Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures, with the banking crisis still in focus. An attempt at a stock market rally is underway, but the indices have been volatile while the range has been narrow.
The major indexes rose modestly for the week, but fell well short of weekly highs. The Russell 2000 hit 2023 lows with bank stocks, but small caps and banks rose for the week.
The rally attempt has been heavily dependent on large Nasdaq stocks. apple stocks, Microsoft (MSFT), Tesla (TSLA), Regeneron Pharmaceuticals (RAIN), Free market (MELI) and Palo Alto Networks (PANW) are Nasdaq 100 stocks holding up well.
The REGN share moved up into a buy zone late in the week on positive news about drug trials. apple (AAPL) and Microsoft are just above buy points while Palo Alto is just below a write. MercadoLibre and Tesla shares have important support levels, not far from being actionable. All have strong relative strengths. MercadoLibre and PANW shares are on the IBD Leaderboard. AAPL stock is on SwingTrader. The MSFT share is on IBD’s long-term leader list. The MELI share is on the IBD 50.
Just because individual stocks are buyable doesn’t mean investors have to act on them. This market rally attempt still needs to confirm its uptrend.
Watch out for another round of banking headlines, although this weekend’s news may not be quite as hectic as the previous two. The FDIC wants to find a buyer for part or all of SVB Financial’s Silicon Valley Bank. Will there be any positive or negative headlines on it First Republic (FRC), PacWest Bancorp (PACW) or the German bank (DB), or more decisive action by regulators or decision makers? On Friday, many banks rebounded, but still suffered heavy to massive losses for the week. Concerns also extended to the German bank (DB), while Wall Street giants such as JPMorgan Chase (JPM) and Morgan Stanley (MS) below the 2023 lows.
The video embedded in this article discusses the week’s market action in depth while also analyzing MELI stock Merit homes (MTH) and PagerDuty (PD), the last two IBD Stock Of The Day picks.
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 share rise resulted in solid gains for the major indices, but with large fluctuations along the way.
The Dow Jones Industrial Average rose 1.2% in last week’s trading. The S&P 500 index rose 1.4 percent. The Nasdaq composite jumped 1.7 percent. The small-cap Russell 2000 rose 0.3%.
U.S. crude futures rose 3.5% to $69.26 a barrel last week, falling on Friday but recovering from intraday lows. Copper prices rose 4.8% last week, but snapped a six-day winning streak on Friday.
The 10-year Treasury yield fell 2 basis points to 3.38%, hitting a six-month low of 3.295% intraday on Friday. The two-year Treasury yield fell 7 basis points to 3.78%, after falling to 3.555% on Friday morning.
The Federal Reserve raised interest rates by a quarter of a point on Wednesday, signaling that only one more increase remains. Still, markets overwhelmingly expect a pause in May, followed by more interest rate cuts from the Fed starting in July. The outlook for the Fed rate hike largely depends on whether bank contagion is contained. Even if the crisis ends, banks are likely to further limit lending, slowing the economy and reducing the need for further Fed tightening.
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 1.4% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 2.7%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.7%, with the MSFT stock a key component. The VanEck Vectors Semiconductor ETF ( SMH ) also climbed 1.7%, but retreated to an 11-month high.
As a result of more speculative stock stocks, the ARK Innovation ETF (ARKK) fell 2.5% last week while the ARK Genomics ETF (ARKG) gained 0.5%. Tesla stock is a core holding across Ark Invest’s ETFs, but it’s also a big weekly loser Coin base (COIN) and Square parent Block (SQ). In fact, Cathie Wood sold some TSLA stock on Thursday to buy up more COIN and SQ.
The SPDR S&P Metals & Mining ETF (XME) rose 1.6% and the Global X US Infrastructure Development ETF (PAVE) rose 1.5%. The US Global Jets ETF (JETS) fell 1.3%, extending huge losses recently. The SPDR S&P Homebuilders ETF (XHB) rose 0.4%. The Energy Select SPDR ETF (XLE) rose 1.2%. The Health Care Select Sector SPDR Fund (XLV) rose 1.1%, with the REGN stock an XLV share.
The Financial Select SPDR ETF ( XLF ) rose 1 cent last week after hitting a five-month intraday low on Friday. JPM shares and Morgan Stanley are notable XLF holdings. The SPDR S&P Regional Banking ETF (KRE) rose 0.2%, after sliding to its lowest levels since late 2020. First Republic and PACW shares are among the many KRE components.
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Market rally analysis
The major indexes posted solid weekly gains, building on last week’s upside. But the stock market experiment had a series of large fleeting fluctuations and divergent actions. On Wednesday and Thursday the indices rose sharply, but fell back from resistance.
Stocks reversed sharp declines on Wednesday after the Fed rate hike and comments from Treasury Secretary Janet Yellen. On Thursday, the major indexes rose but recovered from highs, while the Russell 2000 slipped to a 2023 low as bank shares fell. On a more positive note, the index turned modestly higher on Friday.
The Nasdaq Composite rose sharply, holding above all moving averages despite being turned back to the 12,000 level. The S&P 500 retook its 200-day line this past week, but hit resistance at the 50-day line and tested its 200-day again late in the week. Still, it held the 200-day and moved back above the 21-day mark. The Dow Jones also had a decent gain, despite falling back below the 200-day. Even the Russell 2000 ended slightly higher.
The rally attempt has been concentrated in growth, and even that has been concentrated in a relatively small number of megacaps and chip names such as Apple and Microsoft. Market breadth has been anemic, with losers outnumbering winners.
Chips have been strong but faced some selling on Friday. It was no big deal for extended winners such as Nvidia (NVDA), but it was harmful to the likes of Monolithic power systems (MPWR) and STMicroelectronics (STM).
Housebuilders and a few related plays look solid. Some restaurants are doing well. Medical product and system manufacturers are getting fresher. Certain software games in addition to Microsoft enjoy well, including Salesforce.com (CRM) and PANW stock.
Gold has been a big winner in the middle of the banking crisis.
If the banking crisis goes away, perhaps the market rally attempt will be extended and strengthened, with one or more of the major indices staging a follow-up day. In that scenario, investors would also want to see the Nasdaq move above 12,000, the S&P 500 regain the 50-day and the Dow Jones back above the 200-day. Keep in mind that if the bank woes subside and government bonds decline, large-cap growth names may no longer be viewed as safe havens.
Many bank stocks pared Friday losses or even gained for the day or week, a glimmer of hope on that front. But financials have held up or rebounded at various points in recent weeks, only to crash decisively soon after.
If the banking crisis worsens, even the market leaders may begin to crumble. It is also possible for the market to continue to show whipsaw action, rising higher or lower and then reversing.
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What to do now
There have been some strong performers in recent weeks. If you got into any of these names, you could have a strong start to the year. But many stocks showing promising action have stalled, fizzled or broken down. Although the major indexes rose for the week, anyone who buys near the highs on Wednesday or Thursday is likely to be at a loss.
Investors should keep their exposure light and be extremely cautious about any new purchases. You may consider taking partial profits on winners, even those that have done quite well, to preserve gains in a volatile environment. Be quick to cut losses.
Market conditions can change quickly, so investors should be ready to trade with updated watch lists. When the market starts to show real strength, investors should enter gradually.
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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