Dow Jones futures rose slightly Friday morning, along with S&P 500 futures and Nasdaq futures. Costco Wholesale and homebuilder Lennar headlined overnight earnings.
The stock market rally continued to advance Thursday, with slim gains on the major indexes masking strong advances elsewhere. Treasury yields continued to tumble, with the 10-year rate skidding below 4%.
The small-cap Russell 2000 and S&P MidCap 400 both hit 2023 highs. Industrials, regional banks, chips and housing-related plays were all strong winners.
Adobe tumbled on weak guidance, hitting some other software giants such as Microsoft and ServiceNow. Megacap techs generally had a tough session, with Apple, Nvidia, Amazon.com, Meta Platforms and Google parent Alphabet.
Insurers of various kinds struggled, along with some big pharma plays.
Tesla was the only Magnificent Seven winner of any note, flashing an early buy signal. Monday.com broke out of a consolidation. Flowserve, Beacon Roofing Supply and DDOG stock also were new buys.
Amazon stock, Microsoft, Nvidia, Meta, ServiceNow and Datadog also are all on IBD Leaderboard. Apple stock, Amazon, Datadog and Nvidia are all on SwingTrader. Microsoft stock is on IBD Long-Term Leaders. Nvidia, Microsoft, Meta and ServiceNow stock are on the IBD 50. Adobe stock and Datadog are on the IBD Big Cap 20.
Monday.com was Thursday's IBD Stock Of The Day. DDOG stock was Wednesday's pick.
The video embedded in the article analyzed Thursday's market action as well as American Express, Datadog and FLS stock.
Dow Jones Futures Today
Dow Jones futures climbed 0.2% vs. fair value. S&P 500 futures advanced 0.2%. Nasdaq 100 futures rose 0.3%.
The 10-year Treasury yield edged down to 3.92%.
Crude oil futures rose slightly.
Chinese industrial output rose 6.6% in November vs. a year earlier, the best gain since February 2022. That was up from October's 4.6% and beat views for 5.6%. Retail sales jumped 10.1%, up from October's 7.6% gain but below forecasts for 12.5%.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Earnings
COST stock rose modestly in premarket trade. Costco earnings topped while sales were in line. The warehouse giant also announced a $15 special dividend. Shares fell 1.75% to 630.78 after hitting a record high Wednesday.
LEN stock fell modestly overnight. Lennar earnings topped views though there were some concerns about gross margins and guidance. Shares shot up 6.65% to a fresh high Thursday, continuing to go nearly vertical as mortgage rates have tumbled.
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Stock Market Rally
The stock market rally continued to advanced, led by small caps and midcaps. The Dow Jones Industrial Average rose 0.4% in Thursday's stock market trading. The S&P 500 index climbed 0.3%. The Nasdaq composite advanced 0.2%.
All came off Thursday morning's 52-week highs but shored up from afternoon lows.
Market breadth was very strong once again. The small-cap Russell 2000 jumped 2.7% and the S&P MidCap 400 gained 2.4%, both to fresh 52-week highs.
The Invesco S&P 500 Equal Weight ETF popped 1.4%, also a 2023 best.
The First Trust Nasdaq 100 Equal Weighted Index ETF advanced 0.75%. The Nasdaq 100 edged down 0.1%.
Most of the market revving higher while megacaps lag is encouraging. Tech megacaps pausing is probably healthy, given their massive gains in 2023.
The Nasdaq is starting to get extended from the 50-day moving average, closing 7.4% above that level. It may still be a little early in the market rally to worry about that, but it's worth keeping an eye on.
A lot of stocks are extended, either from traditional buy points or from running straight up from the bottom. Some stocks, but by no means all, that are breaking out have lagging relative strength lines after consolidating for several weeks or months.
The CBOE Volatility Index is still hovering at its lowest levels in nearly four years. The market fear gauge signaling excessive bullishness is another sign that a pullback or pause could be ahead.
U.S. crude oil prices popped 3% to $71.58 a barrel.
The 10-year Treasury yield tumbled 10 basis points to 3.93%, undercutting the 4% level for the first time since late July. The 10-year Treasury rate has plunged more than 31 basis points just this week.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF fell 1.3%, with ADBE stock, Microsoft and ServiceNow all weighing on IGV. DDOG stock also is in IGV. The VanEck Vectors Semiconductor ETF popped 1.85%, even with NVDA stock largely sitting out.
Reflecting more-speculative story stocks, ARK Innovation ETF gained 3.7% and ARK Genomics ETF soared 6.1%. Tesla stock is a major holding across Ark Invest's ETFs.
