Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures.
The stock market had a big week, with the Nasdaq boasting its best weekly gain since March. Major indexes rose on Thursday on a Fed-friendly inflation report. On Friday, the move away from defensive names increased, with many medicals and other defensive or defensive growth plays falling sharply.
While buying opportunities in leading stocks are limited, investors should be looking to gradually increase exposure.
Arista Networks (ANET), Storage Pure (PSTG), Mobile (MBLY), Shift4Payments (FOUR) and Flex ( FLEX ) are technology companies with solid growth but reasonable valuations. Flex and MBLY’s recent IPO stock are in traditional buy areas. FOUR stocks shed an aggressive entry when Arista Networks and Pure Storage were installed.
Arista Networks and MBLY stock are on IBD’s Leaderboard watch list. PSTG and Flex stock are on the IBD 50. ANET is a stock on the IBD Big Cap 20.
The video included in this article discussed, and analyzed, an important week for the market rally Cigna stock (CI), Flex and MBLY.
Megacap stocks were strong last week, but at or near market lows. The night (AAPL) and Microsoft (MSFT) returned to its 50-day moving averages.
One of the big losers is Tesla stock, which fell to a two-year low last week. Tesla ( TSLA ) is facing demand concerns in China, but most of the pressure may stem from CEO Elon Musk’s wild start to Twitter ownership.
Graphic design and data center Nvidia (NVDA) continues to headline the earnings season. Nvidia’s strong earnings and guidance, along with results from the semiconductor equipment maker Applied Materials ( AMAT ), could continue the chip recovery, a positive sign for the market rally. NVDA stock has rallied strongly over the past four weeks, but is still below its 200-day line.
Bitcoin traded below $17,000 on Friday evening, a sharp one-week decline after hitting a two-year low of $15,554.48 on Wednesday. Cryptocurrency exchange FTX, which was seen as the white knight of the industry just a few months ago, suddenly collapsed, with a bankruptcy filing on Friday.
Dow Jones Futures Today
Dow Jones futures open at 6:00 PM ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight activity in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular market session.
Join IBD experts as they analyze active stocks in the market rally on IBD Live
Stock Market Rally
The stock market had been sluggish through the middle of the week, but rebounded on Thursday thanks to a cooler-than-expected inflation report. China eased Covid restrictions on Friday, providing another boost to stocks and commodities.
The Dow Jones Industrial Average rose 4.15 percent in the stock market last week. The S&P 500 index rose 5.9%. The Nasdaq composite rose 8.1%. The small-cap Russell 2000 rose 4.6%.
Apple stock, which posted its worst close in nearly four months on Wednesday, rose to close with an 8.2% weekly gain. AAPL moved above its 50-day line but is below its 200-day, which hit resistance in late October. Microsoft’s stock rebounded 11.6% above its 50-day line after hitting a market low on Nov. 3.
Tesla stock fell 5.5 percent to 195.97, but broke Wednesday’s two-year low of 177.12. China’s expanded stimulus is fueling demand concerns after recent price cuts there. But it’s Musk’s chaotic start to his Twitter reign that may be TSLA’s biggest challenge. This includes Musk’s recent sale of Tesla stock and more-or-less concerns that the “Twitter scandal” is damaging the Tesla brand.
Nvidia rose 15.3% last week to 163.27, its fourth weekly advance and one of three double-digit gains.
The 10-year Treasury yield fell 33 basis points to 3.81%. Markets strongly expect a 50-point Fed rate hike in December and a quarter-point hike in February.
The US dollar continued to suffer its worst weekly loss in years, reflecting falling yields.
US crude oil prices fell 3.9% to $88.96 a barrel, despite Friday’s gains.
Among the best-performing ETFs, the iShares Expanded Tech-Software Sector ETF ( IGV ) rose 12.35% for the week, with MSFT stock a major component. VanEck Vectors Semiconductor ETF (SMH) rose 15.4%, fell below the 50-day line and neared the 200-day. NVDA is the main company.
The SPDR S&P Metals & Mining ETF ( XME ) rose 3.9% last week. The Global X US Infrastructure Development ETF (PAVE) rose 5.4%. The US Global Jets ETF (JETS) climbed 5.6%, a sixth weekly gain. The SPDR S&P Homebuilders ETF ( XHB ) rose 12.1%. The Energy Select SPDR ETF (XLE) rose 1.95%, right at the high level. and the Financial Select SPDR ETF ( XLF ) rose 5.8 percent. The SPDR Health Care Select Sector Fund ( XLV ) rose 1.75 percent, despite Friday’s slide.
