Dow Jones futures tilted lower early Monday, along with S&P 500 futures and Nasdaq futures. Dow giants Caterpillar, Boeing and McDonald's were in focus while Fed chief Jerome Powell expanded his go-slow rate-cut comments.
The stock market rally largely weathered a huge week of earnings and economic news. The Dow Jones and S&P 500 hit fresh all-time highs Friday while the Nasdaq rebounded to a two-year high thanks to Meta Platforms and Amazon.com.
Big Tech earnings for the week were mixed but generally positive, buoying the sector.
Market breadth was weak, with small caps struggling. Tesla broke a weekly losing streak, but is leading S&P 500 losers in 2024.
It's a stock picker's market, for sure. But despite the weak breadth there have been plenty of stocks to choose from.
Adobe, Axon Enterprise, MongoDB, Samsara and Synopsys flashed buy signals Friday.
SNPS stock is on IBD Long-Term Leaders. Synopsys, Samsara and MDB stock are in the IBD 50. Synopsys and Axon stock are on the IBD Big Cap 20. Axon was Friday's IBD Stock Of The Day.
The video embedded in this article discussed the market action in depth and analyzed MongoDB, Axon and SNPS stock.
Earnings will remain heavy. Caterpillar topped EPS views early Monday, though sales just missed. CAT stock rose solidly before the open, already at record highs. McDonald's fell slightly from around a buy point, as sales missed views amid Mideast conflicts.
Chipotle Mexican Grill, Eli Lilly, ELF Beauty, Arm Holdings and Pinterest are among the many notable companies reporting this week.
Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value. Caterpillar provided a modest boost while MCD stock was a slightly drag. Boeing also hit the Dow due to new 737 Max fuselage issues.
S&P 500 futures sank 0.2% and Nasdaq 100 futures edged lower, even with an Nvidia upgrade lifting that megacap.
The 10-year Treasury yield rose several basis points to 4.11%.
Fed chief Jerome Powell, in a "60 Minutes" interview aired Sunday night, reiterated his Wednesday comments that a March rate cut is not the "base case." He added that the Fed is likely to cut rates in 2024 by less than markets expect.
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 struggled midweek, with Fed chief Jerome Powell largely ruling out a March rate cut, and Google-parent Alphabet weighing on techs. But the major indexes then rallied strongly.
The Dow Jones Industrial Average and S&P 500 index rose 1.4% in last week's stock market trading, both setting record highs. The Nasdaq composite climbed 1.1%, buoyed by over-1% gains on Thursday and Friday.
Meta Platforms and Amazon.com were huge earnings winners while, ultimately, Microsoft rallied in its results. Those offset tough weeks for Google parent Alphabet and Apple.
Also, these megacap tech earnings, guidance and — crucially — capital spending plans were good news for peers, partners and suppliers, notably Nvidia but also stocks such as MongoDB.
Market breadth weakened however. Even as the major indexes rallied to highs, losers trounced winners on Friday.
The small-cap Russell 2000 declined 0.8% for the week, falling below the 21-day line but holding support at the 50-day.
The Invesco S&P 500 Equal Weight ETF and First Trust Nasdaq 100 Equal Weighted Index ETF both rose 0.4%, significantly lagging the S&P 500 and Nasdaq 100. But RSP and QQEW are close to recent 52-week highs.
The Nasdaq closed Friday 5.4% above its 50-day moving average with the S&P 500 up 4.9%. The Nasdaq 100 is 6% above its 50-day. Those are starting to get extended again or nearly so.
The 10-year Treasury yield sank 13 basis points to 4.03%, despite Friday's 17 basis-point jump following the hot jobs report. Regional bank fears weighed on long-term Treasury yields. But the two-year Treasury yield, more closely tied to Fed policy, was little changed.
While Fed's Powell seemed to close the door on a March rate cut, he stressed that labor markets don't need to weaken before rate cuts occur. So that's one reason why Friday's stunning strong jobs report did not snuff out the Meta/Amazon-led rally.
U.S. crude oil futures plunged 7.35% to $72.28 a barrel last week.
Amazon Partner Leads Three AI Stocks Near Buy Points
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF rose 1.4%, hitting a two-year high Monday, with Adobe stock a big holding and Samsara also in the ETF. The VanEck Vectors Semiconductor ETF advanced 1.6%. SNPS stock is in both IGV and SMH.
