Market Rally Rebounds: Dow Jones Futures
Dow Jones futures fell slightly after hours, along with S&P 500 futures and Nasdaq futures. JPMorgan Chase (JPM), Citigroup and UnitedHealth are major earnings reports in print Friday.
X
The stock rally picked up sharply after yet another slower than expected inflation reading, together with rising unemployment claims. The major indexes recovered Wednesday’s losses or more. The S&P 500 hit its best level in nearly two months, joining the Dow Jones. Nasdaq arranged a subsequent follow-up day.
Leading stocks had solid gains, but not many flashed buy signals.
Megacap stocks had a strong session. apple (AAPL), Amazon.com (AMZN), Google parent Alphabet (GOOGL), Meta platforms (META), Microsoft ( MSFT ) and Tesla shares all rose more than 2%. Google shares rose back above a buy point. Apple shares and Microsoft rose within buy zones. Tesla ( TSLA ) and Amazon shares rose within bases that formed just below the 200-day moving average. The Meta stock hit an 11-month high.
Amazon is joining Microsoft and Google in the generative AI field, the e-commerce and cloud computing giant said Thursday.
The meta stock is on the IBD Leaderboard and SwingTrader. MSFT stock is on the IBD Long-Term Leaders.
Investors should take part in this market upturn. But large banking revenues are looming large.
Dow Jones Futures today
Dow Jones futures fell 0.1% relative to fair value. S&P 500 futures edged lower and Nasdaq 100 futures fell 0.1%.
Late Thursday, Boeing (BA) warned of lower 737 Max production and deliveries in the near term, citing a parts problem from a supplier. BA shares fell 4%, weighing on Dow Jones futures.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Bank income
JPMorgan, Citigroup (C) and Wells Fargo (WFC) along with super regional PNC Financial Services (PNC) all report Friday morning.
In the midst of the banking crisis, investors are likely to be more concerned about the balance sheet: deposits, loans and more. They will be very interested in the bank managers’ guidance going forward.
Bank deposits have fallen for 10 straight weeks, according to Fed data, although smaller banks saw a slight increase in the past week. Fresh weekly figures will be published late Friday. Fears of bank failure have subsided, but deposit rates – especially in the largest banks – are still well below money market funds and short-term treasury bills.
If the banks have to start paying significantly more for deposits, net interest margins will come under pressure. That’s especially true for smaller banks, as depositors still seek safer havens in too-big-to-fail giants. Lower and more expensive deposits will also probably affect lending, and thus the economy. Bank loans started to fall in recent weeks.
Federal Reserve staff saw a “mild recession” later this year due to bank stress, according to the minutes of the Fed’s policy meeting on 21-22. March published on Wednesday.
All of which explains why the broader market will be closely watching Friday’s bank results and earnings.
Bank shares are clear laggards. JPM stock was up 0.4% on Thursday, above the 200-day line, but remained below the 21-day line and well below the 50-day line. Citi shares are modestly below the 50-day and 200-day. WFC stock is well below these key levels, but has recently reclaimed the 21-day line.
PNC stock rose 1.4% on Thursday, but after hitting its worst level since November 2020 intraday.
Several other major financials are due next week, including Bank of America (BAC), Charles Schwab (BLACK), Goldman Sachs (GS) and Morgan Stanley (MS), as well as several regional and super regionals.
UnitedHealth revenues
Also report before the opening, UnitedHealth Group (UNH) is a Dow Jones giant like JPMorgan.
UnitedHealth earnings start results for health insurers. UNH shares climbed nearly 1% to 526.21 Thursday, moving toward a buy point of 558.20. Stocks have rallied over the past two weeks as Medicare reimbursements are expected to rise. UNH stock has a buy point at 558.20, but is not far from a possible trend line entry. A break around the trend line may be welcome.
The UNH share has joined long-term leaders.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally rebounded from Wednesday’s downside, with the major indexes gaining momentum during Thursday’s session, closing near intraday highs.
