Dow Jones Futures Fall: Stocks Run With Big Earnings, Nasdaq 100 Rebalance Due

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Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. JPMorgan Chase headlines big earnings Friday.

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Tech growth plays led another solid session for the stock market rally, with Treasury yields and the dollar continuing to slide.

Google parent Alphabet (GOOGL), ASML (ASML), Snowflake (SNOW), Arista Networks (ANET) and On Holding (ONON) flashed buy signals Thursday as many other leaders extended gains.

This has been a good week for investors to add exposure, but the risk of another market pullback is rising.

Earnings

Aehr Test Systems (AEHR) reported fiscal Q4 earnings that modestly topped views, with revenue just beating. The chip-testing equipment maker, with exposure EV semiconductors, sees fiscal 2024 revenue up more than 50%, but perhaps just below views. AEHR stock climbed 4% in volatile overnight trading. Shares rose 3.7% to 141.43 on Thursday, extending a bounce from the 10-week line and back above a 40.69 prior buy point that’s no longer valid. AEHR stock has been consolidating for the past few weeks next to the top of a prior base.

JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), BlackRock (BLK) and UnitedHealth (UNH) are on tap early Friday. JPM stock is in a buy zone while BLK stock arguably is actionable. UNH stock and other health insurers are reeling in recent weeks.

Magnificent Seven In Focus

Meanwhile, the Nasdaq is set to announce Friday how it will reweight the Nasdaq 100 via a “special rebalance” that will take place on July 24. The “Magnificient Seven,” Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Google stock, Amazon.com (AMZN), Tesla (TSLA) and Meta Platforms (META) are expected to see lower weights.

On Holding, Nvidia and Tesla stock are on Leaderboard. ONON stock and Arista Networks are on SwingTrader. Both On Holding and ANET also are on the IBD 50. TSLA stock is on the IBD Big Cap 20. On Holding was Thursday’s IBD Stock Of The Day.

Dow Jones Futures Today

Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures lost 0.2%. Nasdaq 100 futures declined 0.1%.

The 10-year Treasury yield rose 2 basis points to 3.78%.

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

The stock market rally saw the major indexes rise for a fourth straight session.

The Dow Jones Industrial Average edged up just 0.1% in Thursday’s stock market trading, hovering around 2023 highs. The S&P 500 index climbed 0.85%, a fresh 14-month high. The Nasdaq composite leapt 1.6%, clearing the 14,000 level to a 15-month best. The small-cap Russell 2000 rose 0.9%.

The Invesco S&P 500 Equal Weight ETF (RSP) advanced 0.5% to the best level in nearly five months.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) popped 1.1%. QQEW lagged the Nasdaq 100 on Thursday somewhat but is outperforming so far this week.

Market breadth strong, with NYSE advancers topping decliners by at least 2-to-1 for the fifth straight session.

Leading stocks continued to do well. Several more stocks flashed buy signals while many others kept running.

U.S. crude oil prices rose 1.5% to $76.89 a barrel, up 5.3% in three sessions. Copper futures leapt 2.3%, extending a recent rebound.

The 10-year Treasury yield tumbled 10 basis points to 3.76%. It’s down 29 basis points this week on tame inflation reports, reversing lower from a 2023 high of 4.09%. The U.S. dollar slid for a sixth straight session.

Market Rally Too Fast, Too Furious?

The only real concern for the stock market rally is that the Nasdaq is now 8% above its 50-day line, with the Nasdaq 100 8.4% above that level. Historically, the odds of a pullback increase as these indexes get 5%-6% above the 50-day, but in recent years the Nasdaq has sometimes topped 10% before scaling back.

But a pullback to, say, the 21-day line would be normal action for a bull market. That would also allow some extended stocks to create new entries.

A pullback might also rein in signs of speculative frenzy. Bitcoin jumped Thursday while many other cryptocurrencies and crypto-stocks ripped higher as a federal judge ruled that Ripple’s XRP token is not necessarily a security.

