Dow Jones futures show a modest rise on Friday morning, in tandem with S&P 500 futures and Nasdaq futures. Earnings reports from Costco Wholesale (COST) and Lennar (LEN) are in the spotlight. Here’s a comprehensive overview of the latest market trends and notable stock movements.
Market Rally Overview: The recent stock market rally maintained its upward trajectory on Thursday, concealing robust advancements in various sectors despite minimal gains in major indexes. Treasury yields continued their descent, with the 10-year rate slipping below the 4% mark.
Key Highlights:
- The Russell 2000 and S&P MidCap 400 surged to 2023 highs, with industrials, regional banks, chips, and housing-related plays emerging as strong winners.
- Adobe (ADBE) faced a decline due to weak guidance, impacting other software giants such as Microsoft (MSFT) and ServiceNow (NOW).
- Megacap tech companies, including Apple (AAPL), Nvidia (NVDA), Amazon.com (AMZN), Meta Platforms (META), and Google’s parent Alphabet (GOOGL), experienced a challenging session.
Stocks in Focus:
- Tesla (TSLA) stood out as the notable Magnificent Seven winner, signaling an early buy opportunity.
- Monday.com (MNDY) broke out of consolidation, while Flowserve (FLS), Beacon Roofing Supply (BECN), and DDOG stock emerged as new buys.
- Market leaders such as Amazon, Microsoft, Nvidia, Meta, ServiceNow, and Datadog (DDOG) retained positions on IBD Leaderboard and other key portfolios.
Earnings Highlights:
- Costco (COST) posted positive earnings, beating expectations, and declared a $15 special dividend. Lennar (LEN) reported strong earnings, although concerns about gross margins and guidance impacted stock performance.
Market Performance:
- The Dow Jones Industrial Average rose by 0.4%, while the S&P 500 and Nasdaq composite climbed 0.3% and 0.2%, respectively.
- Small-cap stocks, as represented by the Russell 2000, surged by 2.7%, and the S&P MidCap 400 jumped by 2.4%.
- Market breadth remained robust, with the Invesco S&P 500 Equal Weight ETF (RSP) reaching a 2023 high, reflecting a 1.4% gain.
ETF Movements:
- Growth-focused ETFs experienced varied results, with the iShares Expanded Tech-Software Sector ETF (IGV) declining by 1.3%, influenced by weaknesses in Adobe, Microsoft, and ServiceNow.
- ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) showcased strength, gaining 3.7% and 6.1%, respectively.
- Sector-specific ETFs, including SPDR S&P Metals & Mining ETF (XME), Global X U.S. Infrastructure Development ETF (PAVE), and SPDR S&P Homebuilders ETF (XHB), demonstrated positive movements.
Technical Analysis – Megacap Techs:
- Microsoft stock experienced a decline, closing below its cup-base buy point. Apple stock maintained stability around its cup-with-handle buy point.
- Amazon stock found support at the 21-day line, and Meta stock held the 21-day line and a buy range.
- Nvidia stock remained in range of its double-bottom buy point, while ServiceNow stock, after a strong ascent, closed just above its 21-day line.
- Adobe stock, despite a significant decline following weak guidance, found support near the rising 50-day/10-week line.
Tesla’s Surge:
- Tesla stock witnessed a notable 4.9% surge, breaking a trendline dating back to July, and offering an aggressive entry point. The RS line showed a recent downward trend.
Other Stocks in Buy Zones:
- Monday.com stock surged 5.1%, clearing a five-month consolidation, while Flowserve stock popped 3.5%, clearing a resistance area.
- Beacon Roofing stock jumped 4.75%, retaking a cup-with-handle buy point, reflecting optimism for future growth.
- Datadog stock rose 2.9%, clearing a high handle from a consolidation since late July.
Conclusion and Investor Strategies: While the stock market rally remains in an early uptrend, investors should exercise caution with stretched stocks. Balancing exposure, considering individual investing styles, and closely monitoring extended stocks are crucial. A watchlist strategy is recommended, with a focus on stocks and sectors gaining momentum amid improved market breadth. Vigilance is key, particularly with the market potentially entering an extended phase.
Note: Actual trading results may vary, and investors are advised to make decisions based on their individual circumstances.
