Dow Jones futures will open on Sunday evening, along with S&P 500 futures and Nasdaq futures.
The stock market rally had a big week, with the Nasdaq boasting its best weekly gain since March. The major indexes surged Thursday on the Fed-friendly inflation report. On Friday, the shift from defensive names is more intensive, and many medical and defensive or other defensive ones are down.
While buying opportunities in stocks are limited, investors should look to add exposure gradually.
Arista Network (SIDE), Pure storage (STG), Mobileye (Bly), Shift4Payments (four) and Flex (FLEX) is a technology company with strong growth but with a reasonable valuation. Flex and MBLY’s latest IPO shares are in the traditional buy zone. FOUR shares flashed an aggressive entry while Arista Networks and Pure Storage are setting up.
The video embedded in this article discusses the pivotal week for the market rally, and analyzes it Cigna (CI), Flex and MBLY stock.
One big laggard is Tesla stock, which hit a two-year low last week. Tesla (salad) under pressure from CEO Elon Kasturi started wildly to own Twitter. Meanwhile, concerns about China’s demand continue, even after an October 24 price reduction and the latest return of insurance subsidies.
Giant graphics and data-center chips Nvidia (NVDA) earnings season headlines are still active. Strong Nvidia earnings and guidance, along with the results of the semiconductor equipment maker Applied Materials (great), can maintain chip rebound, a positive sign for the market rally. NVDA stock has rallied powerfully over the past four weeks, but is still well below its 200-day line.
The price of Bitcoin traded below $ 17,000, relatively stable since Friday morning, but fading slightly on Sunday. Bitcoin plunged over the week, hitting a two-year-low $15,554.48 on Wednesday, with several other cryptocurrencies suffering massive losses. Cryptocurrency exchange FTX, seen as the white knight of the industry just a few months ago, abruptly collapsed, and filed for bankruptcy shortly before the opening bell of the stock market on Friday. Recent revelations about FTX and Alameda-related firms suggest significant financial improprieties.
The FTX fiasco, following several crypto-industry collapsed earlier this year, heightened concerns about confidence despite the state value of cryptocurrencies plunge.
Crypto.com faces a major withdrawal over the weekend after admitting it mishandled a large transaction at the end of October.
Mid Semester Election
Democrats have retained control of the Senate, winning at least 50 seats. That could go as high as 51 if they retain the seat in the upcoming run-off election in Georgia. Republicans are still favored to take the DPR, but with a wafer-thin majority that does not mean assured.
Dow Jones Futures Today
Dow Jones futures open at 6 pm ET, along with S&P 500 futures and Nasdaq 100 futures.
Stock Market Rally
The stock market rally was sick as of midweek, but roared back Thursday thanks to the 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% in the last week stock market trading. The S&P 500 index jumped 5.9%. Nasdaq composite surged 8.1%. The small-cap Russell 2000 popped 4.6%.
Apple shares, which on Wednesday set their worst close in nearly four months, surged to close with a weekly gain of 8.2%. AAPL moved above its 50-day line but below its 200-day line, where it hit resistance in late October. Microsoft stock spiked 11.6% back above its 50-day line after hitting bear market lows on Nov. 3.
Tesla shares tumbled 5.5% to 195.97, but bounced from Wednesday’s two-year low of 177.12. China’s expanded incentives, following recent price cuts there, added to concerns about demand. But Musk’s chaotic start to his Twitter reign could be the biggest drag on TSLA stock. That includes Musk’s fresh Tesla stock sale and the more-ephemeral issue that is the “Twitter circus” damaging the Tesla brand.
Nvidia sored 15.3% last week to 163.27, the fourth straight weekly advance and one of three double-digit gains.
The 10-year Treasury yield dived 33 basis points to 3.81%. Markets expect a 50-basis-point Fed rate hike in December and are leaning towards a quarter-point move in February.
The US dollar plummeted, suffering its worst weekly loss in years, reflecting tumbling yields.
US crude oil futures fell 3.9% to $88.96 a barrel, despite Friday’s bounce.
including The best ETFsiShares Expanded Tech-Software Sector ETF (VAT) leapt 12.35% for the week, and MSFT shares are the main component. VanEck Vectors Semiconductor ETFSMH) soared 15.4%, vaulting above the 50-day line and nearing the 200-day line. NVDA stock is a key holding.
