Dow Jones futures fell slightly Tuesday morning, along with S&P 500 futures and Nasdaq futures, returning after a holiday weekend.
The stock market rally showed strong, broad action last week, running past a surprisingly hawkish Federal Reserve. That raises confidence in the uptrend's longer-term prospects. But with the Nasdaq extended, the odds of a market pullback are elevated in the short term. Friday may have reflected the start of a slide, but it wasn't much of one.
A pullback could create new buying opportunities in leading stocks, many of which are currently far extended from any entry. But in the short run, investors should be cautious about making new purchases, especially in hot tech areas.
BA stock is trading right around a buy point. Boeing and rival Airbus will likely announce a bevy of new orders at the Paris Air Show, which kicked off Sunday. McKesson broke out of a consolidation while Smith & Nephew is above a trendline entry. Marriott International, Chipotle Mexican Grill, Boyd Gaming and Floor & Decor are near buy points. All seven stocks are from nontech areas of market leadership.
Meanwhile, Advanced Micro Devices, Samsara and Rambus are three hot stocks that are starting to pull back.
But many leaders are not retreating. Nvidia hit a fresh record high Friday, surging 10% for the week. Meta Platforms marked a 16-month best before closing a fraction lower on Friday. Tesla, after two tiny losses ended a record 13-day win streak, rose to a fresh eight-month high Friday.
Tesla, META stock and Nvidia are on IBD Leaderboard. CMG stock is on the Leaderboard watchlist. MCK stock was added to SwingTrader on Friday, joining Boeing and FND stock. Chipotle and IOT stock are on the IBD 50. Chipotle and Tesla stock are on the IBD Big Cap 20. McKesson was Friday's IBD Stock Of The Day.
The video embedded in the article reviewed the market action over the past week and analyzed McKesson, Chipotle and AMD stock.
Weekend News
U.S.-China tensions appear to ease somewhat with Secretary of State Anthony Blinken's trip, meeting Chinese President Xi Jinping and other top officials.
Alibaba said Eddie Wu, Chairman of the e-commerce giant's Taobao and Tmall Group, will succeed Daniel Zhang as CEO. Joseph Tsai, vice chairman, will replace Daniel Zhang as chairman. Zhang will continue to lead Alibaba Cloud Intelligent, as the tech titan plans to reorganize into six independently run units.
The NAHB Housing Market Index rose 5 points in June to 55 vs. views for an unchanged 50. It was the sixth straight monthly gain and the first time in 11 months that builder confidence has been above the break-even 50 level. The Commerce Department will release May housing starts data at 8:30 a.m. ET on Tuesday.
Dow Jones Futures Today
Dow Jones futures fell 0.3% vs. fair value. S&P 500 futures declined 0.3% and Nasdaq 100 futures dipped 0.2%.
The 10-year Treasury yield dipped 2 basis points to 3.75%.
China's central bank cut two more key lending rates by 10 basis points overnight, after reducing two other rates by the same amount last week. But Hong Kong's Hang Seng fell 1.5, as investors may have wanted bigger cuts or other stimulus.
U.S. stock markets were closed Monday for the Juneteenth holiday, but other exchanges around the world were open.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally had a strong week, especially on the Nasdaq, despite generally modest losses Friday.
The Dow Jones Industrial Average rose 1.25% in last week's stock market trading, reaching its best levels of the year. The S&P 500 index jumped 2.6%, its best weekly gain since March. The Nasdaq composite leapt 3.25%, its eighth straight weekly advance. The small-cap Russell 2000 climbed 0.5%, well off weekly highs.
The 10-year Treasury yield rose 2 basis points to 3.77%.
U.S. crude oil futures rose 2.3% to $71.78 a barrel last week. Copper prices climbed 2.5%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF advanced 2.1% last week. The iShares Expanded Tech-Software Sector ETF leapt 5.2%. The VanEck Vectors Semiconductor ETF ran 4.45% higher, with Nvidia and AMD stock major holdings.
The SPDR S&P Metals & Mining ETF popped 2.9% last week. The Global X U.S. Infrastructure Development ETF rallied 2.6%. U.S. Global Jets ascended 5.65%. The SPDR S&P Homebuilders ETF stepped up 2.4%. The Energy Select SPDR ETF dipped 0.6%. The Health Care Select Sector SPDR Fund was up 1.4%. MCK stock is in XLV.
The Industrial Select Sector SPDR Fund jumped 3%. BA stock is a major XLI holding.
The Financial Select SPDR ETF rose 1.3%. The SPDR S&P Regional Banking ETF fell 0.9% after big gains since early May.
