Dow Jones futures rose Friday morning, along with S&P 500 futures and Nasdaq futures. Stock markets rallied early Thursday on hawkish Fed statements that extended Wednesday’s losses. But the major indices closed slightly below some key levels.
Treasury yields rebounded as crude oil prices fell.
apple (AAPL), Microsoft (MSFT) and Google Parent Alphabet ( GOOGL ), the only three trillion-dollar stock on US exchanges, rose after testing support at their 50-day moving average. Meanwhile, Tesla ( TSLA ) retreated toward its bear-market lows.
Investors should be cautious in current markets, adding exposure gradually and be prepared to take profits and cut losses quickly.
Applicable materials (AMAT), Palo Alto Networks (PANW), Clearfield (CLFD) and juice stores (ROST) All top EPS and sales views late Thursday, with guidance also generally strong.
AMAT stock rallied strongly early Friday, poised to move back above its 200-day line. PANW stock jumped, signaling a move above its 50-day high. CLFD stock rose in extended trading, looking for a run above the 50-day line as it attempts to build the right side of a double-bottom base. ROST stock explodes toward 2022 highs after closing in range from a lower base.
JD.com (JD) and Atkor (ATKR) reported Friday morning.
JD.com earnings top view, while revenue is down, like most Alibaba (father) Thursday morning. JD stock rose marginally in premarket trading. On Thursday, shares of Alibaba jumped 7.5% on the results, hitting a 200-day line.
ATKR stock rose strongly on Friday after construction products maker Atcor beat fiscal Q4 views and guided higher to Q1 and 2023 profits. ATKR stock fell 3.5% on Thursday, but was comfortably above its 200-day line as it operates on the right side of a deep cup base.
Dow Jones Futures Today
Dow Jones futures rose 0.6% vs. fair value. S&P 500 futures rose 0.8%. Nasdaq 100 futures rose 0.95% with AMAT and PANW stocks lifting tech.
The 10-year Treasury yield rose 2 basis points to 3.79%.
Crude oil futures fell 2%, while natural gas sank more than 3%.
Remember that overnight action in Dow futures and elsewhere does not translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks during the stock market rally on IBD Live.
Stock market rally
Stock markets rallied sharply at the open after St. Louis Fed President James Bullard and Kansas City Fed President Esther George gave hawkish statements. Major indices rebound to close flat down slightly.
The Dow Jones Industrial Average was below break-even in Thursday’s stock market trading. The S&P 500 index fell 0.3%. The Nasdaq Composite fell 0.35%. The small-cap Russell 2000 dropped 0.9%.
Apple stock rose 1.3%. Microsoft stock gave back two cents, while Google stock fell 0.5%. All tested their 50-day lines intraday. All are below their 200-day lines with no clear buy points. Tesla stock plunged 2%, nearing Nov. 9 bear market lows.
The price of US crude oil fell by 4.6 percent to 81.64 dollars per barrel. In addition to hawkish Fed comments, blame Beijing’s new emphasis on “zero-Covid” policies. China’s State Council has reportedly warned cities to avoid “irresponsible lagging” of Covid-19 measures, a week after that top-level body backed relaxed rules. On Wednesday, Peking University was locked down in a single case. The covid infection has increased in China for the past two weeks.
Hawkish Fed Lifts Treasury Yields
The 10-year Treasury yield rose 8 basis points to 3.77%.
The St. Louis Fed’s Bullard said the Fed funds rate, currently at 3.75%-4%, may have to go as high as 7%, well above consensus for around 5%. The Kansas City Fed’s George said a recession may be necessary to reduce inflation.
One reason policymakers listen to hawkish is to raise market rates and prevent a stock market rally. If financial conditions ease enough in anticipation of a Fed pivot, inflation could remain high for longer, forcing the Fed to tighten official rates even more.
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Among the best ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 0.1%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 2.65%, though MSFT stock was a major component. PANW stock is also an IGV holding. VanEck Vectors Semiconductor ETF (SMH) sank 0.5%, with AMAT stock a notable SMH holding.
The SPDR S&P Metals & Mining ETF ( XME ) fell 2.1%. The SPDR S&P Homebuilders ETF ( XHB ) retreated 2%. The Energy Select SPDR ETF ( XLE ) fell 0.5% and the Health Care Select Sector SPDR Fund ( XLV ) fell 0.2%.
Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) shed 2.8% and the ARK Genomics ETF ( ARKG ) dropped 3.2%. TSLA stock is a major holding in Ark Invest’s ETFs.
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Stock market rally analysis
The stock market rally tested some key levels at the open on Thursday. The Nasdaq found support above its 50-day moving average. The S&P 500 briefly touched an October short-term high. The Russell 2000 rebounded near its 21-day line. The S&P 400 MidCap held its 200-day line.
A strong run and the S&P 500 nearing its 200-day line were due for the market to pull back. Meanwhile, the market’s rally on Thursday found support in key areas. So the past few days have been normal and somewhat constructive for the major indices – they may hold Thursday’s lows and eventually move higher.
However, from Tuesday’s intraday high to Thursday morning’s low, the market has seen many stocks break out or flash early entries over the past few days. Many of those entries were tested or failed completely. Some are rebounding while others can do so. In some cases, previous purchase points are still valid, while others require setting new handles or other entries. Still others may struggle for extended periods.
A wide variety of stocks and sectors are showing interesting action.
In all these cases, a healthy market rally will be key.
Apple stock, Microsoft and Google are not market leaders and may not be for some time. But if they can avoid falling behind it will be a big help.
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what to do now
The rise of the stock market on Thursday is encouraging. The overall trend has been higher over the past few weeks. But it has become a detour for investors.
Anyone buying stock after the October 21 follow-through day is likely to be underwater by early November. While the indexes rose on Nov. 10 on the tame CPI report, the Nasdaq, S&P 500 and Russell 2000 have been flat down since then.
The stock market rally remains volatile, with sector rotation and large intraday swings complicating matters. Buying opportunities are often the moment when the market pulls the rug out from investors.
So keep the exposure light. Add exposure gradually — and be prepared to cut exposure due to market conditions or individual stock selling rules.
Keep your watchlist up to date, so you can spot emerging leaders.
Read the big picture every day to stay in sync with market direction and key stocks and sectors.
Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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