Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures. Applied Materials (AMAT) headlined earnings reports Thursday night.
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The stock market rally continued to advance Thursday amid debt-ceiling deal hopes. Big techs dominated. The Nasdaq composite led, with the Nasdaq 100 powering to a 52-week high. The S&P 500 hit its best levels of the year. Thursday’s gains were top heavy, but the Dow Jones and market breadth were mildly positive.
Netflix (NFLX) and Synopsys (SNPS) each leapt 9% Thursday and Palantir Technologies (PLTR) rocketed nearly 15%, all surging out of bases and past buy zones. Cadence Design Systems (CDNS) made a powerful move and Dynatrace (DT) broke out.
Nvidia (NVDA) spiked 5%, starting to go vertical ahead of earnings next week. ServiceNow (NOW) kept rising to just beyond a buy zone and is up 12% so far this week.
There are buying opportunities, but resist FOMO.
Don’t chase stocks if they getting extended. A pullback in the broader market or in techs wouldn’t be a surprise.
More Federal Reserve speakers are on tap Friday, including Fed chief Jerome Powell.
Applied Materials Earnings
AMAT stock fell slightly in late trading after Applied Materials earnings topped fiscal Q2 views. The chip gear maker gave Q3 guidance with midpoints that topped consensus. Applied Materials stock rose 3.4% in Thursday’s session to 129.92, moving above a 125.72 cup-base buy point. On Monday, AMAT stock cleared an early entry as it broke above the 50-day line. But the looming earnings made those entries risky.
Fellow semiconductor equipment giants ASML (ASML) and KLA Corp. (KLAC) were little changed overnight while Lam Research (LRCX) tilted lower. ASML stock broke out Thursday while LRCX stock is now extended. KLAC stock, which flashed an early entry on Monday, ran up toward an official buy point but is extended from its 50-day line.
ASML stock and Nvidia are on IBD Leaderboard. LRCX stock and Cadence Design are on SwingTrader. KLAC stock, Cadence Design and Synopsys are IBD Long-Term Leaders. NOW stock is on the IBD 50. ServiceNow and CDNS stock are on the IBD Big Cap 20.
The video embedded in the article highlighted Thursday’s tech-led market rally and analyzed Cadence Design, ASML and NFLX stock.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures climbed 0.2% and Nasdaq 100 futures advanced 0.3%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
Large tech stocks dominated Thursday’s stock market rally, but the major indexes all advanced.
The Dow Jones Industrial Average rose 0.3% in Thursday’s stock market trading. The S&P 500 index popped 0.9%. The Nasdaq composite jumped 1.5%. The small-cap Russell 2000 climbed 0.6%.
U.S. crude oil prices fell 1.3% to $71.86 a barrel.
The 10-year Treasury yield popped 7 basis points to 3.65%, a two-month high. The U.S. dollar continued its big run over the past couple of weeks, hitting a two-month high.
Stronger economic data, along with easing banking and U.S. debt-ceiling fears, is reviving the possibility of further Fed rate hikes. Fed policymakers continued to signal they’re not ready to declare a halt. The odds of a June 14 rate hike have climbed to 36% from 28% on Wednesday and 11% a week earlier.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.3%. The iShares Expanded Tech-Software Sector ETF (IGV) jumped 2.4%. ServiceNow stock is a big IGV component. The VanEck Vectors Semiconductor ETF (SMH) leapt 3.5%. AMAT stock and Nvidia are big SMH holdings, along with ASML, LRCX and KLAC.
Cadence Design Systems and SNPS stock are in IGV and SMH.
Reflecting stocks with more speculative stories, the ARK Innovation ETF (ARKK) climbed 1.4% and ARK Genomics (ARKG) advanced 0.7%. Ark Invest disclosed it bought 1.26 million PLTR shares on Wednesday.
The SPDR S&P Metals & Mining ETF (XME) dipped 0.2%. U.S. Global Jets (JETS) ascended 0.3%. SPDR S&P Homebuilders (XHB) climbed 1.7%. The Energy Select SPDR ETF (XLE) advanced 0.7%, and the Health Care Select Sector SPDR Fund (XLV) dipped 0.2%.
The Financial Select SPDR ETF (XLF) rose 0.7%. The SPDR S&P Regional Banking ETF (KRE) climbed 0.6%.
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Market Rally Analysis
The stock market rally advanced Thursday but remains reliant on big-cap tech. The Nasdaq composite ran to nine-month highs. The Nasdaq 100, which includes the 100 largest nonfinancial Nasdaq components, shot up past its August peak to hit a 52-week high.
The S&P 500 ran up to clear its February and May peaks, hitting its best levels since last August.
The Dow Jones retreated for much of the session, but rallied late to top its 21-day line.
Winning stocks outpaced losers Thursday, though not by much, especially on the Nasdaq. New highs outpaced new lows, in the best showing in weeks.
The equal-weight ETFs were encouraging. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) jumped 1.6%, following Wednesday’s 1.2% move from near the 50-day line. That reflects strength in big-cap chip and software names beyond the megacaps.
The Invesco S&P 500 Equal Weight ETF (RSP) climbed 0.8%, closing above its 50-day and 200-day lines for the first time since May 1. But RSP is a long way from its 2023 highs.
The Nasdaq and Nasdaq 100 by some measures may be due for a pullback, though that doesn’t have to happen overnight. Many tech stocks, including Nvidia, look extended and could use a breather. Others — such as ServiceNow, Synopsys and Palantir — appear extended from a buying perspective.
A stronger dollar and higher Treasury yields should be a negative, especially for highly valued growth stocks, but that hasn’t hit techs recently.
Can the Nasdaq 100 pull the rest of the market higher, with gains broadening out? That’s what happened on Thursday. Or will the broad market drag down big-cap techs?
Adding to the uncertainty, the market faces rotation in macro concerns. For months, Wall Street was obsessed with inflation and Fed rate hikes. Then it switched to banking fears and recession risk, with maybe some debt-ceiling concerns recently. Now there’s a bit of a shift back to Fed worries, as well as a stronger dollar.
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What To Do Now
If you’re in Nvidia, Palantir, ServiceNow and other big winners, you may be getting exuberant. Have a strategy for taking profits, either on the way up or down.
If you’re watching big winners fly by, you’ll feel the pull of FOMO. Keep your emotions in check and stick to your rules.
Whatever you do, don’t chase extended stocks, especially now.
Have your watchlists ready, paying special attention to a select group of names that are close to breakouts. Set alerts. Doing this work ahead of time means you’ll be ready to act when stocks do flash buy signals.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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