Nikola (NKLA) spiked 61% Thursday on a deal to sell 50 hydrogen fuel-cell big rigs.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) climbed 1.5%. The iShares Expanded Tech-Software Sector ETF (IGV) added 1.65%. Microsoft stock is a major IGV component. The VanEck Vectors Semiconductor ETF (SMH) ran 2.4% higher. Nvidia stock is the top holding in SMH, with ASML also a notable member.

Reflecting more-speculative stocks, ARK Innovation ETF (ARKK) soared 4.5% and ARK Genomics ETF (ARKG) gained 0.9%. Tesla stock is the biggest holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) rose 0.9%. U.S. Global Jets ETF (JETS) descended 0.95%. SPDR S&P Homebuilders ETF (XHB) edged up 0.35%. The Energy Select SPDR ETF (XLE) fell 0.4% and the Health Care Select Sector SPDR Fund (XLV) rose a fraction. UNH stock is a top UNH component.

The Industrial Select Sector SPDR Fund (XLI) inched up 0.1% and the Financial Select SPDR ETF (XLF) climbed 0.3%. JPM stock, Wells Fargo, BlackRock and Citigroup are big XLF holdings.


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Stocks To Watch

Google stock leapt 4.7% to 124.54, decisively retaking its 50-day line and breaking a trendline in heavy volume. Google is launching its Bard chatbot in Europe and Brazil. GOOGL stock has a 129.04 flat-base buy point.

SNOW stock soared 7.15% to 184.22, rebounding from the 50-day line in heavy trade, offering an early entry, especially in the morning. Snowflake stock has hit a lot of resistance around the 185-193 level, with big swings in the past several weeks. Investors could view 193.94 as a messy handle buy point in a base going back to last August, but quieter action would be helpful.

ASML stock rose 3.6% to 750.74 continuing to rebound from the 50-day line and topping a 747.13 point from a flat=base, base-on-base pattern. Shares already are actionable from clearing a not-so-steep trendline. ASML earnings are due early on July 19.

ANET stock climbed 2.8% to 168.61, extending this week’s rebound from the 21-day/10-week lines and breaking a trendline in a consolidation. On Thursday, shares cleared a short-term high. Volume has been below average but is picking up from prior days. The base had ugly action in June, but has improved. The official buy point is 178.36.

ONON stock stepped 3% higher to 33.55, above a trendline entry but just below a 33.67 cup-with-handle buy point, according to MarketSmith analysis. Shares of the upscale Swiss athletic shoe maker hit 34.48 intraday.

Nasdaq 100 Rebalance

Nasdaq will announce its special rebalance changes on Friday, likely after the market close. The rebalance is taking place because Apple stock, Microsoft, Google, Amazon, Nvidia, Tesla and Meta account for more than half of the Nasdaq 100’s weight. So those names will likely come down, with MSFT stock and Nvidia like to see outsized declines.

The other 93 Nasdaq 100 stocks will see their weights rise or fall as well.

Starbucks (SBUX), Mondelez International (MDLZ), Booking Holdings (BKNG), Gilead Sciences (GILD), Intuitive Surgical (ISRG), Analog Devices (ADI) and Automatic Data Processing (ADP) will be special rebalance winners, Wells Fargo analysts calculated Tuesday.

The actual rebalance will take place before the open on July 24. But the news will likely be priced in before then, if not already.

Most of the Magnificent Seven stocks fell on Monday, following news of the special rebalance. But they’ve collectively rebounded, with Nvidia stock and Meta soaring, Google and Amazon up solidly and modest gains for Microsoft and Tesla. Apple stock is essentially flat, near all-time highs.

All but Apple and META stock have offered buying opportunities this week.


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What To Do Now

The market rally has been sending bullish signals via the major indexes and leading stocks. Investors should be taking advantage of this climate by adding to existing positions or making new purchases. Do so gradually, especially now with the Nasdaq getting extended again and earnings season picking up again.

You could cut some relative laggards or take some partial profits in winners to free up cash for loading up on stocks with more potential.

A market pullback could pressure new buys, though longer-held winners could be fine.

Build up and go through those watchlists. The past few trading days have been fun, but doing the work of running screens, setting alerts and other efforts are what make investing pay off.

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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