Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures, with apple (AAPL) and Microsoft lead the top earnings week. The stock market had strong gains last week. signals a change in character.
The 10-year government yield rose to new 14-year highs during the week. But interest rates, particularly the two-year rate, fell Friday on a Wall Street Journal report that raised hopes of slower rate hikes by the Fed soon.
The major indexes, up solidly through a volatile week, rose sharply on Friday. The S&P 500 and Nasdaq cleared key near-term resistance, joining the Dow Jones.
However, with some positive market signals, investors should look for potential winners in the next bull market. Snowflake (SNOW), Shift4Payments (FOUR) and DoubleVerify (DV) are fast-growing technology companies that went public in the past two years. The lithium giant Albemarle (ALB) and Shock wave ( SWAV ) is also booming, with its shares trying to get back to a key level within bases.
Meanwhile, Apple makes, Microsoft (MSFT), Google parent Alphabet (GOOGL), Amazon.com (AMZN), and Meta platforms (META) all report next week, along with Boeing (BA), Merck (MRK), Vertex Pharmaceuticals (VRTX) and hundreds of other companies.
Apart from Vertex and MRK shares, both near buy points, all the names listed above are well off tops. Still, earnings reports can be a catalyst for big market gains, heavy losses or more whiplash.
Vertex and DV shares are on the IBD Leaderboard as well as the IBD 50 list. Albemarle and SWAV shares are on the leaderboard’s watch list. VRTX stock is on the IBD Big Cap 20. Microsoft and Google stock are on the IBD Long-Term Leaders. Shift4Payments was Friday’s IBD Stock Of The Day.
Dow Jones Futures today
Dow Jones futures open at 6 PM ET on Sunday, 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.
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Stock market rally
The attempted stock market rally jumped to start the week, pared gains and then recovered on Friday.
The Dow Jones Industrial Average jumped 4.9% in last week’s trading. The S&P 500 index rose 4.75 percent. The Nasdaq composite rose 5.2 percent. The small-cap Russell 2000 gained 3.6%.
Shares of Apple, Microsoft, Google and Amazon all retook their 21-day moving averages on Friday.
The Meta stock is near the bear market, falling on Friday as Snap ( SNAP ) plunged on its disappointing Q3 report.
Friday’s market bounce came on a Wall Street Journal report that Fed officials are mulling slower rate hikes after a likely fourth straight 75-basis-point hike at the November meeting. Some policymakers from the Fed on Friday and over the past week have also begun to lay the groundwork for smaller interest rate hikes.
Markets are now tilting slightly towards a Fed rate hike of 50 basis points in December, compared to Thursday’s 75% odds for another three-quarter point increase.
Clearly, there is a glut of economic data between now and the December 14 Fed meeting.
The 10-year Treasury yield rose 20 basis points to 4.21%, the 12th consecutive weekly increase. But the benchmark Treasury yield fell back from Friday’s intraday high of 4.33%, a 14-year high, to end the session down 2 basis points.
The two-year Treasury yield, more closely linked to Fed policy, hit a 15-year high of 4.64% on Friday but turned sharply lower to end the day at 4.48%, down 1 basis point for the week.
With Treasury yields back to weekly highs and the Bank of Japan seemingly stepping in to prop up the yen, the US dollar fell solidly for the week, mainly on Friday.
U.S. crude oil futures rose 0.5% to $85.05 a barrel last week. But the prices of natural gas fell by 23 percent.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) was up 5.6% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) was up 4.2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) was up nearly 7%, with MSFT stock a huge IGV component. VanEck Vectors Semiconductor ETF (SMH) shot up 7.6%.
The SPDR S&P Metals & Mining ETF (XME) rose 9% last week. The Global X US Infrastructure Development ETF (PAVE) rose 4.8%. The US Global Jets ETF (JETS) rose 5.35%. The SPDR S&P Homebuilders ETF ( XHB ) rose 0.5%. The Energy Select SPDR ETF (XLE) jumped 8.3% and the Financial Select SPDR ETF (XLF) gained 3.8%. Health Care Select Sector SPDR Fund (XLV) rose 2.1%
Reflecting more speculative storied stocks, the ARK Innovation ETF ( ARKK ) rose 5.6% last week and the ARK Genomics ETF ( ARKG ) 2%.
