Dow Jones futures fell Monday morning, along with S&P 500 futures and Nasdaq futures, as Treasury yields marched higher.
The stock market rally had another big week, with the Nasdaq running higher amid major news from the latest Fed outlook to the jobs report to massive earnings from Apple, Meta Platforms and more.
Don't be surprised to see a market pullback after the big gains in recent weeks, with Tesla and Apple stock up strongly yet again. Friday may have been the start of a pullback, with Amazon.com plunging on its weak earnings and outlook. But with the uptrend showing more signs that it's more than a bear market rally, investors can continue to gradually add exposure over time.
Dow Jones giant Microsoft, lithium and fertilizer giant SQM, auto parts maker Autoliv, Pure Storage and Freeport-McMoRan are stocks near buy points.
Microsoft, Autoliv and FCX stock already have earnings out of the way, while SQM and PSTG stock aren't due for several weeks. MSFT stock is on IBD Long-Term Leaders.
Onsemi, formerly ON Semiconductor, reported better-than-expected Q4 earnings and announced a $3 billion buyback. But On Semiconductor guided low on Q1. ON stock fell before the open. The EV-focused chipmaker surged 9.8% last week, breaking out of a cup base to a new high, but ended the week extended.
The video embedded in this article reviewed the strong market action and analyzed Regeneron Pharmaceuticals, Microsoft and ALV stock.
Takeover Bids
Newmont made a non-binding offer to buy Australian gold miner Newcrest Mining for $17 billion in stock. NEM stock fell solidly.
Public Storage made an unsolicited $11 billion bid for rival property REIT Life Storage on Sunday. It also hiked its quarterly dividend by 50% to $3 a share. PSA stock tumbled early Monday. LSI stock soared.
Danaher is interested in buy Catalent, Bloomberg reported over the weekend, though a deal isn't seen as imminent. CTLT sock spiked higher.
Dow Jones Futures Today
Dow Jones futures fell 0.5% vs. fair value. S&P 500 futures declined 0.6% and Nasdaq 100 futures sank 0.75%. Futures are off their worst levels.
Crude oil futures rose 1%.
The 10-year Treasury yield jumped 7 basis points to 3.6%. The dollar rose modestly after big gains late last week.
China's central bank substantially weakened the yuan's trading range vs. the dollar, which surged against rivals Friday following the stronger-than-expected jobs report.
U.S.-listed Chinese stocks and Hong Kong's Hang Seng fell solidly, following U.S. stocks' Friday losses and rising U.S.-Sino tensions over an alleged Chinese spy balloon.
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 shook off a weak Monday for a generally strong week.
The Dow Jones Industrial Average dipped 0.2% in last week's stock market trading. The S&P 500 index rose 1.6%. The Nasdaq composite jumped 3.3%. The small-cap Russell 2000 sprinted 3.9% higher.
Apple stock, a Dow Jones, S&P 500 and Nasdaq component, leapt 5.9% for the week, vaulting above its 200-day line. Shares reversed higher on Friday despite weak Apple earnings and revenue.
AMZN stock plunged 8.4% on Friday, back below its 200-day moving average, though it did close up 1.1% for the week. Late Thursday, Amazon reported a 98% EPS decline for Q4. While revenue slightly beat, Amazon guided low on Q1 revenue, with the high-margin Amazon Web Services a key reason.
The 10-year Treasury yield rose 1 basis point to 3.53% for the week, with the yield jumping 13 basis points Friday on the hot jobs report. Intraday Thursday, the yield fell to 3.33%, the lowest since Sept. 13.
U.S. crude oil futures plunged 7.9% to $73.39 a barrel last week, with gasoline down 10.5% and natural gas off 12.9%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF rose 1.25% last week, while the Innovator IBD Breakout Opportunities ETF climbed 1.9%. The iShares Expanded Tech-Software Sector ETF popped 2.4%, with Microsoft stock a major holding. The VanEck Vectors Semiconductor ETF jumped just over 4%, with ON stock a modest holding.
Reflecting more-speculative story stocks, ARK Innovation ETF jumped 6.1% last week and ARK Genomics ETF popped 3.7%, continuing their strong performance to start 2023. Tesla stock is a major holding across Ark Invest's ETFs. Tesla stock jumped 6.8% to 189.98 for the week, up 87% from its Jan. 6 bear market low.
SPDR S&P Metals & Mining ETF advanced 1.45% last week. The Global X U.S. Infrastructure Development ETF soared 4%, clearing a 13-month consolidation to hit a record high. U.S. Global Jets ETF ascended 2.2%. SPDR S&P Homebuilders ETF stepped up just over 6%. The Energy Select SPDR ETF slumped 5.7%, wiping out several weeks of slim gains. The Financial Select SPDR ETF climbed 1%. The Health Care Select Sector SPDR Fund slipped 0.1%, its sixth straight modest weekly decline.
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Elon Musk Not Liable
Late Friday, Tesla CEO Elon Musk was found not liable in a class action shareholder lawsuit suit over his 2018 "funding secured" tweets in August 2018, when he said he was mulling taking Tesla private. Musk also tweeted that "investor support" for a deal at $420 a share was "confirmed." Funding was not, in fact "secured," but Musk's attorney argued in San Francisco federal court that, "in that moment he didn't think."
