Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. The stock market rally had strong gains last week, overcoming some key resistances. Techs retreated on Friday for Snap ( SNAP ) and other weak gains.
Apple ( AAPL ), Microsoft ( MSFT ), Google parent Alphabet ( GOOGL ), Amazon.com ( AMZN ) and Facebook parent Meta Platforms ( META ) headlined a huge week of gains.
Shares of META and Google sold off heavily on Friday on Snap’s results and lack of guidance. Microsoft shares fell back to their 50-day line. Amazon just cut big weekly gains. But Apple stock is one of five even near its 200-day line, and there’s no obvious buy point.
Meanwhile, the Federal Reserve is rallying, with another big rate hike of 75 basis points likely on Wednesday. Directions for future action will be key. Investors began discounting interest rate hikes in September, with limited tightening thereafter. This is largely due to the economy slowing rapidly, perhaps even falling into recession. A recession, along with still-high inflation, is not a good combination for corporate profits.
Fed recession may already be here; What this means for the S&P 500
While the recent performance of major indices has been promising, investors should still be cautious as they add exposure.
Not many leading stocks are flashing buy signals. Meanwhile, several promising stocks suffered sudden selloffs, including Dollar Tree ( DLTR ), Lantheus ( LNTH ), Agilon Health ( AGL ), and Li Auto ( LI ), forcing tough decisions for investors.
Shares of LNTH were IBD ranked while Agilon left Friday. Li Auto and Agilon are in the IBD 50. MSFT and Google are in the IBD Long-Term Leaders.
The video embedded in the article reviewed important market action while also analyzing shares of Cross Country Healthcare (CCRN), Li Auto, and DLTR.
Dow Jones futures today
Dow Jones futures open at 6 PM ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD’s experts as they analyze active stocks on IBD Live’s stock market rally
Stock market rallies
The stock market rally had strong weekly gains, even after Friday’s pullback.
The Dow Jones Industrial Average rose 2% in trading last week. The S&P 500 rose 2.6%. The Nasdaq Composite jumped 3.3%. The small-cap Russell 2000 jumped 3.7%.
The yield on the 10-year Treasury fell 15 basis points to 2.78%, down 25 basis points on Thursday-Friday. The government bond yield curve has inverted from one-year to 10-year. The six-month Treasury bill yield of 2.94% is well above the 10-year Treasury yield. All this reflects the growing risks of a recession.
U.S. crude futures fell nearly 3 percent to $97.59 a barrel last week.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) gave up 0.6% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 0.45%. The iShares Expanded Tech-Software Sector ETF ( IGV ) jumped 5.4%, with MSFT shares a major component. The VanEck Vectors Semiconductor ETF ( SMH ) rose 5.6%.
The SPDR S&P Metals & Mining ETF ( XME ) bounced 1.9% last week. Global X US Infrastructure Development ETF (PAVE) jumped 5%. The US Global Jets ETF ( JETS ) rose 0.9%. The SPDR S&P Homebuilders ETF ( XHB ) jumped 6%. The Energy Select SPDR ETF (XLE) gained 3.7% and the Financial Select SPDR ETF (XLF) gained 3%. The Healthcare Select Sector SPDR Fund ( XLV ) was down 0.3%.
Reflecting more speculative stocks, the ARK Innovation ETF ( ARKK ) rose 4.85% last week and the ARK Genomics ETF ( ARKG ) 1.2%, although both gave up more than half of their weekly gains in Friday.
The five best Chinese stocks to watch now
Stock shakes, shakes
When a leading stock sells off to or below a buy point, investors face a tough decision: hold tight, get out, or short the position. There isn’t necessarily a “right” answer. Sometimes stocks will bounce right away, others will continue to fall – perhaps after a short bounce. A more cautious approach may make more sense in the current volatile market. Buying near the entrance can also offer a little more cushion.
Shares of DLTR were gradually climbing into a buy zone this week when they suddenly tumbled nearly 5% intraday on Thursday. Shares fell slightly short of a 166.45 buy point but found support at the 21-day line, according to MarketSmith analysis. By the close, DLTR shares were down just under 1%. On Friday, shares of Dollar Tree briefly moved out of buy territory before closing little changed.
Shares of LNTH hit a record high on Wednesday, just breaking out of the cup base but closing nearly 14% above the 50-day line. On Thursday, Lantheus shares tumbled 7.8% intraday, although they trimmed their losses to 3.1%. A quick shake? Maybe not. Shares of LNTH fell 4.5% on Friday.
Shares of Agilon broke Thursday off a bottom base with a 27.12 buy point. But shares fell 8.3% to 25.18 on Friday.
Shares of Li Auto bounced off their 21-day line on July 13th and posted solid gains through Monday, July 18th. But the stock fell below its 21-day line on Tuesday, although it recovered to close above that key level, down 4.7%. On Wednesday, LI shares sank 3.7%, right off Tuesday’s low. On Thursday, Li Auto almost regained its 21-day line, but then sold off convincingly on Friday. After all, it was a down week of turnaround for the Chinese EV maker.
Market Rally Analysis
The stock market rally made significant headway this past week. The major indexes broke above their 50-day and 10-week moving averages, which has been a key stumbling block in recent months.
Weak results from Snap, Verizon ( VZ ), Seagate Technology ( STX ) and Intuitive Surgical ( ISRG ) provided the catalyst for Friday’s pullback.
But the market probably had to pull back, especially the Nasdaq and growth stocks. It is better to get this pullback before the profits are completely wiped out.
If everyone is bullish on earnings, that’s a recipe for a big sell-off in actual results. That may be especially true this time around, with guidance particularly unclear as the economy rapidly deteriorates.
Friday’s retreat underscores how treacherous the earnings season has been, and not just for the company. Snap’s earnings report slammed shares of Meta and Google, along with other online ad-dependent firms and the broader market.
Friday’s pullback also shows the risks of bottom fishing, buying lagging growth stocks as they return.
The market may bottom out in mid-June, but that doesn’t necessarily mean it’s a quick and easy march to historic highs and beyond. The market bottomed in late 2002 and late 2008, but did not make a sustained move for several months.
In addition to tech titans Apple, Microsoft, Meta, Google, and Amazon, other notable performers next week include Exxon Mobil (XOM), Chevron (CVX), Merck (MRK), Pfizer (PFE), General Motors (GM), and Qualcomm (QCOM).
Shares of Apple, Microsoft, Merck and XOM are components of the Dow Jones.
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What should we do now
Investors should still have modest exposure at most. There haven’t been many good stocks to buy and they can be prone to sudden selloffs. Earnings season and the Fed meeting can send the market, various sectors and individual stocks in all sorts of directions.
So be extra careful in the next few days. If you are making new purchases, look for early buying opportunities and try to buy as close to those records as possible.
Keep working on your watchlists. The market rally showed some strength. You want to be ready to take advantage.
Read The Big Picture daily to stay in tune with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and much more.
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