Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures.
The stock market rally came under pressure last week, with the Nasdaq leading a sell-off as Treasury yields jumped to 2023. The major indexes tried to rebound Friday as yields fell back, but stocks reversed lower.
The market rally could be at an inflection point, for good or ill. With the uptrend “under pressure,” investors should be cautious about new buys. But it is an excellent time to be looking for promising stocks.
Nvidia (NVDA) is bouncing from a near-test of its 10-week line. Tesla (TSLA) is holding its 50-day and 10-week lines, with multiple possible entries. Broadcom (AVGO) is trading tightly. Toll Brothers (TOL) is rebounding from its 10-week line while Delta Air Lines (DAL) is trying to do so.
Earnings season has gone through its busiest two weeks, but hundreds of companies will be reporting this coming week.
Warren Buffett’s Berkshire Hathaway (BRKB) reported a 7% gain in operating profit Saturday morning, with with revenue up 21% to $92.5 billion. Analysts expected Berkshire earnings to fall 8% vs. a year earlier to $3.87 a share, with revenue up nearly 6% to $80.58 billion.
Berkshire stock buybacks slowed to $1.4 billion in Q2 vs. $4.4 billion in Q1. The conglomerate’s cash pile jumped to $147.38 billion from Q1’s $130.62 billion.
Warren Buffett sold a net $7.98 billion worth of stocks. In Q1, Berkshire sold a net $10.4 billion worth of stocks.
BRKB stock is slightly extended from a buy point.
Nvidia stock, Tesla and Celsius are on IBD Leaderboard. TSLA stock is on the IBD 50. The video embedded in this article discusses the market action in depth, while also analyzing AVGO stock, Delta Air Lines and Toll Brothers.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Stock Market Rally
The stock market rally saw solid losses this past week. A Friday bounce turned into a downside reversal, even as Treasury yields came well off highs. It’s not clear what drove the afternoon selling. There was a report of a major cyberattack.
The Dow Jones Industrial Average retreated 1.1% in last week’s stock market trading. The S&P 500 index slumped 2.3%. The Nasdaq composite tumbled 2.85%. The small-cap Russell 2000 gave up 1.15%.
The S&P 500 and Nasdaq regained their 21-day moving averages intraday Friday, but closed back below that level. The Russell 2000 is just above that key short-term level, while the Dow Jones is approaching it.
Apple stock was a big contributor to the market’s tough week. The Dow titan tumbled 7.1%, its worst weekly loss in nine months. AAPL stock gapped below the 50-day line on Friday following earnings, with its market cap back below $3 trillion.
The 10-year Treasury yield jumped 9 basis points to 4.06%. But that’s below the old 2023 highs. The yield got as high as 4.21% intraday Friday, a nine-month high and not far from the October 2022 15-year high of 4.31%. But the yield tumbled 13 basis points for the day.
The July jobs report showed hiring trends are slowing, with two Fed policymakers signaling a shift away from further rate hikes. The two-year Treasury yield, more closely tied to Fed policy, fell 10 basis points on Friday and for the week to 4.79%.
U.S. crude oil futures rose 2.8% to $82.82 a barrel, a sixth straight weekly gain.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) tumbled 4.3% last week. The iShares Expanded Tech-Software Sector ETF (IGV) slumped 3.5%. The VanEck Vectors Semiconductor ETF (SMH) gave up 3.9%. Nvidia is the No. 1 holding in SMH, with AVGO stock a notable holding as well.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) plunged 8.2% last week and ARK Genomics ETF (ARKG) sold off 8.85%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs. Cathie Wood’s Ark also owns some PLTR stock.
SPDR S&P Metals & Mining ETF (XME) fell 1.9% last week. The Global X U.S. Infrastructure Development ETF (PAVE) dipped 0.2%. U.S. Global Jets ETF (JETS) descended 4.4%, with DAL stock a big component. SPDR S&P Homebuilders ETF (XHB) declined 0.7%, with TOL stock a notable holding. The Energy Select SPDR ETF (XLE) rose 1.25%. The Health Care Select Sector SPDR Fund (XLV) fell back 2.1%, with LLY stock a notable component. The Industrial Select Sector SPDR Fund (XLI) stepped down 1.7%.