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Stocks to watch
Snowflake went public in September 2020, and rose to a record high of 429 in December 2020. But shares fell all the way to 110.27 in June 2022. But SNOW stock has now created a bottom base around its 50-day line with a buy point of 205, 76. Shares rose 16% to 177.10 in the past week. A move above the 200-day line could offer an early entry. But SNOW stocks can have a lot of overhead resistance.
Snowflake boasts strong revenue growth, but is only now on track to become consistently profitable, with big gains expected in 2023.
DoubleVerify stock, an April 2021 IPO, has been consolidating in recent weeks, finding support at the 50-day line. The DV share has a buy point of 30.02. Stocks tried to break out Tuesday and pulled back, but still had a solid week. Earnings are strong and revenue growth robust for the digital advertising game.
FOUR shares are working on their own bottom base, with a buy point of 51.52, according to MarketSmith analysis. Shift4Payments stock could see an early entry above 48.66, which would mean clearing the 50-day and 200-day lines. The digital payment processor, an IPO in June 2020, is expanding from restaurants to a number of other fields. Earnings growth is strong and is expected to remain so through 2023.
ALB shares rose nearly 14% last week to 270.01, after plunging nearly 13% last week as some analysts bet on lower lithium prices. The prices of the metal used in electric cars have risen to record high levels, and supply has seen demand outstrip for years to come. Albemarle, not a recent IPO, is reaping the benefits of higher-priced contracts while increasing production over time.
The ALB share now has a new base with a buy point of 308.34. A decisive move above the 50-day line could offer an early entry.
SWAV stock jumped 9% last week to 276.70. It remains below the 50-day mark, which has served as resistance recently. Shockwave stock has a buy point at 315. But a strong move above the 50-day would also break a trendline, providing an early entry. A word of caution: Volume has been low in recent days and weeks.
But Shockwave revenue rises amid triple-digit revenue growth.
The relative strength line remains near all-time highs, despite the SWAV stock’s decline from its late August highs.
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Market rally analysis
The stock rally continues to be volatile, but showed positive action. The major indexes were higher from Monday’s open and remained comfortably positive throughout the week even as government yields continued to rise.
Friday’s WSJ report suggests Fed officials may finally be getting ready to scale back aggressive tightening.
The Dow ended the week comfortably above its 21-day moving average, with the S&P 500, Russell 2000 and even the Nasdaq composite above short-term levels on Friday.
NYSE volume increased throughout the session compared to Thursday, with option expirations pushing Nasdaq volume higher at the close.
The market rally may have legs, but that doesn’t mean it’s off to the races. This could be another bear market rally. The Dow Jones is just below its 50-day moving average – and above its 10-week line – with the other indexes not too far behind. Above the 50-day line towers the 200-day average and the mid-August highs.
Oil stocks are doing well, thanks to a recent upward trend in crude oil prices and expectations of further recovery over the winter. Natural gas producers struggle as Natgas futures plunge.
Some biotech, pharmaceutical and health care firms continue to show strength, including Merck, Vertex, Cardinal health (CAH), Humana (HUM) and more.
Few growth stocks have broken out, but many are still going strong, such as ALB stocks and Shockwave.
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What to do now
Keeping your emotions in check while remaining flexible is a key part of investing. The market rally is showing some strength, so you cannot remain locked in a bearish mindset. But you don’t want to get too excited and rush back in with big bets.
Investors can take some small positions in stocks or broad market ETFs. If these work, and the market rally continues to build momentum, you can slowly increase your positions. But if the market falls again, get back quickly.
So make sure your watchlists are up to date over the weekend. Have a curated list of stocks that are tradable or potentially tradable over the coming days. But also keep a broader list of stocks that show relative strength.
Remember that earnings season can affect the overall market and sectors, not just individual stocks. Apple’s revenue can swing a wide range of iPhone chip makers and suppliers. Microsoft, Google, Meta Platforms and Amazon can raise hopes or doubts when it comes to cloud computing, IT spending, e-commerce and online advertising.
Microsoft and Google stock report Tuesday night, with Boeing and Meta on Wednesday. Merck, Vertex, Amazon and Apple shares are on Thursday.
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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