Dow Jones futures showed little movement on Monday morning, alongside S&P 500 futures and Nasdaq futures, marking the beginning of an eventful week for earnings and economic reports.
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The stock market continued its rally last week, reaching new record highs for the Dow Jones and S&P 500 on Friday. However, the Nasdaq struggled to make gains after midday Wednesday.
Major companies such as Apple (AAPL), Microsoft (MSFT), Meta Platforms (META), Google parent Alphabet (GOOGL), Amazon.com (AMZN), Advanced Micro Devices (AMD), and Novo Nordisk (NVO) are set to headline a busy week of earnings. Microsoft’s performance is particularly crucial during this period.
Furthermore, the Federal Reserve is scheduled to meet on Tuesday and Wednesday. Although no immediate action is expected, policymakers might hint at the potential timing of rate cuts by the Fed. The financial markets view the likelihood of a rate cut in March as uncertain. Additionally, this week will see a flurry of economic data releases, concluding with the December jobs report on Friday.
Considering these events, investors may choose to await the influx of news before significantly adjusting their positions.
Stocks such as Meta and NVO are featured on IBD Leaderboard, while MSFT stock is highlighted on SwingTrader and IBD Long-Term Leaders. Moreover, Google stock, Meta, Microsoft, and Novo Nordisk are all part of the IBD 50, and Meta stock and Google are featured on the IBD Big Cap 20.
Dow Jones Futures Today
Dow Jones futures showed a slight decline compared to fair value. S&P 500 futures exhibited a minor increase, while Nasdaq 100 futures rose by 0.2%.
The 10-year Treasury yield dropped to 4.1%.
It is important to note that the overnight activity in Dow futures and other markets doesn’t necessarily translate into actual trading during the upcoming regular stock market session.
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Stock Market Rally
The stock market sustained steady gains for another week. The Dow Jones Industrial Average climbed by 0.65% in the previous week’s stock market trading. The S&P 500 index experienced a 1.1% surge, while the Nasdaq composite saw an increase of 0.9%. However, it finished the week in the lower half of its range.
The small-cap Russell 2000 surged by 1.75%, putting an end to a four-week decline.
The Invesco S&P 500 Equal Weight ETF (RSP) rose by 1.1%, coming close to its recent two-year highs.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) advanced by 0.5%, almost reaching its record high.
Tesla (TSLA), Humana (HUM), and Intel (INTC) experienced a decline due to bleak guidance. This helped moderate earnings expectations to some extent ahead of the upcoming week.
This development also contributed to cooling off the Nasdaq, which had become overextended by Wednesday morning. By the end of the week, it was 5.2% above the 50-day line, not as stretched but still some distance from being so.
The 10-year Treasury yield rose by 1 basis point to 4.16%, surpassing a declining 50-day line.
U.S. crude oil futures surged by 6.5% to $78.01 a barrel, reaching a two-month high.
ETFs
In the category of growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) recorded an uptick of 1.2%, with Microsoft as a significant component. The VanEck Vectors Semiconductor ETF (SMH) saw a 0.6% increase but closed close to its weekly lows. AMD is a major holding within SMH.
The SPDR S&P Metals & Mining ETF (XME) rallied by 1.15% last week. The U.S. Global Jets ETF (JETS) soared by 5.6%. On the other hand, the SPDR S&P Homebuilders ETF (XHB) experienced a 1% decline. The Energy Select SPDR ETF (XLE) rebounded by 5.1% from a six-month low, while the Health Care Select Sector SPDR Fund (XLV) dipped by 0.1%.
The Industrial Select Sector SPDR Fund (XLI) rose by 0.9%, and the Financial Select SPDR ETF (XLF) increased by 1.9%.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) fell by 0.8% last week, and ARK Genomics ETF (ARKG) rose by 0.9%.
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Big Earnings To Watch
Tech giants such as Apple, Microsoft, Google, Amazon, and Meta, as well as big-cap chip leader AMD, will be reporting earnings. These companies collectively hold a market capitalization of over $10 trillion and their results and guidance will have a significant impact on chips, software, and the broader market, spanning e-commerce, online advertising, cloud computing, and artificial intelligence.
The earnings report from Microsoft is anticipated to be the most influential due to its dominance in various hot tech segments, including AI, cloud computing, business software, gaming, and cybersecurity. MSFT stock is currently the most valuable company with a market cap of $3.002 trillion. Apple stock retreated to $2.989 trillion.
Google, Amazon, Meta, and Microsoft have all exceeded their buy points. Meanwhile, Apple stock has indicated an early entry, not far from an official buy point.
On the other hand, Novo Nordisk is set to report early on Wednesday. Novartis leads the weight-loss drugs sector, together with Eli Lilly (LLY), which will report on February 6. NVO stock is within the buy range, alongside Eli Lilly, according to MarketSmith analysis.
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What To Do Now
The stock market rally continues to make progress, buoyed by nearly impeccable economic data and robust earnings performance.
However, with the Nasdaq nearing overextension and a fairly limited number of stocks showing buy signals at present, investors might want to observe how the market responds to the significant earnings and economic developments in the upcoming week.
For those with stocks reporting earnings, a decision needs to be made on whether to take partial profits, exit the position, or hold onto it. It’s also crucial to keep an eye on stocks like Apple, Microsoft, AMD, and other major players, given their potential impact on your holdings and the overall market.
Stay engaged and remain adaptable.
The coming days may present numerous opportunities for potential trades and buying prospects, so be prepared with your watchlists. Conversely, a negative market reaction to this week’s developments could trigger sell signals. Therefore, ensure your exit plan is up to date.
Read The Big Picture daily to stay aligned with market direction and leading stocks and sectors.
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