SPDR S&P Metals & Mining ETF leapt 3.8% and the Global X U.S. Infrastructure Development ETF climbed 2.8%. U.S. Global Jets ETF ascended 2.7%. SPDR S&P Homebuilders ETF stepped up 5.4%. The Energy Select SPDR ETF rebounded 2.9% and the Health Care Select Sector SPDR Fund declined 0.5%.
The Industrial Select Sector SPDR Fund advanced 1.3%.
The Financial Select SPDR ETF rose 1%. The SPDR S&P Regional Banking ETF jumped 4.8%.
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Megacap Techs
Microsoft stock fell 2.25% on Thursday to 365.93, closing below its 366.78 cup-base buy point for the first time since the Nov. 10 breakout. Shares also settled below the 21-day line for the first time since Oct. 26. MSFT stock could easily regain those levels. Another possibility is a retreat to the 50-day line, which is just 3.2% away now.
Apple stock edged up 0.1% to 198.11, holding in range from a 192.93 cup-with-handle buy point.
Amazon stock fell nearly 1% to 147.42, but found support at the 21-day line once again and held a 145.86 buy point, according to MarketSmith analysis.
Meta stock dipped 0.5% to 333.17, holding the 21-day line and a buy range.
Google stock edged down 0.5% to 131.94, hitting resistance again at the 50-day line. GOOGL stock isn't that far from a 139.42 cup-with-handle buy point, though the RS line is at the lowest since late July.
Nvidia stock climbed 0.5% to 483.50, still in range of a 476.09 double-bottom buy point.
ServiceNow skidded 4.9% to 680.39, but after a strong ascent from late October. Shares closed just above their 21-day line.
ADBE stock tumbled 6.35% to 584.64 following weak Adobe guidance for 2024. Shares are on track for an ugly, downside week that engulfs the prior four weeks of trading. Still, Adobe stock found support a rising 50-day/10-week line, modestly above a prior consolidation.
Tesla Stock
Tesla stock jumped 4.9% to 251.05 in heavy volume. Shares cleared a trendline going back to July, offering an aggressive entry. TSLA stock also briefly topped a short-term high of 252.75, another early entry. The RS line has been trending lower in recent months amid the stock's consolidation.
Thursday's move followed Wednesday's shakeout below the 50-day line to an intraday low of 228.20 before reversing slightly higher.
Early Friday, shares edged higher to just above the 252.75 entry.
Tesla's fundamentals have been weak in 2023, and growth drivers seem limited for next year. But tumbling Treasury yields are good for growth stocks, and good for fueling auto demand by making loans more affordable.
Other Stocks In Buy Areas
Monday stock leapt 5.1% to 190.77, clearing a five-month consolidation in heavy volume. The official handle buy point was 185.81. The RS line for MNDY stock is right at consolidation highs. Monday.com is now firmly profitable with strong growth.
Flowserve stock popped 3.5% to 40.36, clearing a resistance area just above 39 for an early entry. Shares have an official 41.02 flat-base buy point. The RS line for FLS stock has lagged during the consolidation. Earnings growth has been powerful in recent quarters, with sales growth accelerating for six straight quarters.
Beacon Roofing stock jumped 4.75% to 85.80 in heavy volume, retaking an 83.48 cup-with-handle buy point. It's been a rough year for the roofing business, but tumbling mortgage rates raise hopes for a stronger growth ahead.
Datadog stock rose 2.9% to 120.65, clearing a 120.26 high handle from a consolidation going back to late July. Investors could have bought DDOG stock as it broke the downtrend of that high handle.
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What To Do Now
The stock market rally appears to be in the early stages of another run. There have been some new buying opportunities in the past few days, but a lot of leading stocks are stretched.
Investors could have added some more exposure this week, but also could be taking some profits in stocks that are getting extended. Investors also could shift out of more-sluggish stocks into faster horses.
But much of this depends on your investing style and exposure level. Your cushion is a big factor as well. If you bought Nvidia below, say, 200, you're in a much-different position than someone who bought around the latest 476.09 buy point.
Whatever you do, don't chase after extended stocks. That's especially true now, with the overall market looking extended with heavy bullish sentiment.
Definitely work on your watchlists. With market breadth improving dramatically, a lot of stocks and sectors that were off the radar for months are gaining altitude.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on X/Twitter at @IBD_ECarson, Threads at @edcarson1971 and Bluesky at @edcarson.bsky.social for stock market updates and more.