On Saturday, Tesla raised U.S. Model Y prices by $1,000-$1,500, while trimming the base Model 3 by $500. On Friday, the Biden administration revised EV tax credit eligibility, making all Model Y vehicles in the U.S. eligible for $7,500 credits with a price tag of up to $80,000. The ruling also benefits the Ford Mach-E as well as other EV crossovers.
Tesla Berlin reportedly is shut down, from Jan. 30-Feb. 6, for maintenance and upgrades.
TSLA stock rose modestly early Monday.
Stocks Near Buy Points
Autoliv stock fell 2.7% this past week to 90.27, consolidating after gapping up 9% on Jan. 27 following strong earnings. ALV stock is in buy range from an 89.98 bottoming base. But investors could view the recent pause as a handle on a base going back to November 2021. The cup-with-handle buy point is 93.88. Many other auto parts stocks are showing strength in 2023.
Pure Storage stock jumped 5.7% for the week to 29.91, decisively rising from key moving averages. PSTG stock has a 31.33 double-bottom buy point, but is already actionable from clearing a downward-sloping trendline in that base on Wednesday. Volume has been strong as Pure Storage has bounced back in the past two weeks. The relative strength line is lackluster at best, reflecting sideways action over the past year. But while PSTG stock hasn't rebounded as fast as some growth plays, it didn't plunge in 2022 either.
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FCX stock fell 3.7% to 43.16 last week, closing just below the 21-day line as copper prices retreated. FCX stock has a three-weeks-tight pattern with a 46.83 buy point. Investors could also use that as a handle or alternate handle on a 10-month base.
Microsoft stock jumped 4.1% to 258.35 last week, even with Friday's 2.4% pullback. Shares broke out of a bottoming base that formed below the 200-day line. But Thursday's breakout cleared the 200-day line and a yearlong trendline. Investors could treat the move as a place to enter MSFT stock as a Long-Term Leader.
SQM stock has retaken key moving averages and is working on a double-bottom base with a 112.45 buy point, according to MarketSmith analysis. Shares rose 2.6% to 97.09 last week. It's possible that SQM stock could carve out a handle or some form of early entry. SQM stock likely won't report until March, but lithium peers Albemarle and Livent release earnings in less than two weeks. Albemarle already reported strong preliminary Q4 results and gave a generally bullish outlook.
SQM stock and Albemarle are notable holdings in the Global X Lithium & Battery Tech ETF. Tesla stock and China EV and battery giant BYD also are significant holdings, along with China and other Asian battery makers. The LIT ETF is finding support at its 200-day line, just below a double-bottom base.
Tesla Vs. BYD: EV Giants Vie For Crown, But Which Is The Better Buy?
Market Rally Analysis
The stock market rally had another impressive week. After skidding on Monday, the Nasdaq, S&P 500 and Russell 2000 had strong weekly gains, decisively above their 200-day lines and their late 2022 highs.
The Dow Jones is lagging, but found support and isn't far from its recent highs.
Some top sectors or groups faltered, but generally leading stocks broke out, flashed buy signals, set up or simply extended big recent gains.
All of this is happening amid economic data and earnings reports that are often mixed at best.
The late August highs are the next test for the market rally, with the Russell 2000 almost there and the S&P 500 not far away.
Still, evidence is growing that the market uptrend has real legs, and is not just another bear market rally.
Perhaps the biggest complaint about the current market rally is that it's too strong. The Nasdaq has run up for five straight weeks. The CBOE Volatility Index, or VIX, as well as the put/call ratio, have tumbled, signaling growing complacency.
Perhaps Friday's retreat was the start of a much-needed pause or pullback for the major indexes. That would let stocks forge handles or pull back to key support levels. A lot of interesting stocks are looking significantly extended.
One question is whether Tesla, Roku and other ARK-type speculative growth names continue to surge or settle down.
The U.S. dollar hit its lowest levels in several months on Wednesday following the Fed meeting, but then roared back on Thursday-Friday for a solid weekly gain. The dollar's sharp downtrend in recent months has been a major factor in the stock market's reviving fortunes.
After Friday's jobs report, markets now expect toward two more quarter-point Fed rate hikes to a 5%-5.25% range, matching the central bank's target.
On Tuesday, Fed chief Jerome Powell will speak. Markets surged on Powell's perceived dovish hints about inflation and financial conditions. If he wants to underscore hawkishness, this could be the time.
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What To Do Now
With the market rally running up for several weeks, most breakouts and buying opportunities have been working. So investors should have been taking advantage.
But do so prudently. Add exposure gradually, so you're not caught out in a pullback. It's possible that new buys will briefly dry up if the market pauses, but that could pave the way for a lot more entries.
Don't get too concentrated in a particular stock or sector. Cut losses short.
Spend time working on watchlists this weekend, making sure you're looking at quality stocks from a variety of sectors. Identify your prime targets, and do some more analysis on these potential buys.
After a brutal 2022, the new year is off to a great start. So stay engaged and ready to act.
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.
