Dow Jones futures fell slightly Sunday night, along with S&P 500 futures and Nasdaq futures.
The stock market rally continued to strengthen last week, with the S&P 500 index and Dow Jones hitting record highs while the Nasdaq delivered a second straight strong weekly gain.
After weeks of wondering if a split market rally would survive, the Dow Jones and S&P 500 are at risk of becoming extended, raising the odds of a pullback.
Floor & Decor (FND), Square (SQ), JPMorgan Chase (JPM), Mosaic (MOS) and Apple (AAPL) supplier Skyworks Solutions (SWKS) are stocks in or near buy zones that offer some portfolio diversity amid a still-tricky market rally.
Megacap techs were big winners, with Microsoft (MSFT), Facebook (FB) and Google parent Alphabet (GOOGL) breaking out while Apple stock and Amazon.com (AMZN) jumped as they try to shake off months of sluggish action.
All five stocks are S&P 500 and Nasdaq members, with Apple stock and Microsoft also Dow components. So when these giants get going, the major indexes do too.
FND stock and Microsoft are on IBD Leaderboard. Google stock is on SwingTrader. MSFT stock is on IBD Long-Term Leaders. Floor & Decor and Square stock are on the IBD 50.
Chinese regulators imposed a $2.8 billion antitrust fine vs. Alibaba (BABA) for abusing its market dominance over merchants and rivals. The record penalty vs. Alibaba comes amid unprecedented scrutiny vs. the Chinese e-commerce giant and its founder Jack Ma. But it was a smaller fine than some feared. Alibaba’s CEO said Monday morning local time that he doesn’t expect negative impacts from regulators’ required changes.
BABA stock, along with rivals JD.com (JD), Pinduoduo (PDD) and Tencent Holdings (TECHY) have come under heavy pressure in recent months.
Alibaba shares rose solidly in Hong Kong trading Monday.
Meanwhile, Microsoft reportedly is in late-stage talks to buy AI and speech recognition company Nuance Communications (NUAN) for $16 billion. The possible $56-a-share price tag would be a 23% premium.
Fed Chief Powell Sees Rapid Growth
Federal Reserve Chairman Jerome Powell told “60 Minutes” that the “economy is about to start growing much more quickly” with rapid job growth thanks to vaccinations and massive fiscal and monetary efforts. But he said the coronavirus remains a threat. Powell continues to signal that he is in no hurry to scale back bond buying.
However, Powell did say that “some asset prices are overvalued.”
Dow Jones Futures Today
Dow Jones futures were 0.3% below fair value. S&P 500 futures dipped 0.3% and Nasdaq 100 futures fell 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.
Coronavirus cases worldwide reached 136.63 million. Covid-19 deaths topped 2.94 million.
Coronavirus cases in the U.S. have hit 31.91 million, with deaths above 575,000.
Stock Market Rally Last Week
U.S. Stock Market Today Overview
Last Update: 4:12 PM ET 4/9/2021
The stock market rally had another strong week, with the major indexes closing on a high note.
The Dow Jones Industrial Average rose almost 2% in last week’s stock market trading while the S&P 500 index climbed 2.7%, both hitting record highs. The Nasdaq composite, after reaching its 50-day line in the prior week, rallied 3.1% in the latest week, surging past its March short-term highs. The big-cap Nasdaq 100 jumped 3.9% to an all-time closing high.
The laggard was the Russell 2000, which fell 0.5%, but held above its 50-day line.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 2.7%. The iShares Expanded Tech-Software Sector ETF (IGV) jumped just over 4%, with MSFT stock its top holding. The VanEck Vectors Semiconductor ETF (SMH) gained a relatively modest 1.2%. SWKS stock is an SMH component.
Reopening plays lagged or declined last week. SPDR S&P Metals & Mining ETF (XME) sank 2.2% and Global X U.S. Infrastructure Development ETF (PAVE) edged up 0.2%. U.S. Global Jets ETF (JETS) climbed nearly 1%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) advanced 2% while ARK Genomics ETF (ARKG) sank 2%. Square stock is a notable holding for ARK Investments.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
These Five 2020 Winners Are Setting Up For Another Run
Stocks Near Buy Points
While these five stocks wouldn’t touch on all the leading sectors of the market, they could be part of a nutritious breakfast, as it were.
