The stock rally had another sideways week, with the Dow Jones, S&P 500 and Nasdaq composite all drifting lower in continued tight action. Investors are waiting for a flood of earnings with the headlines Microsoft (MSFT), Amazon.com[ticker symb=AMZN], Meta platforms (META) and Google parent Alphabet (GOOGL).
Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures.
There have not been many buying opportunities, and many have failed or failed. Earnings season will be in full swing this coming week, bringing the potential for the market rally to derail.
Microsoft, Amazon, Meta and Google are particularly important. Microsoft and, arguably, Amazon shares are actionable now. Google shares are near a buy point as Facebook parent Meta pulls back after a massive run.
In themselves, they have a large impact on the major indices. And their comments on future growth in key markets such as cloud computing, artificial intelligence, e-commerce and PCs will have a major impact on the technology sector and beyond.
Meanwhile, First Solar (FSLR), Dexcom (DXCM), Mobileye (MBLY), Boeing (BA), Service Now (NOW), Cloudflare (NET), Adjust technology (ALGN), Righteous Isaac (FICO), Visa (V) and Chipotle Mexican Grill ( CMG ) are just a few of the notable companies reporting this coming week with shares in or near buy zones.
MBLY stock in particular is having an action-packed week, with the IPO lock-up expiring on Monday followed by earnings on Wednesday.
In the meantime, stay tuned for this weekend’s news Shockwave Medical (SWAV). SWAV stock rose on Friday after a report that Boston Scientific (BSX) is considering a Shockwave offer. But the companies have not said anything.
The video embedded in this article reviewed Arista Networks (A WEB), TJX Cos. (TJX) and JPMorgan Chase (JPM).
Microsoft stock is on the IBD Long-Term Leaders.
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.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock rally did not have much direction in the last week.
The Dow Jones Industrial Average fell 0.2% in last week’s trading. The S&P 500 index fell 0.1 percent. The Nasdaq composite fell 0.4 percent. The small-cap Russell 2000 rose 0.6%.
The 10-year government yield rose 5 basis points to 3.57%.
US crude oil futures fell 5.5% to $77.87 a barrel last week.
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) climbed 2.7% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.4%. The iShares Expanded Tech-Software Sector ETF ( IGV ) pushed down 0.1%, with MSFT stock a large holding. The VanEck Vectors Semiconductor ETF ( SMH ) fell 1.5%.
As a result of more speculative story stocks, the ARK Innovation ETF (ARKK) fell 3% last week and the ARK Genomics ETF (ARKG) climbed 1%.
The SPDR S&P Metals & Mining ETF ( XME ) fell 4.2% last week. The Global X US Infrastructure Development ETF ( PAVE ) rose 0.55%. The US Global Jets ETF (JETS) rose 1.8%. The SPDR S&P Homebuilders ETF (XHB) rose 3.4%. The Energy Select SPDR ETF (XLE) fell 2.6% and The Health Care Select Sector SPDR Fund (XLV) fell 0.2% after five weekly gains.
The Financial Select SPDR ETF ( XLF ) climbed 1%, with JPM stock a big holding. The SPDR S&P Regional Banking ETF ( KRE ) rose 1.5% but has a long way to go to recover.
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Market rally analysis
The stock rally continues to move sideways, with the major indexes falling slightly. The S&P 500 and the Nasdaq Composite are effectively in four-week tight patterns. The Nasdaq tested support at the 21-day line and the 12,000 level late in the week.
More broadly, the major indexes are stuck in a range between their early 2023 highs and their 50-day moving averages.
Market breadth is still weak, especially on the Nasdaq. It doesn’t drop anymore, but it doesn’t improve much either.
The Invesco S&P 500 Equal Weight ETF ( RSP ) finished fractionally higher in the past week, holding close to its 50-day line.
Homebuilders look strong, with more reporting this week to come. Medical product companies have also been leaders, including Boston Scientific and SWAV stocks.
Chip stocks have retreated all month, with the SMH ETF closing just below the 50-day line on Friday. This may be a healthy break, but it has been difficult for chip investors. Other tech hardware names struggled in the past week on concerns about IT spending.
Microsoft, Google, Amazon and Meta will provide some insight into broader IT usage plans. Their own spending plans and growth prospects will be important to key vendors, such as Arista Networks.
At some point, the market rally will break out of its last range, for better or for worse. Earnings season in the coming weeks, along with key economic data and the Fed meeting in early May could provide the catalyst for a decisive rally or sell-off. Or they can offer a variety of mixed signals that add more volatility to a range-bound market.
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What to do now
The market rally hasn’t done anything wrong, but isn’t doing anything special at the moment.
Sideways action and short-term rallies, along with sector rotation, are not a good environment to buy stocks, especially on traditional breakouts. By the time a stock makes a strong move, flashing buy signals, there is a good chance it will fall again.
Truth be told, it’s probably a positive that the market rally and leading stocks didn’t take off just before earnings from Microsoft, Google and hundreds of others.
Now with earnings season in full swing, it’s not only important to know which stocks are performing, but also which rivals, suppliers and customers are reporting.
If the market reacts well to earnings, there could be a number of buying opportunities. Even then, investors should increase their exposure gradually. The risk that specific stocks or the broader market will give back gains may remain high.
But be ready to jump on early registrations. Keep watch lists up to date. Keep track of a large list of stocks that are performing well or setting up, and put special focus on stocks right around buy points.
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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