Dow Jones Futures: Market Rally Eyes 2023 Highs; First Republic, Fed, revenue in focus
Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures.
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The stock market rally fell sharply over the past week, but rebounded to close with solid gains, a shakeout that could lay the foundation for a stronger advance. JPMorgan Chase and PNC Financial are competing to buy First Republic Bank (FRC) after an FDIC takeover as soon as this weekend.
The major indexes fell on Tuesday as First Republic Bank revived banking fears. But the major indices found support and rallied again. Basically megacaps such as e.g Meta platforms (META) and Microsoft (MSFT) led the comeback, but the breadth improved late in the week, especially on Friday.
The market recovery looks healthier, but is still “under pressure.” Investors still need to see a little more market strength and many more buying opportunities.
The earnings season is still heavy in the coming week, with Advanced Micro Devices (AMD) out late Tuesday and apple (AAPL) with term Thursday. Another Fed rate hike is on tap for Wednesday, along with key economic data in the coming week. A big question is whether Fed chief Jerome Powell signals that the central bank will put rate increases on hold.
FDIC sees takeover of First Republic
Banking giants included JPMorgan Chase (JPM) and PNC Financial Services (PNC) wants to buy First Republic after a government seizure, The Wall Street Journal reported Friday night, citing sources. The FDIC has asked for final bids by Sunday, Bloomberg reported Saturday, after gauging initial interest earlier in the week.
Because of its size, JPMorgan would need a regulatory waiver to buy First Republic.
Bank of America (BAC) is among the banks considering a First Republic bid, CNBC reported Saturday.
An FDIC takeover and sale of First Republic Bank could come this weekend.
FRC stock had plunged 34% in heavy after-hours trading Friday, following reports that the FDIC would take the California-based bank into receivership.
First Republic stock already crashed 75% during the week to new record lows, fueled by a massive outflow of deposits in the first quarter. Despite attempts to engineer a quasi-bailout by major banks, expectations of an FDIC takeover grew during the week.
An FDIC takeover would almost certainly protect all First Republic Bank deposits. But FRC stock investors could end up with nothing.
While regional banks fell on Tuesday, they narrowed their weekly losses significantly. First Republic’s deposit exodus was in a class of its own.
Federal Reserve data on Friday night showed both bank deposits and loans rose in the past week, signaling no credit crunch so far.
A quick resolution to the First Republic situation could restore confidence in the banking sector and boost market sentiment – if there are no more shoes to drop.
Amazon leads 5 S&P 500 stocks near buy points after earnings
Dow Jones Futures today
Dow Jones futures open at 6 p.m. ET, along with S&P 500 futures and Nasdaq 100 futures.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
META stock is on the IBD Leaderboard, with DXCM stocks and earnings options. MSFT stock is on the IBD Long-Term Leaders. ANET stock is at the IBD 50. AMD, Arista Networks and DXCM stock are at the IBD Big Cap 20. Arista Networks was Friday’s IBD Stock Of The Day
The video embedded in the article discussed a big market week and analyzed AMD stock, InMode (INMD) and Dexcom.
Monday Earnings, Sales
Meanwhile, the EV-focused chipmaker At Semiconductor (ON) will report before Monday’s opening. ON stock fell solidly in the past week along with other EV-exposed chipmakers on concerns about EV demand.
China EV startups Li Auto (LI), Nine (NIO) and XPeng (XPEV) will report April deliveries early Monday. Weekly data shows strong sales for Li Auto, while Nio and Xpeng are struggling.
China EV and battery giant BID (BYDDF) will release sales data for April early this week. The Tesla ( TSLA ) rival reported strong first-quarter earnings Thursday.
Tesla isn’t breaking out China sales, but weekly data so far shows a solid start to local sales there. Over the weekend, Tesla began offering some new modest discounts on some Model 3 and Y cars in Europe.
BYD stock is within range of an early entry. LI stock is trying to regain key levels. The XPeng and Nio shares face significant obstacles. Tesla stock is below all moving averages.
Also, Arista Networks (ANET) is on tap to report first-quarter earnings Monday evening. ANET stock, a major supplier to Meta Platforms and Microsoft, found support at its 50-day line this past week.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock rally looked ugly on Tuesday, but returned to gain on the major indexes.
