Dow Jones futures were little changed Sunday evening, along with S&P 500 futures and Nasdaq futures. Nvidia (NVDA) looms large.
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Amid the hot inflation reports, the stock market's rally last week was relatively strong. The Nasdaq fell steadily, but was off its weekly lows. The S&P 500 and Dow Jones were down slightly, but the Russell 2000 had a solid week. Both are near 52-week or all-time highs.
NVIDIA's earnings results on Wednesday will be a key test for the AI-driven market rally. Nvidia's earnings and guidance have a significant impact directly through NVDA stock.
But they are also likely to sway their rivals Advanced Micro Devices (AMD) as well as arm holdings (arm), taiwan semiconductor (TSM), broadcom (AVGO) and Palantir Technologies (PLTR) and other megacaps like microsoft (MSFT) and Google's parent company alphabet (Google). Right now, it's hard to find a technology company that doesn't advertise an AI business.
There are a lot of bubbles in the AI ​​field. super microcomputer SMCI, which has tripled in less than a month, staged a bearish downside reversal on Friday after exhibiting other climax-type moves in recent days.
Investors should consider their exposure to AI as a whole, not just Nvidia stock. More broadly, with the Nasdaq nearing an extension and bullish momentum increasing, it's time to be cautious about new purchases and consider taking defensive measures.
Nvidia and Arm stocks are featured on the IBD Leaderboard and IBD 50 list. Nvidia stock is listed on SwingTrader. Microsoft stock is on his IBD long-term leaders list. Nvidia and SMCI stocks are included in the IBD Big Cap 20.
The video embedded in the article reviewed the weekly movement of the market up and analyzed super micro stocks. lenner (Len) and weatherford international (WFRD).
Dow Jones futures today
Dow Jones futures rose modestly relative to fair value, along with S&P 500 futures. Nasdaq 100 futures rose 0.1%.
U.S. markets are closed on Monday for the President's Day holiday, but other markets around the world are open. Dow futures are trading as usual.
Please note that overnight trades such as Dow futures do not necessarily translate into actual trades in the next regular stock market.
IBD experts analyze leading stocks and markets on IBD Live.
stock market rise
Despite Friday's strong PPI report, stock market gains held up relatively well despite a heavy sell-off following Tuesday's hot CPI inflation numbers.
The Dow Jones Industrial Average fell 0.1% in stock market trading last week. The S&P 500 index fell 0.4%. The Nasdaq Composite fell 1.3%.
Despite the worst Tuesday, market breadth is improving.
The small-cap Russell 2000 rose 1.1% after falling nearly 4% on Tuesday.
The Invesco S&P 500 Equal Weight ETF (RSP) rose 0.7% to a 22-month high after finding support at its 10-week line. The First Trust Nasdaq 100 Equal Weight Index ETF (QQEW) fell 0.6%, outperforming the Nasdaq 100 and just below its all-time high.
The 10-year Treasury yield rose 11 basis points to 4.29% on strong CPI and PPI inflation data. The market is currently predicting four quarter-point rate cuts in 2024, but maybe only three. That's down from his six, maybe seven, just a month ago. Federal Reserve policymakers had hinted late last year that they would cut interest rates three times in 2024, but are backing aggressive easing.
U.S. crude oil futures rose 3.1% last week to $79.19 a barrel, the highest closing price in three months.
The Nasdaq's weekly decline puts it 4.2% above its 50-day line, no longer an extension, but not far off. Over the past few weeks, a 6% to 7% increase over the 50-day period has triggered a temporary decline in the Nasdaq.
If the Nasdaq retreats to its 50-day line, it could cause huge losses, especially since many of the growth stocks have expanded significantly or significantly.
Various sentiment indicators are showing bullishness reaching extreme levels.
On the plus side, although this is an AI and technology-driven rally, several sectors are showing strength.
ETF
Among growth stock ETFs, the iShares Expanded Technology Software Sector ETF (IGV) fell 3.2%, with Microsoft the top IGV holding. The VanEck Vector Semiconductor ETF (SMH) fell 1%. Nvidia is his No. 1 holding in SMH, and Taiwan Semiconductor and AMD stocks are also major holdings.
