Dow Jones futures tilted higher early Friday, along with S&P 500 futures and Nasdaq futures. Adobe rose overnight on strong results and earnings guidance.
After showing resilience after Wednesday's hawkish Fed rate-hike outlook, the stock market rally flexed on Thursday, with strong, broad-based gains. The Nasdaq and S&P 500 hit fresh 52-week highs while the Dow Jones finally topped 2023 peaks. Microsoft was a big driver for the major indexes, with Apple and Meta Platforms also contributing. But market breadth was strong.
Cava surged 99% in its debut Thursday, after CAVA stock priced its IPO at 22 a share, above the expected range. CAVA stock opened at 42 and closed at 43.78. The Mediterranean fast-casual restaurant is not profitable yet but growing rapidly.
Snowflake, Monday.com and Smith & Nephew flashed buy signals. But the risks of a market pullback raise the risks of new buys in the short run.
The Nasdaq and Nasdaq 100 look increasingly extended, with the S&P 500 also starting to look stretched.
META stock is on IBD Leaderboard. MSFT stock is on IBD Long-Term Leaders. MNDY stock is on the IBD 50.
Dow Jones Futures Today
Dow Jones futures were 0.1% above fair value. S&P 500 futures climbed 0.15% and Nasdaq 100 futures rose 0.35%. Adobe stock is an S&P 500 and Nasdaq 100 component.
Microsoft edged higher, boosting all the major indexes, as it eyes a record all-time at Friday's open.
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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Adobe Earnings
Adobe earnings beat fiscal Q2 views with revenue edging past forecasts, with CEO Shantanu Narayen touting a "new era of generative AI" in the release. The software giant guided EPS forecasts slightly higher and revenue in line.
ADBE stock jumped nearly 5% early Friday. Shares rose 2.4% to 490.91 in Thursday's regular session, hitting a 16-month best. Adobe stock has skyrocketed in the past few weeks as it pushes artificial intelligence efforts and alliances.
Stock Market Rally
The stock market rally started off mixed but steadily moved higher for strong gains.
The Dow Jones Industrial Average jumped 1.3% in Thursday's stock market trading, hitting its best levels since December's 52-week high. The S&P 500 index rallied 1.2% and the Nasdaq composite 1.15%, both at their best levels in more than a year. The small-cap Russell 2000 climbed 0.8%.
Microsoft rose 3.2% to 348.10 setting an all-time closing high and just below the November 2021 intraday peak of 349.67. It's up 6.5% so far this week. Apple stock climbed 1.1% to record levels. Meta Platforms popped 3.1%, a 52-week high. Microsoft stock and Apple are on the Dow Jones, S&P 500 and Nasdaq composite, with META stock on the S&P 500 and Nasdaq.
U.S. crude oil prices popped 3.4% to $70.62 a barrel.
The 10-year Treasury yield fell 7 basis points to 3.73%.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF rose 2%, with MSFT stock a major component. The VanEck Vectors Semiconductor ETF retreated 0.75%.
Reflecting more-speculative story stocks, ARK Innovation ETF climbed 1.1% and ARK Genomics ETF leapt 2.2%.
SPDR S&P Metals & Mining ETF rallied 1.6% and the Global X U.S. Infrastructure Development ETF advanced 1.2%. U.S. Global Jets ETF ascended 0.9%. SPDR S&P Homebuilders ETF stepped up 1.6%. The Energy Select SPDR ETF gained 1.1% and the Health Care Select Sector SPDR Fund rebounded 1.55%.
The Financial Select SPDR ETF rose 1.3%. The SPDR S&P Regional Banking ETF advanced 1.9%.
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Stocks In Buy Areas
SNOW stock jumped 5.5% to 190.98, clearing a key 185 resistance level in a consolidation going back to late August. Volume was above average. Snowflake stock plunged on May 25 after the data analytics software maker cut full-year guidance, but shares immediately started coming back. That's not normal, but that's happened with a large number of growth stocks in the past few weeks.
MNDY edged down 0.1% to 182.77, but rebounded from a morning low of 168.88, just above the 21-day line. Monday.com gapped up on earnings on May 15, offering an initial early entry. Another entry came a week later as MNDY stock moved past a not-quite handle. Shares moved above the official 171.89 consolidation buy point on May 31, but were greatly extended from moving averages. The recent pause in June has let the 21-day line catch up somewhat. Investors could buy Monday.com stock from the 21-day line bounce or use 184.60 as a high-handle entry.
SNN stock rose 1.4% to 32, clearing a downward-sloping trendline, offering an early entry. On Wednesday, Smith & Nephew stock jumped 5.55%, gapping above the 50-day line. It's one of several medical products firms showing strength this week. SNN stock has an official 33.09 buy point from a flat base.
Market Rally Analysis
The stock market rally could have easily sold off following the Federal Reserve's rate-hike outlook, either on Wednesday or in a day two reaction on Thursday. Instead, stocks held up relatively well on Wednesday and then powered ahead Thursday.
Apple, Meta and Microsoft stock helped fuel the big-cap indexes.
The Dow Jones led, while the Nasdaq and S&P 500 climbed for a sixth straight session.
Advancers led decliners by 3-to-1 on the NYSE and more than 2-to-1 on the Nasdaq.
The Invesco S&P 500 Equal Weight ETF rose 1.2% to 148.95.
The First Trust Nasdaq 100 Equal Weighted Index ETF climbed 1.2%. It's now 7.4% above its 50-day line.
The Nasdaq has been rising strongly since late April, especially over the past month. It's now 10.1% above its 50-day line, with the Nasdaq 100 11.6% above that level. The S&P 500 is 6% above its 50-day, which is getting elevated for that benchmark index.
That raises the odds of a near-term pullback, and the risks that it would be a larger slide. Of course, that doesn't have to happen right away, as the past few days have shown.
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What To Do Now
Once again, the market rally is showing strength, but investors need patience.
If you've owned some big winners for a long time, the prospect of a Nasdaq pullback to, say, the 21-day line probably wouldn't be alarming. There's also the possibility of a sharper correction, or that your stocks will fall much further. If you're heavily exposed, you could choose to take partial profits to lock in some gains in highly extended names.
A pullback would be a bigger deal for new positions, especially techs.
SNOW stock, for instance, would likely struggle to hold Thursday's breakout if the Nasdaq were to slide 4%-5% over the next few sessions. MNDY stock could easily tumble below the official buy point, though earlier entries might be safe.
You can choose to gradually take on new positions here, perhaps stressing areas outside the tech space. But there's a strong argument for waiting for a market pullback to create safer buying chances in new stocks or adding to existing holdings.
Right now, there aren't a lot of stocks in buying opportunities. Chip, software and megacap names such as Apple, Microsoft and Meta are greatly extended. Even newer leaders in the travel and industrial sectors look extended after racing from the bottom of bases. All of this is another sign that the market could use a breather.
A market pullback or pause should create a number of new buying opportunities.
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