Reflecting stocks with more speculative stories, the ARK Innovation ETF rallied 4.2% last week and ARK Genomics leapt 3.9%. Tesla stock is the No. 1 holding across Ark Invest's ETFs.
Five Best Chinese Stocks To Watch Now
Stocks To Watch
BA stock rose 1.2% to 219.99 this past week, just below a 221.43 flat-base buy point. Many other industrial plays look extended from their 50-day lines, but not Boeing.
MCK stock climbed 3.1% to 406.20, breaking out past a 401.53 handle buy point Friday.
SNN stock jumped 6.9% to 32.16 last week, clearing a trendline in a flat base that's part of a base-on-base formation.
CMG stock dipped 0.4% to 2,032.92 in low volume, trading at its 21-day line with the 10-week line catching up. Chipotle has a four-weeks-tight pattern with a 2,139.88 official buy point. That pattern could turn into a flat base in another week.
MAR stock fell 1.5% to 176.36, finding support at the 21-day and 10-week lines. Marriott stock has a 183.37 buy point from a flat base next to several bases, according to MarketSmith analysis.
BYD stock edged down 0.6% to 68 last week, just above its 10-week line. Boyd Gaming has a 71.69 buy point from a flat base next to two long cup-with-handle consolidations. Investors could use 70.04 as an early entry.
FND stock nudged 0.3% higher to 96.26, just above the 50-day line. Floor & Decor stock has a 101.39 buy point from a cup-with-handle base, though investors could use 99.50 as aggressive entry.
AMD stock fell 3.9% to 120.08 last week, reversing in heavy volume from a 52-week high of 132.83 on Tuesday. Shares are falling back toward their 21-day line and the lows of their recent mini-consolidation. AMD released new AI chips to take on Nvidia, but the market reaction wasn't great. Is AMD a potential buy if it finds support? Or do investors wait for, say, NVDA stock to take a rest?
IOT stock dipped 0.3% to 28.90, pulling back reluctantly late in the week after nearly topping its late-2021 all-time high of 31.41. Shares are trading around the 10-day line, with Samara stock still well above the 21-day.
RMBS stock declined 5.2% in the last week to 60.38, sliding just below the 21-day line. It's the third straight weekly decline for Rambus stock.
Market Rally Analysis
The market rally continues to show impressive strength. On Wednesday, the major indexes showed resilience in the face of a surprisingly hawkish Fed, then powered higher Thursday. The S&P 500 and Nasdaq hit fresh 52-week bests while the Dow Jones set new 2023 highs.
Even on Friday, with the Nasdaq clearly extended and the S&P 500 also getting stretched, the uptrend resisted a pullback.
Market breadth was weak Friday, but has improved significantly in the past few weeks.
The Invesco S&P 500 Equal Weight ETF popped 2.5% to 148.83, barely falling on Friday. It's a huge change from just a few weeks ago. The First Trust Nasdaq 100 Equal Weighted Index ETF advanced 3.2% last week.
The Nasdaq is now 9.1% above its 50-day line, while the Nasdaq 100 is up 10.6%. The S&P 500 is 5.5%. That all signals a market pullback is likely, with rising odds that any such retreat will be large. But stocks could continue to get even more extended for a time.
Ideally, the Nasdaq would pause or give ground grudgingly in light volume, letting moving averages catch up. That would let leading stocks take a break, perhaps retreating to the 21-day or 10-week lines or even forging new bases. Of course, a pullback could be more intense, and even in a mild market retreat many individual names will suffer outsize losses.
Depending on how mild or widespread the pullback is, quality stocks from outside the tech sphere could break out or at least hold up. Medical products, industrials, restaurants, travel and various housing-related plays are doing well, including Boeing, SNN, CMG, MAR and FND.
Stocks rallied last week in no small part because investors simply don't believe that the Fed will raise rates two more times. Fed chief Jerome Powell could take a more hawkish tone before Congress this week after his relatively dovish comments last Wednesday.
Time The Market With IBD's ETF Market Strategy
What To Do Now
With the Nasdaq and so many chip, software and AI leaders extended, it's not a good time to be buying techs. Investors could look to add exposure elsewhere. Still, a Nasdaq-led pullback could hit everyone. Investors also may want to save their powder for post-pullback buying opportunities in big tech winners.
You can consider taking partial profits in big winners, either on the way up or as they cross below their 10-day lines. That will depend on the size of your individual positions and overall exposure, your conviction in various holdings and your own investing style. But have an exit strategy in place.
When a market pause or pullback takes hold, you'll want to keep a close eye on stocks finding key support or consolidating around buy points. So run your screens this long weekend to keep track of the wide array of leaders and potential leaders.
The market rally has been impressive. Despite some near-term caution, the overall trend is bullish. Act accordingly.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
