Dow futures were little changed early Friday, along with S&P 500 futures and Nasdaq futures. Adobe (ADBE) rose overnight on strong results and earnings guidance.
After showing resilience following hawkish expectations of a rate hike on Wednesday by the Federal Reserve, the stock market rally bowed out on Thursday, with strong and broad gains. The Nasdaq and S&P 500 are at 52-week highs while the Dow has finally surpassed the 2023 highs. Microsoft (MSFT) was a big driver for the major indices, with apple (AAPL) And Meta platforms (meta) also contribute. But the market breadth was strong.
reward (CAVA) rose 99% in its Thursday debut, after CAVA stock priced its initial public offering at 22 shares, above the expected range. CAVA opened at 42 and closed at 43.78. The casual Mediterranean restaurant is not yet profitable but it is growing rapidly.
The Nasdaq and the Nasdaq 100 seem to be increasingly stretched, as the S&P 500 is also starting to show up.
Dow jones futures today
Dow futures contracts were flat against fair value. S&P 500 futures fell and Nasdaq 100 futures tilted higher. Adobe Stock is a component of the S&P 500 and Nasdaq 100.
Crude oil futures fell slightly.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Adobe’s earnings beat second-quarter financial views as revenue beat previous expectations, with CEO Shantanu Narayen announcing a “new era of generative AI” in the release. The software giant channeled slightly higher EPS forecasts and revenue in line.
ADBE stock rose 3% early on Friday. Shares rose 2.4% to 490.91 in Thursday’s regular session, marking their best in 16 months. Adobe stock has been up in the past few weeks as it drives its AI and alliances efforts.
Stock market rise
The stock market’s rally started mixed but steadily rose to post solid gains.
The Dow Jones Industrial Average jumped 1.3% in stock market trading Thursday, hitting its best level since a 52-week high in December. The S&P 500 rose 1.2% and the Nasdaq Composite rose 1.15%, both at their best levels in over a year. Small cap Russell 2000 rose 0.8%.
Microsoft stock rose 3.2% to 348.10, marking an all-time closing high. It’s up 6.5% so far this week. Apple shares jumped 1.1% to record highs. Meta Platforms rose 3.1%, a 52-week high. Microsoft and Apple stocks are in the Dow Jones, S&P 500, and Nasdaq Composite, with META stocks in the S&P 500 and Nasdaq.
US crude oil prices rose 3.4% to $70.62 a barrel.
The 10-year Treasury yield fell 7 basis points, to 3.73%.
Exchange Traded Funds
SPDR S&P Metals & Mining ETFs (XME(up 1.6% and the US Global Infrastructure Development Fund (ETF))cradle) an advance of 1.2%. US Global Gates Foundation ETF (Planes) rose 0.9%. SPDR S&P Homebuilders ETF (XHB) by 1.6%. Energy Defined Fund SPDR ETF (xle(gained 1.1% and SPDR Healthcare Fund)XLV) rebounded 1.55%.
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Stocks in buy zones
SNOW stock jumped 5.5% to 190.98, clearing a key resistance level of 185 in a consolidation process dating back to late August. The volume was above average. Snowflake stock fell on May 25 after the data analytics software maker cut guidance for the full year, but shares immediately started to come back. This isn’t normal, but it has happened with quite a few growth stocks in the past few weeks.
MNDY fell 0.1% to 182.77, but rebounded from the morning low of 168.88, above the 21-day line. Monday.com took advantage of the earnings on May 15th, providing an early initial entry. Another entry came a week later as MNDY stock moved past the incomplete handle. Stocks moved above the official 171.89 consolidation buy point on May 31, but were largely extended from the moving averages. The recent pause in June has given the 21-day streak some catching up. Investors can buy Monday.com stock from the retracement of the 21-day line or use 184.60 as a high-handle income.
SNN stock rose 1.4% to 32, removing the downward sloping trend line, providing an early entry. On Wednesday, Smith & Nephew stock jumped 5.55%, crossing its 50-day line. It’s one of many medical product companies that have shown strength this week. SNN stock has an official buy point of 33.09 points from a flat bottom.
Market rally analysis
The stock market rally could have been sold easily in the wake of expectations of a rate hike from the Federal Reserve, either on Wednesday or in reaction during the second day on Thursday. Instead, stocks held up relatively well on Wednesday and then picked up steam on Thursday.
Apple, Meta and Microsoft stocks helped support major corporate indices.
The Dow advanced, while the Nasdaq and the S&P rose for the sixth consecutive session.
Investors led the losing stocks by 3-to-1 on the New York Stock Exchange and more than 2-to-1 on the Nasdaq.
Invesco S&P 500 Equal Weight Fund (RSP) rose 1.2% to 148.95.
First Trust Nasdaq 100 Equal Weighted Mutual Fund (QQEW) increased by 1.2%. It is now 7.4% above the 50-day line.
The Nasdaq has been rising strongly since late April, especially over the past month. It is now 10.1% above the 50-day line, with the Nasdaq 100 up 11.6% above that level. The S&P 500 is up 6% on the 50-day basis, which is higher for this benchmark.
This increases the odds of a pullback in the near term, and raises the risk of a larger slippage. Of course, this doesn’t have to happen right away, as the past few days have shown.
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What are you doing now
Once again, the market rally is showing strength, but investors need patience.
If you’ve been holding some big winners for a long time, the possibility of the Nasdaq pulling back from, say, the 21-day line probably wouldn’t be so worrisome. There is also the possibility of a sharper correction, or that your stocks will drop much more. If you are heavily exposed, you may choose to take partial profits to lock in some gains in highly stretched names.
A downturn would be a bigger deal for new jobs, especially in technology.
SNOW stock, for example, will likely struggle to sustain Thursday’s breakout if the Nasdaq falls 4%-5% over the next few sessions. MNDY stock could easily drop below its official buy point, although previous entries may be safe.
You may choose to gradually take on new positions here, possibly emphasizing areas outside of technology. But there is a strong case for waiting for the market to decline to create safer buying opportunities in new shares or adding to existing holdings.
Right now, there aren’t a lot of stocks to buy in. Chipset, software, and megacap names like Apple, Microsoft, and Meta have been greatly expanded. Even the new leaders in the travel and industry sectors look stretched after the race from the bottom of the bases. All of this is another sign that the market could use an breathing space.
A market downturn or pause should create a number of new buying opportunities.
Read the big picture every day to stay in sync with market trend, leading stocks and sectors.
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