The Dow Jones Industrial Average rose 0.9% in last week’s trading. The S&P 500 index also rose 0.9 percent. The Nasdaq composite jumped 1.3 percent. Small-cap Russell 2000 fell 1.3%
The 10-year Treasury yield fell 12 basis points during the week to 3.45%.
US crude oil futures fell 1.1% to $76.78 a barrel in the past week, even with Friday’s 2.7% pullback. Gasoline futures fell 0.9% for the week, but 9.1% over the past two weeks.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 3.6% last week, with several components suffering huge income losses. Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.3%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 1.45%, with Microsoft a major IGV component. VanEck Vectors Semiconductor ETF ( SMH ) fell 0.4%. The AMD share is a large SMH holding with ON shares also in the ETF.
Reflecting more speculative storied stocks, the ARK Innovation ETF ( ARKK ) fell 4.5% last week and the ARK Genomics ETF ( ARKG ) 5.3%. Tesla stock is No. 1 across Ark Invest’s ETFs, with Cathie Wood adding more TSLA shares in recent weeks. Ark also owns a small BYD share.
The SPDR S&P Metals & Mining ETF ( XME ) retreated 1.6% last week. The Global X US Infrastructure Development ETF (PAVE) ended just above break-even. The US Global Jets ETF (JETS) fell 1% but recovered from lows. The SPDR S&P Homebuilders ETF (XHB) rose 2.2 percent. The Energy Select SPDR ETF (XLE) increased fractionally. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.6% but recovered from lows. The DXCM stock is an XLV component.
The Financial Select SPDR ETF ( XLF ) fell 0.15% but rebounded to close just below its 50-day. The SPDR S&P Regional Banking ETF (KRE) fell 0.6% but pared losses after hitting its worst levels since late 2020. The FRC stock is a KRE holding.
Top five Chinese stocks to watch now
Market rally analysis
The stock rally had a wild week, with the major indexes testing support, but ultimately finishing with solid gains.
The Nasdaq dipped to its 50-day line on Tuesday as First Republic spooked investors once again. The S&P 500 and Dow Jones are close to that level, undercutting their 21-day lines by midweek.
Worse, the First Trust Nasdaq-100 Equal Weighted Index ETF (QQEW) and the Invesco S&P 500 Equal Weight ETF (RSP) fell below their 50-day lines on Tuesday. The latter also slipped below its 200-day as those ETFs continued to fall Wednesday, even as Microsoft edged up the Nasdaq.
Meta stocks and other tech titans led a strong rally on Thursday. QQEW and RSP lagged QQQ and SPY respectively, but still did well. On Friday, the indices rose modestly, with the RSP outperforming its 50-day line.
The Nasdaq index fell short of its intraday high on April 18, but had its best finish since September. The S&P 500 and Dow Jones topped their April highs with all the major indexes near 2023 highs.
The SMH chip ETF, which fell to its worst levels since mid-March, pared weekly losses but remained below its 50-day mark. A few names, such as Lamb Researchh (LRCX) and AMD make, set up proximity inputs. But many chip games had nasty sales, including some huge revenue drops.
Massive revenue losses among leading stocks have been all too common in recent days. The market leadership is still narrow. Not many stocks are flashing buy signals or are on the verge of doing so. Several of these have income at a loss, including AMD, Flooring and furnishings (FND), InMode (INMD) and ANET shares.
Apple stock looks extended on a daily chart, but on a weekly chart, investors can see it as just above a buy point from a long cup handle or double bottom. The handle is also showing as a three-week tight pattern, according to MarketSmith analysis.
After last week’s shakeout, the market recovery may be ready for a stronger advance. If the major indexes break to 2023 highs with any kind of breadth, the market rally could have some room to run with big earnings and the Fed meeting in the rearview mirror. But stocks may hit resistance again in the coming days.
Time the market with IBD’s ETF market strategy
What to do now
The stock market rise has been difficult to navigate.
Investors likely cut exposure in the past week as many stocks erased gains or flashed sell signals. Despite the fact that the major indices closed higher, there were not many opportunities to increase positions. It is okay. If the market rally really strengthens, those chances will come. If the indexes are whipping with weak breadth, you’ll be glad you’re mostly in cash.
Add exposure gradually as conditions improve. Pay attention to income reports.
While the end-of-week pullback didn’t trigger many breakouts and early entries, many stocks started to move into position. So have the watch lists ready.
Many leading stocks, including some big winners from earlier in the year, flashed sell signals in the last week or so
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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