Dow Jones futures fell slightly overnight, along with S&P 500 and Nasdaq futures. Adobe (ADBE) soared overnight on strong results and earnings guidance.
After showing resilience after Wednesday’s Fed rate hike prospects, the equity market rally eased on Thursday with strong and broad-based gains. The Nasdaq and S&P 500 hit new 52-week highs, while the Dow finally broke through its 2023 highs. Microsoft (MSFT) has been a big mover for major indexes, with Apple (AAPL) e Metaplatforms (META) also contributing. But the breadth of the market was strong.
Quarry (CAVA) jumped 99% on its debut Thursday after CAVA stock listed its IPO at 22 a share, above its expected range. CAVA stock opened at 42 and closed at 43.78. The Mediterranean fast-casual restaurant is not yet profitable but is growing rapidly.
Snowflake (TO SNOW), Monday. com (MNDY) e Smith and nephew (SNN) has issued buy signals. But the risks of a market pullback increase the risks of new buying in the near term.
The Nasdaq and Nasdaq 100 look increasingly stretched, with the S&P 500 starting to look stretched as well.
META shares are in the IBD ranking. MSFT shares are on IBD long-term leaders. MNDY stock is on the IBD 50.
Dow Jones Futures today
Dow Jones futures fell 0.1% from fair value. S&P 500 futures fell 0.2% and Nasdaq 100 futures fell 0.3%. Adobe stock is a constituent of the S&P 500 and Nasdaq 100.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session of the stock market.
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Adobe’s earnings beat fiscal second-quarter views with revenue exceeding past forecasts, with CEO Shantanu Narayen touting a “new era of generative AI” in the release. The software giant led forecasts for slightly higher EPS and revenue in line.
ADBE stock is up 3.5% in recent trading. Shares rose 2.4% to 490.91 in Thursday’s regular session, hitting a 16-month best. Adobe stock has skyrocketed in recent weeks as it pushes AI efforts and alliances.
Stock market rebound
The stock market rally started off mixed but steadily moved higher for strong gains.
The Dow Jones Industrial Average rose 1.3% in stock market trading on Thursday, hitting its best levels since a 52-week high in December. The S&P 500 index rose 1.2% and the Nasdaq composite 1.15%, both to their best levels in more than a year. The small-cap Russell 2000 was up 0.8%.
Microsoft rose 3.2% to 348.10 to set an all-time closing high. It’s up 6.5% so far this week. Apple shares rose 1.1% to record highs. Meta Platforms rose 3.1%, a 52-week high. Microsoft and Apple stocks are on the Dow Jones, S&P 500 and Nasdaq composite, with META stocks on the S&P 500 and Nasdaq.
US crude prices fell 3.4% to $70.62 a barrel.
The yield on the 10-year Treasury fell 7 basis points to 3.73%.
Among growth ETFs, iShares Expanded Tech-Software Sector (IGV) ETF was up 2%, with MSFT stock as the largest constituent. The VanEck Vector Semiconductor (SMH) ETF was down 0.75%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) was up 1.1% and ARK Genomics ETF (ARKG) was up 2.2%.
SPDR S&P Metals & Mining ETF (XME) was up 1.6% and Global X US Infrastructure Development ETF (PAVE) was up 1.2%. The US Global Jets ETF (JETS) was up 0.9%. SPDR S&P Homebuilders ETF (XHB) was up 1.6%. The Energy Select SPDR ETF (XLE) gained 1.1% and the Health Care Select Sector SPDR Fund (XLV) rebounded 1.55%.
The SPDR Financial Select ETF (XLF) was up 1.3%. The SPDR S&P Regional Banking (KRE) ETF was up 1.9%.
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Stocks in buying areas
SNOW stock jumped 5.5% to 190.98, clearing a key resistance level of 185 in a consolidation dating back to late August. The volume was above average. Snowflake shares plunged on May 25 after the data analytics software maker cut its full-year forecast, but shares quickly started to rally. Not normal, but it has happened with a large number of growth stocks in recent weeks.
MNDY fell 0.1% to 182.77, but rebounded from a morning low of 168.88, just above the 21-day line. Monday.com gapped on earnings on May 15, offering an initial early entry. Another rumor came a week later when MNDY stock crossed a not quite limit. The stock moved above the official consolidation buy point of 171.89 on May 31 but was significantly extended from its moving averages. The recent break in June has allowed the 21-day line to recover a bit. Investors could buy Monday.com’s shares off the bounce of the 21-day line or use 184.60 as a high-handle entry.
SNN stock rose 1.4% to 32, clearing a declining trendline, offering an early entry. Smith & Nephew stock jumped 5.55% on Wednesday, breaking above the 50-day line. It is one of several medical products companies showing strength this week. SNN stock has an official buy point of 33.09 from a flat basis.
Analysis of market rallies
The stock market rally could easily be sold off following the Federal Reserve’s rate hike prospects on Wednesday or in a second-day reaction on Thursday. Instead, shares held up relatively well on Wednesday and then rallied on Thursday.
Apple, Meta and Microsoft stocks helped fuel the big-cap indices.
The Dow Jones led, while the Nasdaq and S&P 500 rose for the sixth consecutive session.
Progressives led declines by 3 to 1 on the NYSE and more than 2 to 1 on the Nasdaq.
The Invesco S&P 500 Equal Weight (RSP) ETF was up 1.2% to 148.95.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) was up 1.2%. It is now 7.4% above its 50-day line.
The Nasdaq has been up sharply since the end of April, especially in the last month. It is 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 rallying for that benchmark.
This increases the odds of a short-term pullback and the risks of a larger slippage. Of course, it doesn’t have to happen right away, as the last 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 a few big winners for a long time, the prospect of a Nasdaq pullback to, say, the 21-day line probably wouldn’t be alarming. There is also the possibility of a sharper correction or your stock going down much more. If you are heavily exposed, you may choose to take partial profits to lock in some gains in very broad names.
A pullback would be a bigger deal for new positions, especially tech ones.
SNOW stock, for example, 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 dip below its official buy point, although previous entries may be safe.
You may choose to gradually take on new positions here, perhaps emphasizing areas outside the tech space. But there is a strong case for waiting for a market pullback to create safer buying options in new stocks or add to existing holdings.
Right now, there’s not a lot of stock in buy opportunities. The names of chips, software and megacaps such as Apple, Microsoft and Meta are greatly extended. Even the most recent leaders in the travel and industry sectors look extended after competing from the bottom of the bases. All of this is another sign that the market may need a break.
A pullback or pause in the market should create a number of new buying opportunities.
Read The Big Picture daily to stay abreast of market direction and major stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarsonfor stock market updates and more.
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