additional purchases, cutting losses quickly and moving to take partial profits early to lock in some gains. If the shares continue to advance, you can keep the remaining shares as a position trade.

Whether you pull the trigger now or not, you’ll definitely want to see big winners, look for those holding on or coming back from support. Keep your watchlists up to date from a variety of sectors. Using early listings, and buying near those listings, is still important.

Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.

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