Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures.
The stock market had a mixed week. On the one hand, the S&P 500 and especially the Nasdaq advanced, snapping three-week losing streaks. But the major indexes suffered ugly reversals Thursday despite blowout Nvidia (NVDA) earnings and guidance. Stocks did rebound Friday following Fed chief Jerome Powell’s speech, but many leaders remain damaged.
A market rally attempt remains ongoing, but investors should remain cautious in the current environment, especially with tech names.
Nvidia stock rose solidly for the week, but came well off Thursday morning highs and faces a key test. Meanwhile, other chip and artificial intelligence plays suffered sharp losses.
Tesla (TSLA) jumped last week, coming up to key levels.
Other stocks to watch: Meta Platforms (META), Google parent Alphabet (GOOGL) as well as Dow Jones giants Visa (V), Caterpillar (CAT) and Salesforce.com (CRM). Salesforce headlines another big week for software earnings.
The video embedded in this article discussed the market’s big moves and analyzed Nvidia, CAT stock and Marsh & McLennan (MMC).
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Stock Market Rally Attempt
The stock market rally attempt started the week off strong, but then tumbled back Thursday, with all the major indexes hitting resistance at their 50-day moving averages. Stocks bounced Friday after wobbling initially following Fed chief Jerome Powell’s Jackson Hole speech.
The Dow Jones Industrial Average fell 0.45% in last week’s stock market trading. The S&P 500 index climbed 0.8% and the Nasdaq composite popped 2.3%.
The small-cap Russell 2000 dipped 0.35%.
The 10-year Treasury yield fell 1 basis point to 4.24%. The 10-year Treasury yield hit a 15-year high of 4.36% intraday Tuesday, then tumbled to as low as 4.19% on Wednesday.
The two-year yield, more closely tied to the Fed policy outlook, climbed 12 basis points to 5.05%. Markets are now leaning toward another Fed rate hike by Nov. 1.
Powell’s speech was slightly more hawkish than after the July policy meeting, reflecting stronger U.S. economic data. But he also said policymakers would “proceed carefully,” suggesting they’re not in a rush.
U.S. crude oil futures fell 1% to $79.83 a barrel for the week. Copper futures climbed 1.65%, ending a three-week slide.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.1% last week. The iShares Expanded Tech-Software Sector ETF (IGV) gained 3%, with CRM stock a major component. The VanEck Vectors Semiconductor ETF (SMH) climbed 2%. Nvidia stock is the No. 1 holding in SMH.
SPDR S&P Metals & Mining ETF (XME) fell 1.6% last week. The Global X U.S. Infrastructure Development ETF (PAVE) edged up 0.5%. U.S. Global Jets ETF (JETS) descended 1.7%. SPDR S&P Homebuilders ETF (XHB) dipped 0.3%. The Energy Select SPDR ETF (XLE) fell 1.4% and the Health Care Select Sector SPDR Fund (XLV) nudged down 0.1%. The Industrial Select Sector SPDR Fund (XLI) inched up 0.3%, with CAT stock the top holding.
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NVDA stock ran up heading into earnings, retaking the 50-day line and flashing buy signals. Nvidia earnings crushed views with the AI chip leader guiding sharply higher yet again.
But after spiking to a record 502.66 at Thursday’s open, Nvidia stock essentially closed flat. On Friday, shares fell 2.4% to 460.18, but found support at the 21-day line, just above its 50-day.
Ultimately, NVDA stock jumped 6.3% for the week.
Holding those levels will be important for Nvidia but perhaps even more so for other AI plays as well as the general market. If the booming AI leader struggles, what chance do other growth stocks have?
Tesla stock leapt 10.7% to 238.59 last week, ending a three-week losing streak. The EV giant is now right at the 21-day moving average. A move above the now-falling 50-day line could offer an early entry in what would then be a new base with an official 299.20 buy point. But a reversal from the 21-day or 50-day line could present a chance to short.
Buzz is building for an upgraded Model 3 and the upcoming Tesla Cybertruck. But there are still a lot of unknowns about those vehicles, with Elon Musk hinting at production issues for the Cybertruck.
Meanwhile, Tesla continues to beef up discounts in key markets, even as it curbs production somewhat in Q3. Finally, the National Highway Traffic Safety Administration says it’s close to ending its probe of Tesla’s driver-assist systems Autopilot and Full Self-Driving, but it’s unclear if NHTSA regulators will take significant action vs. the EV giant.
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Other Stocks To Watch
Google stock edged up 0.1% to 129.88 last week, after briefly hitting a 52-week high. GOOGL stock is in buy range from a 127.10 cup-with-handle buy point, though investors might want to wait for a move above the past weeks of action.
Meta stock rose 0.8% to 285.50, but hit resistance at the 50-day/10-week lines. META stock is now 4.2% below its 10-week line. That’s a sell signal, though shares didn’t quite undercut the prior week’s lows. A decisive move above the 50-day line and trendline would offer an early entry, but Meta may need more time.
Visa stock rose 1.85% to 242.57 in the past week. Shares have a new 245.37 buy point from a flat base that formed right on top of another flat base. The base-on-base pattern is especially bullish in choppy or weak markets. Investors could use the Aug. 10 high of 243.95 as a slightly early entry.
Caterpillar stock edged down 0.45% to 272.56, just below the 21-day line. Shares have been consolidating this month, pulling back gradually in light volume following a solid breakout. CAT stock could forge a new base, perhaps finding support at the 10-week line.
CRM stock rose 2.3% to 209.47 last week, but is hitting resistance at the 21-day line, below the 50-day. A decisive move above the 50-day line would create an early entry in what would then be a new base. Salesforce earnings are due Wednesday night.
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Market Rally Analysis
Thursday’s sharp reversal from the 50-day moving average was a serious blow to the market rally attempt. Still, Friday’s bounce was nice, but continued a trend of gains coming on light volume.
The picture looks a little better on weekly charts. The Nasdaq had solid gains, albeit off highs. The S&P 500 rose modestly and the Dow Jones just edged lower.
Still, the best that can be said is that the market direction remains unclear.
The stock market rally attempt remains valid until the S&P 500 and Nasdaq undercut their Aug. 18 lows. So investors should still be on watch for a follow-through day. Ideally, a FTD would also involve retaking the 50-day line following Thursday’s heavy-volume reversal from that key level.
Market breadth has weakened considerably in recent weeks.
As breadth has narrowed, so has leadership. Most tech growth plays look damaged and need at least a little repair time. Nvidia stock and key earnings from Salesforce.com, Broadcom (AVGO) and more will be key this week.
Homebuilders are threatening to break down.
Insurance brokers are faring well. So are some construction, infrastructure and industrial plays, discounters and medicals are faring OK.
Energy is the best-looking sector right now, but is pausing for now along with crude oil prices.
Earnings reports and Friday’s September jobs report will be key headlines for the upcoming week. But stocks may continue to take their cue from bond markets.
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What To Do Now
Investors should have pared exposure substantially in recent weeks, and there haven’t been a lot of reasons — or opportunities — for new buys.
This is a show-me market. Until the market rally attempt proves itself with real strength, investors should be in wait-and-see mode.
A rebound up to the 50-day line could foreshadow buying or shorting opportunities, depending on what happens next.
So investors should have buy and shortlists prepared, as well as a broader list of stocks holding key levels and showing relative strength.
A market break below recent lows would signal investors should further cut exposure, even going entirely to cash.
In other words, stay engaged, remain flexible and be prepared.
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.
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