SPDR S&P Metals & Mining ETFXME) popped 3.9% last week. Global X US Infrastructure Development ETF is capitalizedSave) drove 5.4% higher. US Global Jets ETFJETS) rose 5.6%, the sixth straight weekly gain. SPDR S&P Homebuilders ETFXHB) increased by 12.1%. The Energy Select SPDR ETFAxle) up 1.95%, right above. and the Financial Select SPDR ETF (45) jumped 5.8%. The Health Care Select Sector SPDR Fund (XIV) up 1.75%, despite Friday’s slide.
Showcasing a more speculative story stock, the ARK Innovation ETF (RKK) reversed from a five-year low to a high of 14.6% last week and the ARK Genomics ETF (ARKG) jumped 11.4%. TSLA stock remains a major holding across Ark Invest’s ETFs.
Growth Stocks Near Buy Points
Arista Networks’ revenue and sales growth have accelerated for four straight quarters, to 69% and 57%, respectively, in Q3. ANET stock fell 1.9% to 128.55 last week, but after two big weekly gains in heavy volume. Arista stock has a high entry handle of 133.80 in consolidation going back to August 18 – or long consolidation going back to the end of 2021. ANET stock price to earnings ratio is 32.
PSTG shares gained 1.45% to 30.78 last week. Investors can use 31.62 as a buy points or the first entry from either consolidation back to August 18 or from a cup-with-handle base starting at the end of March. Pure Storage earnings rose 129% in the latest quarter on a 30% revenue gain. PSTG stock has a PE ratio of 27.
MBLY shares jumped 15.7% in the past week to 29.95, just clearing 29.86 basis of IPO buy points. Mobileye, which offers driver assistance systems, went public in late October at $21 per share, topping the official range but below the owner’s valuation. intelligence (NTC) had hoped. Mobileye’s revenue rose 36% in the most recent quarter, with revenue growth of 41%. MBLY stock has a PE of 48.
Four stocks leapt 17.8% to 47.30, but after a wild week. Shift4 Payments reversed sharply below Monday earnings, but then roared back the rest of the week. On Friday, Shift4 stock reclaimed the 200-day line and broke a trendline. EMPAT stock has 51.52 bottoming-base buy point, according to MarketSmith analysis. Shift4’s revenue was up 69% and revenue 45%, both accelerating from the previous quarter. FOUR stocks have a PE of 45.
FLEX shares rose 5% in the past week to 20.18, closing in a buy point range of 19.73. Stocks are clearing short bases but also consolidating longs back to early 2021. FLEX revenue rose 31% in fiscal Q2 with revenue up 25%, both accelerating for the third straight quarter. Flex is part of the highly rated Electronics-Contract Manufacturing Group.
Market Rally Analysis
The stock market rally had a pivotal week. Already under pressure, the uptrend struggled with some notable losses on Wednesday that pushed the S&P 500 below its 50-day line.
But Thursday’s October CPI inflation report was the game changer, pointing to a slower Fed rate increase and perhaps a lower peak rate. The main index blasts higher, as Treasury yields and the US dollar plunged. The Dow Jones vaulted back above its 200-day line, while the S&P 500 and later the Nasdaq ran up past their 50-day line and October highs. The Russell 2000 jumped above its 50-day and 200-day lines.
All that action pushed the market rally back into a “confirmed uptrend.”
Meanwhile, actionable shares are hard to find. Many of the big winners are beaten-down megacaps like Apple and Microsoft shares, as well as battered cloud software plays. On the flip side, the name of the defense growth and the defense that has led suddenly come under pressure. It includes many medical in pharmacy, health insurance and drug distributor space. Defense contractors, auto parts retailers, restaurants, discounters and food manufacturers also suffered losses.
Building products, networking stocks and many other great energy plays. Few traditional automakers, not Tesla, are showing strength. Some steel stocks are doing well, while miners are now coming up.
Chip names are also rebounding, but most of them, like Nvidia shares, have a long way to go. Solar and medical products have some interesting names.
What To Do Now
The stock market rally is reviving with positive inflation news to provide a tailwind. There seems to be a rotation out of defensive stocks and into growth, but actionable stocks are quite limited.
Investors should look to add exposure, but there’s no need to rush. With so few stocks 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 so, keep your exposure modest, letting the market pull you over time.
As you add exposure, be careful not to concentrate too much on a specific sector.
But build that watch list. Attractive stocks are set as growth names come back. You want to be ready to buy the best names when they come out.
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Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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