Dow Jones Futures Rise: Beware The Megacap Rally; AMAT Stock Leads 5 Key Earnings – Investor's Business Daily

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Dow Jones futures rose modestly early Friday morning, along with S&P 500 futures and Nasdaq futures, with a House vote on a huge reconciliation bill as well as Applied Materials (AMAT) and Palo Alto Networks (PANW) earnings in focus.

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The stock market rally was mixed Thursday, but it was a strong day for tech giants. Nvidia (NVDA) surged on earnings, also lifting up rival Advanced Micro Devices (AMD) and providing a tailwind for chip names. Amazon.com (AMZN) and Google parent Alphabet (GOOGL) flashed buy signals, joining Apple stock, which extended Wednesday’s breakout amid fresh Apple Car buzz.

With Apple, Amazon, Nvidia and other megacaps leading the charge, the Nasdaq 100 hit a record high. It’s looking extended from the 50-day line once again, raising the risk of another pullback. Those tech titans also are masking some weakness beneath the surface.

Meanwhile, several retailers boomed on earnings. Macy’s (M) shot up 21% to a three-year high. Kohl’s (KSS) jumped nearly 11%, breaking out of a double-bottom base handle entry. Bath & Body Works (BBWI) popped 5%, perhaps offering an add-on entry. Former sister company Victoria’s Secret (VSCO) leapt 14%, breaking a trend line and gapping above its 50-day line.

EV Stocks Losing Charge

Rivian (RIVN) and Lucid (LCID) sold off for a second straight session, down 15.5% and 10.5%, respectively. At 123.38, Rivian stock is still up 58% from its $78 IPO price, but it’s 31% off Tuesday’s intraday high. Lucid stock is 18.5% off Wednesday’s intraday high.

Tesla stock edged up 0.7% to 1,096.38. A report that Apple (AAPL) is accelerating car efforts, aiming for a 2025 launch of a fully-autonomous electric car helped push Tesla into the red briefly intraday. TSLA stock is up 6.1% for the week.

Other EV stocks, from startups such as Fisker (FSR) to China plays like Xpeng (XPEV), retreated significantly. Overnight, Xpeng unveiled the G9 SUV, with a fast-charging battery system.

Key Earnings

Applied Materials, Palo Alto Networks, Workday (WDAY), Williams-Sonoma (WSM) and Intuit (INTU) were key earnings late Thursday.

AMAT stock fell 5% overnight, back toward its buy point, after Applied Materials missed on EPS and sales. The chip-equipment giant blamed supply-chain issues.

WDAY stock and Williams-Sonoma fell hard despite beating views, signaling moves back toward or below recent buy points.

PANW stock, initially down slightly, rose modestly overnight following positive earnings and guidance. Shares are signaling a new high after finding support near their 50-day line. INTU stock jumped on strong Intuit earnings.

IBD Watchlist Stocks

Tesla, Google, Nvidia and AMD are on IBD Leaderboard. Apple stock is on SwingTrader. Google stock is on IBD Long-Term Leaders. Tesla stock, AMD, Nvidia and Williams-Sonoma are on the IBD 50.

The video embedded in this article analyzed the market action as well as Amazon stock, Kohl’s and ServiceNow (NOW).

House Vote On Reconciliation Spending Bill

The House is moving toward passing a reconciliation bill Friday with $1.64 trillion in spending and $1.27 trillion in tax revenue, boosting federal deficits by $367 billion over 10 years, according to Congressional Budget Office estimates. Including $207 billion in higher revenue from a beefed-up IRS, and the CBO sees a 10-year deficit add of $160 billion.

A long filibuster-like speech by House Minority Leader Kevin McCarthy pushed back a House vote Thursday night.

The legislation includes an array of programs as well a significant increase in state and local tax deductions. The SALT deductions will largely benefit wealthy Americans in Democratic states such as California and New York. The reconciliation bill also includes EV tax credits of $7,500, or $12,000 for union-made EVs. However, the Senate is likely to make significant changes to the reconciliation package.

Dow Jones Futures Today

Dow Jones futures rose 0.4% vs. fair value. S&P 500 futures advanced 0.4% and Nasdaq 100 futures climbed 0.5%.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.


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Stock Market Rally

The stock market rally had a mixed session, with megacap techs powering higher.

