Dow Jones futures open on Sunday night, along with S&P 500 futures and Nasdaq futures, with Apple (AAPL) and Microsoft leading peak earnings week. The stock market rally posted strong gains last week.
Ten-year Treasury yields spiked to new highs in 14 years during the week. But yields, especially two-year yields, fell in a report from the Wall Street Journal on Friday, raising hopes of slower rate hikes by the Fed.
Major indices moved above the main short-term resistance. Volatility remains high for indices, equities and overnight futures.
But with some positive market signals, investors should look for potential winners in the next bull market. Snowflake (SNOW), Shift4Payments (To celebrate Double Verify (DV) are high-growth technology companies that have come public in the past two years. Lithium giant Albemarle (ALB) and shock wave (SWAV) are also booming, with their stocks trying to find their way back to a key level within the bases.
Meanwhile, Apple shares, Microsoft (MSFT), Google parent Alphabet (GOOGL), Amazon.com (AMZN), and Metaplatforms (META) will all report next week, along with Boeing (BA), Merck (MRK), Vertex Pharmaceuticals (VRTX) and hundreds of other companies.
Aside from Vertex and MRK stocks, both of which are near buying points, all of the names mentioned above are well aware. Still, the earnings reports can be a catalyst for big market gains, hefty losses or more whiplashes.
Vertex and DV stocks are on the IBD Leaderboard as well as the IBD 50 list. Albemarle and SWAV stocks are on Leaderboard’s watchlist. VRTX stocks are on the IBD Big Cap 20. Microsoft and Google stocks are on IBD Long-Term Leaders. Shift4Payments was the IBD share of the day on Friday.
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.
Keep in mind that an overnight action in Dow futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks during the stock market rally on IBD Live
stock market rally
The stock market rally attempt jumped to start the week, limited gains and then rebounded on Friday.
The Dow Jones Industrial Average rose 4.9% in trading last week. The S&P 500 index shot up 4.75%. The Nasdaq composite rose 5.2%. The small cap Russell 2000 won 3.6%.
Apple stocks, Microsoft, Google and Amazon all recaptured their 21-day moving averages on Friday.
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Friday’s market rally came on a Wall Street Journal report that saw Fed officials ponder slower rate hikes after a likely fourth straight move of 75 basis points at the November meeting. Markets are now leaning slightly towards a 50 basis point Fed rate hike in December, from Thursday’s 75% chance of another three-quarters point increase.
Obviously, there’s a slew of economic data out there between now and the December 14 Fed meeting.
The 10-year Treasury yield rose 20 basis points to 4.21%, the twelfth consecutive weekly gain. But benchmark Treasury returns fell from Friday’s intraday high of 4.31%, a 14-year peak.
Two-year Treasury yields, more closely tied to Fed policy, hit a 15-year high of 4.64% on Friday, but fell sharply to end at 4.48%, down 1 basis point for the week .
With government bond yields weakening weekly highs and the Bank of Japan apparently stepping in to support the yen, the US dollar fell sharply for the week, especially on Friday.
US crude oil futures rose 0.5% last week to $85.05 a barrel. But natural gas prices fell by 23%.
One of the best ETFs was the Innovator IBD 50 ETF (FFTY) last week up 5.6%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 4.2%. The iShares Expanded Tech-Software Sector ETF (IGV) was up nearly 7%, with MSFT stocks being a huge IGV component. The VanEck Vectors Semiconductor ETF (SMH) shot up 7.6%.
SPDR S&P Metals & Mining ETF (XME) rose 9% last week. The Global X US Infrastructure Development ETF (PAVE) gained 4.8%. US Global Jets ETF (JETS) rose 5.35%. SPDR S&P Homebuilders ETF (XHB) gained 0.5%. The Energy Select SPDR ETF (XLE) rose 8.3% and the Financial Select SPDR ETF (XLF) rose 3.8%. The Health Care Select Sector SPDR Fund (XLV) rose 2.1%
As a result of more speculative story stocks, ARK Innovation ETF (ARKK) gained 5.6% and ARK Genomics ETF (ARKG) 2% last week.