The SPDR S&P Metals Mining ETF (XME) rose 0.8% last week. The U.S. Global Jets ETF (JETS) rose 1.5%. The SPDR S&P Home Builders ETF (XHB) fell 0.35% with significant holdings in LEN stock. The Energy Select SPDR ETF (XLE) rose 2.7% and the Healthcare Select Sector SPDR Fund (XLV) rose 1.1%. Industrial Select Sector SPDR Fund (XLI) rose 0.9%.
Financial Select SPDR ETF (XLF) rose 1.4%.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) rose 1.5% and the ARK Genomics ETF (ARKG) rose 3.2% last week.
Timing the Market with IBD's ETF Market Strategy
Nvidia's revenue
Nvidia's financial results are expected to be released after the close of trading on Wednesday. Analysts are expecting a massive 422% EPS increase. Revenues increased 237% to $20.37 billion. This marks the third consecutive quarter of triple-digit growth. But investors may be expecting another explosive beat-and-raise report.
If Nvidia decides that the AI ​​boom will continue indefinitely, NVDA stock and other artificial intelligence-related moves could continue to be hot. But any signs of slowing growth could hurt the tech sector.
Nvidia stock rose 0.7% last week to 726.13, marking its sixth straight week of gains. The company is currently the third most valuable U.S. company with a market capitalization of $1.79 trillion. Amazon.com (AMZN) and Google stock over the past few days. Nvidia is 28% above its 50-day moving average.
Meanwhile, AMD and other AI-inspired chipmakers like Arm, Broadcom, and Taiwan Semiconductor will likely take cues from Nvidia's earnings. So are software plays like Palantir. ServiceNow (now) and snowflake (SNOW), as well as Microsoft, Google, Amazon, meta platform (meta)
These are just a few of the dozens of stocks that have jumped on the AI ​​bandwagon.
AMD has been working on the integration for several weeks, with 21 days of support. According to MarketSmith, Microsoft and ServiceNow are testing the 21-day line, while Meta is in a close race after a big rally. These may provide opportunities for additional purchases or new purchases. But many AI stocks, including ARM and Super Micro, have expanded significantly.
Google and adobe (ADBE) is an exception. GOOGL stock fell 5.7% last week on concerns about competition from OpenAI, and Adobe fell 12.8%, both below their 50-day lines. This is a reminder that AI is not only a growth opportunity, but also a threat to many incumbent companies that are considered artificial intelligence players.
5 stocks that are close to buy points but not in the line of fire
super micro stock
Supermicro stock soared 246% from its closing price on January 18th to its intraday high of 1,077.87 on February 16th. Although too short to qualify as a climactic run, SMCI stock exhibited an otherwise climactic move.
SMCI stock rose Wednesday and Thursday as part of a 73% nine-day rally. Thursday's gain of 123.45 points was the biggest of the session, with volume hitting a new high. The AI ​​server maker's closing price for the day was 136% above its 50-day price and more than 200% above its 200-day price.
On Friday, Supermicro widened the gap to a peak of 1,077.87, but then suffered an outside reversal, plummeting 20% ​​to 803.32. This is below Wednesday's low. Friday's trading volume was much higher than Thursday's. Daily and weekly point ranges exceeded everything in the running.
There is a high risk that SMCI will continue to decline, at least in the short term.
Investors would have taken partial profits by the end of the week, if not outright.
what to do now
The market rally was strong and resisted significant declines along the way.
However, an extension of the Nasdaq stock price is not far off. There's a lot of bubbles around AI and the overall sentiment is very bullish. While Nvidia's earnings could be a positive catalyst, the possibility of a significant decline is real, especially in the hot AI space.
Investors who are frequently exposed to AI will need to decide whether they can afford to lose a large portion of their winnings over the past few weeks and months. It depends on your risk appetite, beliefs about different stocks, etc.
On the other hand, there are also some buying opportunities, although there isn't much else beyond the earnings gap. Investors may look to diversify their portfolios by owning stocks outside of AI and technology in general.
This is definitely the time to prepare. Prepare a watch list and exit strategy. Be proactive and stay flexible.
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