The ARK Innovation ETF ( ARKK ) rose 14.6% last week and the ARK Genomics ETF ( ARKG ) jumped 11.4%, as the stocks look more speculative. TSLA Corporation remains a major shareholder in all of Ark Invest’s ETFs.
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Growth Stocks Near Buy Points
Arista Networks’ profit and sales growth increased to 69% and 57%, respectively, in Q3 for four straight quarters. ANET stock fell 1.9 percent to 128.55 last week, but after two big weekly gains in heavy volume. Arista stock traded back to 133.80 on August 18. ANET’s stock price ratio was 32 as of Thursday’s close.
Last week, PSTG stock rose 1.45 percent to 30.78. Investors can use 31.62 as a buy point or early entry from a consolidation that dates back to August 18 or from a cash-in-hand basis that starts in late March. Pure Storage’s revenue rose 129% last quarter on a 30% revenue gain. PSTG stock has a PE ratio of 27.
MBLY stock jumped 15.7% last week to 29.95, just clearing the IPO’s primary buy point of 29.86. Mobileye, which offers driver assistance systems, went public in late October at $21 a share, which is in the official range but well below the owner’s valuation. Intel (INTC) expected. Mobileye’s revenue rose 36% last quarter, with revenue growth of 41%. MBLY stock has a PE of 48.
The FOUR market rose 17.8% to 47.30, but after a wild week. Shift4 shares fell sharply Monday after earnings, but then bounced back over the weekend. On Friday, Shift4 stock retook the 200-day line and broke a trend. According to MarketSmith analysis, FOUR stock has a basic buy point of 51.52. Shift4’s revenue increased 69% and revenue increased 45%, both faster than the previous quarter. FOUR stock has a PE of 45.
FLEX stock rose 5% last week to 20.18, hitting a buy point of 19.73. Shares are clearing a short base, but also have a long consolidation going back to early 2021. FLEX’s revenues increased 31% in fiscal Q2 and revenue increased 25%, both fastest for the third straight quarter. Flex is part of the highly regarded Electronic Contract Manufacturing Group.
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Market Rally Analysis
The stock market rally had an important week. Already under pressure, the bullish trend struggled on Wednesday with some notable losses that pushed the S&P 500 below its 50-day line.
But Thursday’s October CPI inflation report was a game-changer, signaling a slower Fed rate hike and possibly a lower peak rate. Major indexes were higher, as Treasury yields and the U.S. dollar fell. The Dow Jones rebounded above its 200-day line, while the S&P 500 and then the Nasdaq crossed their 50-day lines and October highs. The Russell 2000 rose above its 50-day and 200-day lines.
All that market rally action translates into “confirmed upside”.
Meanwhile, active stocks were hard to come by. Many of the big winners are failed megacaps such as Apple and Microsoft stocks, as well as failed cloud software plays. On the one hand, the growth names of defense and defense that were leading suddenly came under pressure. It includes many doctors in the areas of medicine, health insurance and drug distribution. Defense contractors, auto parts stores, restaurants, retailers and food manufacturers were also affected.
Even outside of that space there were some nasty reversals in stocks, incl CF Industries (CF) and Enphase Energy (ENPH).
Building products, network stocks and many energy plays are doing well. Few conventional autos, not Tesla, show power. Many steel stocks have recovered, while miners are now exiting.
Chip names are also making a comeback, but most, like Nvidia stock, have a long way to go. Sun and medical products have some interesting names.
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What to do now
Stock market rally revived with positive inflation news providing tailwind. There seems to be a turn away from defensive stocks and toward growth, but action stocks are limited.
Investors should look to increase exposure, but there is no need to rush. While several stocks are flashing buy signals so far, there will be plenty of opportunities ahead if the market rally has legs.
One option is to buy broad market or sector ETFs until more promising individual names emerge. Even then, keep the exposure soft, let the market draw you in over time.
As you add exposure, be careful not to focus too much on a particular sector.
But make those checklists. Attractive stocks are formed when growth names return. You want to be ready to buy the best names when they hit.
Read The Big Picture every day to stay in sync with market direction and leading companies and sectors.
Please follow Ed Carson on Twitter @IBD_ECarson for stock updates and more.
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