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Stocks to watch
Snowflake went public in September 2020 and rose to a record 429 in December 2020. But shares tumbled all the way to 110.27 in June 2022. But SNOW shares have now bottomed out around the 50-day line with a buy point from 205.76. Shares rose 16% last week to 177.10. A move above the 200 day mark could provide early access. But SNOW stocks can have a lot of overhead resistance.
Snowflake has strong revenue growth, but is only now on the cusp of becoming consistently profitable, with big profits expected in 2023.
DoubleVerify shares, an April 2021 IPO, have been consolidating in recent weeks and have found support near the 50-day line. DV shares have a buy point of 30.02. Shares tried to break out on Tuesday and pulled back, but still had a solid week. Revenues are strong and revenue growth robust for the digital advertising game.
FOUR stocks is working on its home ground, with a buy point of 51.52, according to MarketSmith’s analysis. Shift4Payments stocks could have an early entry above 48.66, which would mean clearing the 50-day and 200-day lines. The digital payment processor, a June 2020 IPO, is expanding from restaurants to a host of other areas. Earnings growth is strong and is expected to remain so until 2023.
ALB shares recovered nearly 14% last week to 270.01, after falling nearly 13% in the previous week as some analysts bet on lower lithium prices. Prices for the metal used in EVs have risen to record highs, with supply outpacing demand in the coming years. Albemarle, not a recent IPO, is reaping the benefits of more expensive contracts as production ramps up over time.
ALB shares now have a new base with a buy point of 308.34. A decisive step above the 50-day limit could provide an early entry.
SWAV shares are up 9% last week to 276.70. It is still below the 50-day mark, which has served as resistance recently. Shockwave stocks have a buy point of 315. But a strong move above 50 days would also break a trendline, signaling an early entry. One caveat: Volume has been light for the past few days and weeks.
But Shockwave revenue is soaring amid triple-digit revenue growth.
Relative strength remains close to all-time highs despite SWAV’s pullback from late August highs.
Market rally analysis
The stock market rally remains volatile, but showed positive action. Major indices were higher from Monday’s open and remained comfortably positive throughout the week, even as government bond yields continued to rise.
Friday’s WSJ report suggests Fed officials may finally get ready to reverse aggressive tightening.
The Dow Jones ended the week well above its 21-day moving average, with the S&P 500, Russell 2000 and even the Nasdaq composite above that short-term level on Friday.
Expiration of options drove higher trading volume on the NYSE.
The market rally may have legs, but that doesn’t mean it’s going to the races. This could be another bear market rally. The Dow Jones is just below the 50-day moving average – and above the 10-week line – with the other indices not too far behind. Above the 50-day line, the 200-day moving average and mid-August highs are looming.
Oil stocks are doing well, thanks to a recent upward trend in crude oil prices and expectations for further gains in the winter. Natural gas producers are struggling as wet gas futures plummet.
Some biotech, drug and health services continue to show their strength, including Merck, Vertex, Cardinal health (CA), human (HUM) and more.
Few growth stocks have broken out, but many are still building, such as ALB stocks and Shockwave.
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What to do now
Keeping your emotions in check while remaining flexible is an important part of investing. The market rally is showing some strength, so you can’t stay locked in a bearish mindset. But you don’t want to get too excited and rush back in with big bets.
Investors can take some small positions in broad-market stocks or ETFs. If those work and the market rally continues to gain momentum, you can slowly expand your positions. But if the market tumbles again, step back quickly.
So make sure your watchlists are up to date on weekends. Over the next few days, make a select list of useful or potentially useful stocks. But also keep a broader list of stocks that are relatively strong.
Keep in mind that earnings season could affect the market and sectors as a whole, not just individual stocks. Apple’s revenue could affect a wide range of iPhone chip makers and suppliers. Microsoft, Google, Meta Platforms and Amazon could raise hopes or doubts for cloud computing, IT spending, e-commerce and online advertising.
Microsoft and Google stock report Tuesday evening, with Boeing and Meta due Wednesday. Merck, Vertex, Amazon and Apple are on Thursday.
Read The Big Picture every day to stay up to date on market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.
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