The Financial Select SPDR ETF (XLF) shed 0.8%. BRKB stock is the No. 1 holding in XLF, with Warren Buffett’s Berkshire owning stakes in a number of other big financials, including Bank of America (BAC). The SPDR S&P Regional Banking ETF (KRE) dipped 0.3%.
Rising long-term yields and falling shorter-term rates is good news for banks.
Stocks To Watch
Nvidia stock slumped 4.4% to 446.80, but did rise slightly after testing the 10-week line on Wednesday. Investors could try to add shares with a strong bounce. But a longer pause, perhaps with an actual touch of the 10-week line, would be preferable. Nvidia is the clear AI chip leader and the poster child for the Ailed market rally, so investors should be paying close attention to its action.
AVGO stock sank 2% to 881.65 last week. The chipmaker has flirted with a 921.78 buy point from a 16%-deep consolidation, according to MarketSmith analysis. The base is odd, starting with a downside reversal on a massive spike May 30. But Broadcom, which is also getting a big AI lift, has tightened up while the 10-week line is catching up. Last week’s move may be part of a healthy shakeout.
Tesla stock fell 4.7% to 253.86, closing just above the 50-day line but below the 10-week. Shares are hitting resistance at the 21-day line. A strong move above the 21-day line could offer an early entry into the EV giant. Meanwhile, Tesla stock has an official cup-with-handle buy point of 299.29 on a deep consolidation going back to last September.
Tesla continues to increase discounts, adding to pressure on margins. An updated Model 3, with an eye at lower production costs, may begin production at the Shanghai plant later this month, according to local social media posts. Tesla China sales, including exports, hit a 2023 low last month, perhaps as Shanghai cuts production of the current Model 3.
Delta stock fell 2.5% to 44.59, testing its 10-week line before a slim gain Friday. Shares have retreated from a two-year high of 49.81 following earnings last month, but DAL stock is looking better than other airline stocks. A strong bounce, perhaps above the 21-day line, would offer an early entry. Investors also could view 49.81 as a handle buy point to a massive base starting in March 2021.
TOL stock fell 1% to 79.39 last week, bouncing back Friday from the 10-week line with a 2.2% gain, albeit in below-average volume. Toll Bros. could be actionable from a move above a short trendline, using the Aug. 1 high of 81 as an entry point. The luxury homebuilder is a few weeks away from a new base.
Market Rally Analysis
The stock market rally suffered significant losses last week amid rising Treasury yields, with Friday’s downside reversal discouraging.
The market has been due for a sideways stretch. The Nasdaq is just above its 50-day line, the smallest gap in four months. A longer pause or pullback also would be healthy.
Market breadth remains strong with leadership across many sectors.
Many leading stocks are finding key support or working on bases. Some of the names finding 50-day/10-week support, including Tesla stock, Toll Bros. and DAL, could be setting up for bullish moves. But they could also break those key levels, especially if the broader market retreats.
Treasury yields are clearly a major factor for the stock market rally right now. If the 10-year yield tumbles back below 4%, the indexes could move back toward recent highs. If yields resume their sharp advance and approach long-term peaks, the uptrend would likely come under further pressure.
What To Do Now
With the market rally under pressure, investors don’t want to be too aggressive. As a practical matter, not many stocks are flashing buy signals at the moment. But, a lot of stocks are close to doing so. So spend this weekend running screens and building up your watchlists.
With the market at a possible inflection point, investors have to stay flexible.
In the past week, investors may have wanted to take a more-defensive stance, taking some profits and trimming exposure somewhat. If the market shows further weakness, investors may need to step that up, so review your portfolio closely.
If stocks flash buy signals and you take action, do so gradually. The past few weeks of up-and-down trading, including Friday, have meant that many recent buys have quickly struggled.
Earnings season is far from over. This past week saw several big winners but also a lot of major losers.
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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