The Dow Jones Industrial Average fell 0.2% in Thursday’s stock market trading. The S&P 500 index climbed 0.3%. The Nasdaq composite advanced 0.45%, with the Nasdaq 100 up 1%, fueled by Apple stock, Amazon and Nvidia. The small-cap Russell 2000 dipped 0.4%.

Nvidia stock popped 8.25% to 316.75 even though it closed off intraday highs. With a market cap approaching $800 billion, NVDA stock is definitely a Nasdaq driver.

Apple stock rose 2.85% to 157.87, hitting a record high and still in range from a 153.26 cup-with-handle buy point, according to MarketSmith analysis. Volume was strong after Wednesday’s above-average trading. The relative strength line, while not at consolidation or record highs, did hit a short-term peak. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.

Amazon stock popped 4.1% to 3,696.06, moving above a 3,605.55 handle buy point in heavy volume. The RS line for AMZN stock has been moving up in the past couple of weeks, but has been trending lower since July 2020. Amazon stock has been rangebound over that time, with a series of failed breakouts.

Google stock climbed 1.2% to 2,996.77, hitting a new high intraday. Shares are within range of a 2,925.17 flat-base buy point, consolidating around that entry for the past few weeks. In fact, GOOGL stock has formed a three-weeks-tight pattern, with a 3,012.40 entry. That could give investors a bit more confidence buying Google stock higher in the flat base’s buy zone.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) climbed 0.8%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) sank 0.9%. The VanEck Vectors Semiconductor ETF (SMH) jumped 2.5%, with Nvidia stock and AMD major components, along with AMAT.

SPDR S&P Metals & Mining ETF (XME) was just above break-even and Global X U.S. Infrastructure Development ETF (PAVE) edged up 0.2%. U.S. Global Jets ETF (JETS) sank 1.6%. SPDR S&P Homebuilders ETF (XHB) advanced 0.3%. WSM stock is a big XHB holding.

The Energy Select SPDR ETF (XLE) dipped 0.6% but came off lows as crude oil futures reversed higher. The Financial Select SPDR ETF (XLF) sank 0.5%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) slid 2.5% and ARK Genomics ETF (ARKG) 3.4%, with ARKG at a 52-week low. Tesla stock remains ARK Invest’s top holding across its ETFs.


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Market Rally Analysis

The stock market rally is getting top heavy again. The big-cap Nasdaq 100, led by Apple, Google, Amazon, Nvidia and Tesla, hit a new high, up 1.8% this week. The Nasdaq composite and S&P 500, with more-modest gains, are just below all-time high levels. The Dow is down slightly this week, while the Russell 2000 is off 1.9%, both trading near 21-day lines

The Nasdaq is now 5.5% above its 50-day line, not quite at the 6% level that raises concerns of a pullback. But the Nasdaq 100 is 6.7% over the 50-day.

If Apple, Google and Amazon march higher, joining Microsoft (MSFT), it’s going to be hard to keep the Nasdaq and especially Nasdaq 100 from getting significantly extended. That’s true even if Nvidia and Tesla take a breather.

If that’s the case, then the market rally may not have much room to run before hitting resistance.

Meanwhile, a lot of leaders are extended. Some are continuing to run, like Nvidia, while others are pulling back, such as Lucid stock. The EV sector, which was overheating amid the Rivian IPO, seems to be powering back down. TSLA stock is holding up better than most four-wheeled rivals, though that’s after last week’s sell-off.

Some stocks are gapping up on earnings, but gap-ups have been tricky.

Aside from megacap techs and retail names, shipping stocks still look intriguing. Housing-related stocks are doing well.

But Apple et al. are masking weakness. Losers led winners by two-to-one on the Nasdaq on Thursday. There were 264 Nasdaq stocks hitting 52-week lows vs. 116 new Nasdaq highs.


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What To Do Now

It may sound like a broken record (what’s a record, Webby?), but investors can do a lot worse than letting their positions work. Yes, the market rally is looking a little extended, so it’s not an ideal time to be adding much exposure. But stocks are generally doing well, so investors needn’t slash exposure.

Consider taking partial profits in stocks when they are greatly extended from their 10-day or 50-day moving averages. That’s especially true with recent IPOs. The odds of a major pullback, even erasing all your gains — see Dutch Bros (BROS) — are just too high.

Investors should work on their watchlists, keeping an eye on stocks that are building handles and short consolidations. A few decent bases are out there, but the market rally may need a few weeks of sideways action or pullbacks for more good setups.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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