The Dow Jones Industrial Average rose 1.1% in Thursday’s trading. The S&P 500 index rose 1.3 percent. The Nasdaq composite rose 2%. The small-cap Russell 2000 rose 1.3%.
U.S. crude fell 1.1% to $82.16 a barrel, pulling back from its best levels in nearly five months.
The 10-year government yield rose 3 basis points to 3.45%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.55%. The iShares Expanded Tech-Software Sector ETF ( IGV ) jumped 1.9%, with ServiceNow and MSFT big holdings. The VanEck Vectors Semiconductor ETF ( SMH ) rose 0.8%.
ARK Innovation ETF ( ARKK ) reflected more speculative stock stocks, falling 4% and ARK Genomics ETF ( ARKG ) 5.6%. Tesla stock is a large holding across Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF ( XME ) climbed 2.2%, with the FCX stock a notable holding. The Global X US Infrastructure Development ETF ( PAVE ) rose 0.3%. The US Global Jets ETF (JETS) rose 0.2%. The SPDR S&P Homebuilders ETF ( XHB ) rose 0.4%. The Energy Select SPDR ETF (XLE) climbed 0.6% and the Health Care Select Sector SPDR Fund (XLV) climbed 1.3%.
The Financial Select SPDR ETF ( XLF ) closed up 0.9%. JPM shares, Wells Fargo and Citigroup are all major XLF holdings. The SPDR S&P Regional Banking ETF (KRE) rose 1.5%. PNC bearing is a KRE component.
Top five Chinese stocks to watch now
Market rally analysis
The stock market rallied after Wednesday’s downside with an even stronger rise.
The Nasdaq led the way on Thursday. The technology-heavy index returned above the 12,000 level. It is close to March 31, with a peak in 2023 just above that. Volume rose slightly on the Nasdaq, giving the tech-heavy index an accumulation day after three distribution days in the previous five sessions.
The strong increase in higher price marked a subsequent follow-up day for the Nasdaq.
NYSE volume fell compared to Wednesday. Still, the S&P 500 rose above early April, topping out at its best level since mid-February, short of the 2023 highs. The Dow Jones retook the 34,000 level with the 2023 highs above it. The Russell 2000 moved above its 21-day line but is well below the 50-day and 200-day lines.
Winners beat losers by nearly 5-to-2 on the NYSE and Nasdaq
But despite the wide range and the major indices’ strong rise in price, there were not many shares that flashed buy signals.
Southern copper (SCCO) and Freeport McMoRan (FCX) showed bullish action, while ServiceNow (NOW) flirting with a breakout. STMicroelectronics (STM), HubSpot (HUBS) and Flywire (FLYW) all redeemed purchase points.
The Invesco S&P 500 Equal Weight ETF (RSP) rose 0.8%, a decent gain but definitely trailing the S&P 500. And the RSP remains below its declining 50-day.
Megacap stocks were strong performers on Thursday and have been so for all of 2023. AMZN stock jumped 4.7%, reclaiming its 50-day line. Apple shares rose 3.4% while Meta gained 3%. Google shares rose 2.7% as the tech titan moved back above the buy point. Tesla shares rose 3%, but it was an inside day for the EV giant, which is below all moving averages. The Microsoft share fell behind with a gain of 2.2%.
Breaking out to 2023 highs would be a big step for the market rally. Ideally, the breadth will continue to improve, with RSP gaining some ground on SPY.
Friday’s earnings reports, especially JPMorgan and other banks, could be big market moves up or down.
Time the market with IBD’s ETF market strategy
What to do now
Thursday’s action was a positive step for the stock market recovery, despite relatively few buying opportunities.
Investors can increase their exposure gradually, provided the market trends higher. It didn’t take much before the major indexes and leading stocks look damaged again.
The market remains in a sideways pattern, with sectors and individual names subject to large swings at times. Try to build a portfolio with positions in leading stocks from a variety of sectors or themes.
Be ready to take profits and cut losses quickly. Investors should always be flexible, but this is definitely not a time to be locked into a bullish or bearish mindset.
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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