Dow Jones futures were little changed early Friday, along with S&P 500 futures and Nasdaq futures. The February jobs report looms before the open.
The stock market rally had a strong session, with the S&P 500 and Nasdaq hitting fresh all-time highs on Thursday.
Nvidia rose sharply again, becoming the most extended its been in decades. Chips overall were hot, with Taiwan Semiconductor Broadcom and Marvell Technology also running and extended. But Monolithic Power cleared a short consolidation above a prior base. Microchip Technology vaulted past some early entries and flirted with an official breakout.
A few other stocks flashed buy signals Thursday.
However, the market rally is already looking stretched again. Investors should be cautious.
Key Earnings
Broadcom and Marvell reported earnings after the close, along with Costco Wholesale, Gap and software makers MongoDB, Samsara and DocuSign.
Winners: Samsara stock spiked higher, signaling a gap out of a base. DocuSign stock and Gap are set to jump above their 50-day lines and move toward consolidation buy points.
Losers: Marvell retreated solidly and MongoDB declned sharply, both on weak guidance. Costco stock fell solidly on a sales miss. Broadcom stock fell slightly.
On Friday, Taiwan Semiconductor reported February sales rose 11.3% in local currency vs. a year earlier, with January-February revenue up 9.4%. TSM stock rose nearly 4% before the open. The chip foundry, which cleared a short consolidation on March 1, have already shot up 11.4% this week. TSMC's sales also are good news for customers like Nvidia as well as chip-equipment makers.
The FDA has delayed a decision on Eli Lilly's Alzheimer drug past the first quarter, the company said Friday. Eli Lilly stock edged lower.
Nvidia stock is on IBD Leaderboard. Monolithic Power is on the IBD Long-Term Leaders watchlist.
Jobs Report
The Labor Department will release the February jobs report at 8:30 a.m. ET. Economists expect nonfarm payrolls to rise by a solid 190,000, but that's down sharply from January's 353,000. The jobless rate is expected to hold steady at 3.7%.
A strong jobs report could spur the Federal Reserve to scale back its rate-cut projections at the March 20 meeting.
Dow Jones Futures Today
Dow Jones futures lost 0.2% vs. fair value. S&P 500 futures were flat. Nasdaq 100 futures edged lower. Broadcom and Marvell are Nasdaq 100 members.
The 10-year Treasury yield dipped to 4.07%.
The jobs report is sure to move Dow futures and Treasury yields.
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 strong, broad advance Thursday.
The Dow Jones Industrial Average climbed 0.3% in Thursday's stock market trading. The S&P 500 index gained 1% and the Nasdaq composite jumped 1.5%, both hitting fresh all-time highs. The small-cap Russell 2000 rose 0.8%, hitting a 23-month high intraday.
Within tech, chips are clearly leading. Many software names have suffered damage in the past couple of weeks, but some could be setting up again. Manhattan Associates cleared a short consolidation.
Meanwhile, the broad housing/construction/infrastructure space looks strong. Makers of medical products are popping up. Edwards Lifesciences broke out Thursday, a day after Dexcom's advance.
Several trucking stocks have been doing well, with ArcBest clearing a short consolidation. ArcBest is the IBD Stock Of The Day.
Many bank stocks have been flashing buy signals, along with some energy plays.
However, the Nasdaq is already slightly extended again, 5.1% above its 50-day moving average. Many of the rally's big leaders are significantly stretched. Market sentiment is close to extreme bullishness, understandable but worrisome.
Those factors raise the risks of a market pullback, just in time for Friday's jobs report. So far those pullbacks have, ultimately, been modest and often very brief, but at some point that will shift. Many leading stocks could see sharp declines in that scenario.
U.S. crude oil prices dipped 0.25% to $78.93 a barrel.
The 10-year Treasury yield edged down 1 basis point to 4.09%, but off early lows at 4.05%.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF gained 1.2%, still recovering from Tuesday's 3.8% tumbled. The VanEck Vectors Semiconductor ETF popped 3.45% and is up 33.9% so far this year. Nvidia stock by far is the largest SMH holding, with Taiwan Semiconductor, Broadcom, Monolithic Power, Microchip Tech and Marvell also components.
Reflecting stocks with more speculative stories, the ARK Innovation ETF gained 1.15%. ARK Genomics tacked on 1.1%.
The SPDR S&P Metals & Mining ETF jumped 2.6%, and the Global X U.S. Infrastructure Development ETF was up 1.2%. SPDR S&P Homebuilders stepped up 1.6%.
The Energy Select SPDR ETF advanced 0.85%, and the Health Care Select Sector SPDR Fund climbed 0.5%. The Industrial Select Sector SPDR Fund rose 0.8%.
The Financial Select SPDR ETF dipped 0.15%. The SPDR S&P Regional Banking ETF edged up 0.1%.
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Nvidia Stock
Nvidia popped 4.5% to 926.69 on Thursday after Mizuho raised its price target to 1,000. Shares are up 12.6% so far this week. That would be the biggest gain in a nine-week win streak starting in early January.
The AI chip leader is up 86.9% in 2024. It now boasts a $2.32 trillion valuation.
Nvidia stock is now 41.9% above its 50-day. That's more extended than it got during its 2023 run or the Covid rally. In fact, it's the most extended from the 50-day line at the close since June 2003.
That raises the risk of a significant pullback or correction. That would likely trigger sharp losses in a variety of chip stocks and other AI plays, and perhaps the broader market.
However, a pullback isn't inevitable.
On May 30, 2023, NVDA stock closed 40.4% above its 50-day line, following a huge earnings gap-up. Shares did keep advancing at a slower pace for the next few months before consolidating for the rest of the year.
A pullback isn't happening yet: Shares are up modestly early Friday, continuing to run toward 1,000.
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What To Do Now
The stock market rally is showing impressive strength, bouncing back from Tuesday's sell-off. The short pauses and quick recoveries limit buying opportunities, but investors with heavy exposure have been reaping the benefits.
The Nasdaq and especially Nvidia are extended, while sentiment is close to euphoric. So it's time to be careful about new buys once again.
Depending on your exposure, concentration levels and investing style, you could consider taking partial profits in some extended leaders. In any case, you should have your exit strategy in place.
Keep working on watchlists and looking for those new 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 Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