Reflecting more-speculative story stocks, ARK Innovation ETF climbed 1.6%, snapping a five-week losing streak. The ARK Genomics ETF edged up 0.2%. Tesla stock remains a major holding across Ark Invest's ETFs.
The Global X U.S. Infrastructure Development ETF jumped 3.4% and the Industrial Select Sector SPDR Fund rallied 1.9%, both to record highs. The Health Care Select Sector SPDR Fund climbed nearly 2%, clearing a long consolidation.
SPDR S&P Metals & Mining ETF advanced 0.5% last week. U.S. Global Jets ETF nudged 0.2% higher. SPDR S&P Homebuilders ETF rose 1.7%. The Energy Select SPDR ETF fell 0.9%.
The Financial Select SPDR ETF rose 0.85% but the SPDR S&P Regional Banking ETF tumbled 7.2% on fresh lending concerns.
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Stocks In Buy Zones
MongoDB stock jumped 6.6% to 436.01 on Friday, breaking out from a 425.51 handle buy point in a two-month consolidation and setting a 22-month closing high. The consolidation is right next to a failed cup-with-handle base, so clearing the Nov. 30 high of 442.84 is a big test for MDB stock as well. The database software firm, with AI aspirations, was a beneficiary of Amazon's strong Q4 results.
Axon Enterprise stock popped 1.7% to 256.99 on Friday, extending Thursday's move from the 10-week line and offering an early entry. The law enforcement products company is now expanding its body cameras for retail and health-care workers.
Adobe stock rose 1.1% to 634.76 on Friday, just above a 633.89 flat-base buy point. Shares rose 3.4% for the week, their fourth straight weekly gain.
Synopsys stock climbed 2.2% on Friday to 552.05. The chip and electronics design software maker has a 554.57 buy point from a cup-with-handle base, but Friday's move offered an early entry. Shares popped 4.5% for the week, rebounding from the 50-day and 10-week lines. The 50-day line is a good place to start a position in a Long-Term Leader.
Samsara stock rose 2.8% to 32.51 on Friday, retaking the 21-day and 50-day moving averages and clearing a tight trendline. IOT stock has a 36.91 consolidation buy point, according to MarketSmith. Investors could use Friday's move as an early entry. Decisively clearing Friday's high of 32.98 would also mean topping the 10-week line.
This Internet of Things software firm, an AI play, is prone to head fakes. Friday's low could be a place to exit.
Tesla Stock
Tesla stock rose 2.5% to 187.91, snapping a six-week losing week. But it's down 24.4% in 2024, making it the S&P 500's worst performer so far. TSLA stock hasn't even touched its plunging 10-day line in 2024.
The EV giant's market cap is now $597 billion, less than half of any of the other Magnificent Seven stocks. But it still boasts, by far, the highest forward price-to-earnings ratio of those megacaps.
After Tesla's weak Q4 earnings and 2024 growth warning, Wall Street analysts now see this year's earnings flat vs. 2023's tumble to $3.12 a share.
Tesla has already cut prices in China and Europe, with Model Y inventory discounts over 10% in the U.S. All of this in the backdrop of sluggish EV demand worldwide and intense competition in China.
On Sunday, Tesla raised the price of its Model 3 Long Range variant by $1,000 to $46,990, while keeping the base Rear Wheel Drive version at $38,990. This may reflect strong demand for "Highland" Model 3 or limited initial supply in the U.S. as the Fremont plant switch over to the refreshed sedan.
Over the weekend, The Wall Street Journal reported that some Tesla board members felt pressure to do drugs with Elon Musk. The in-depth report said some friends have urged him to go to rehab, and highlighted concerns that the board is not sufficiently independent from Musk.
TSLA stock fell 1% in premarket trade.
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What To Do Now
The stock market rally continues to power higher. The weak breadth is something to note. However, leadership remains robust, even if many of the biggest winners are in the AI space.
Investors had a few buying opportunities late in the week, while some more stocks are setting up. But many leaders are extended, often greatly.
The Nasdaq getting extended once again is a reason to be cautious about new buys. But investors should have significant or heavy exposure.
Keep working on those watchlists.
The weekend also is a good time to review your portfolio. Are there laggards to prune? With big winners, do you look to take profits or try to find places to add shares? The answers will depend greatly on your investing style.
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