Floor & Decor Stock
Floor & Decor stock jumped 9.9% last week to 108.69. On Wednesday, FND stock nudged past a 101.84 handle buy point. On Friday, shares vaulted higher, hitting a record high and clearing alternate entries of 108.14 or 108.64.
Square stock vaulted 14% to 261.65 last week, with above-average volume in the last three days. SQ stock is nearing a 283.29 buy point, according to MarketSmith analysis, after previously offering early entries.
JPMorgan stock climbed 1.7% last week to 156.28. JPM stock has been trading at its 21-day line in tight action for several weeks. In fact, it has a four-weeks-tight pattern with a 161.79 official buy point. Aggressive investors could buy JPMorgan stock now, trading above the bulk of recent action, with one huge caveat: JPMorgan earnings are on tap Wednesday. Buying a stock just before earnings is highly risky unless you are using an earnings strategy.
(Goldman Sachs (GS), Citigroup (C) and Wells Fargo (WFC) also have tight patterns, but report earnings next week as well.)
Investors may want to wait for these bank earnings to see if JPM stock and its peers will break out.
Big Picture: Late-Session Rally Comes With This Big Development
Mosaic stock edged up 0.6% to 31.47 last week, rallying on Thursday and Friday to find support at its 50-day line and reclaiming its 21-day. Investors could buy MOS stock right here, though it’s already had multiple 50-day/10-week line bounces after its most recent base. A little more strength and Mosaic stock could break a short downtrend, offering a chance for a partial position as the fertilizer play works on a new base.
A number of economic recovery and reopening plays have fallen modestly to key support in the past few weeks.
Skyworks is a 5G and Apple iPhone chip supplier. SWKS stock rose just 0.55% last week to 188.73, pulling back after Monday’s solid gain, much like the SMH ETF and many chip stocks. Skyworks stock has a 195.92 consolidation buy point. But if holds in its recent range for one more day, it’ll have a handle with a 192.07 entry.
As for Apple stock, the iPhone giant rallied 8.1% to 132.99 last week, running right through its 50-day line and providing a big boost to the Dow, S&P 500 and Nasdaq composite. But volume was below normal on all five days, though Friday was close to break-even. That, along with a weak RS line, gave little reason to be aggressive with Apple stock. But it is working toward a 145.19 buy point.
Market Rally Analysis
Over the past couple of weeks, the stock market rally has improved dramatically, with the Nasdaq shifting from a de facto correction to racing toward record highs. The Dow Jones and S&P 500 continue to set all-time peaks.
The small-cap Russell 2000 is the relative laggard, but it’s holding the 50-day line. That’s a much-higher floor than the Nasdaq living below its 50-day and 21-day lines.
The Dow Jones and S&P 500 are about 5.5% above their 50-day moving averages. That’s not extended, but very close to being so. The Nasdaq has been on a strong run in the last couple of weeks. So a pullback in the major indexes and many leaders wouldn’t be surprising, and might even be healthy. A modest retreat would let the 50-day catch up and let stocks such as Skyworks finish handles.
What To Do Now
The stock market rally is rewarding cautious optimism. Investors should have taken advantage of this market rally, adding to exposure in the past few weeks.
Investors may want to be careful about adding significant new exposure in the very near term, given the possibility of some sort of pullback. But otherwise the stock market rally is in good health.
Tech stocks are bouncing back, from the megacaps such as Apple and Google to chips and even software. Some big 2020 winners are bouncing back, but that doesn’t mean all of them are. There is a big difference between the Square stock chart and technical action of Teladoc (TDOC).
Meanwhile, don’t ignore non-tech names. FND stock is just one of many housing-related retailers doing well. Mosaic and Caterpillar (CAT) are among many recovery or reopening plays that are working on new bases.
It’s still important to have balanced a portfolio, avoiding too much exposure to a particular stock, sector or theme. You want to concentrate on a small number of leaders, just have some variety among those names.
If you have a 100% portfolio of 10 stocks, and one holding drops 5%, that’s just a 0.5% portfolio decline. That’s easy to handle, especially if your other stocks are generally rising. But if eight of your stocks fall 5%, that’s a 4% portfolio loss. A few days of that can be punishing, and will force you to act even if the individual stocks are still looking OK.
Don’t just diversify between individual groups. You also don’t want to exclusively hold reopening/recovery stocks or traditional “growth” names. (Arguably, several megacap techs, including Apple, Microsoft, Facebook and Google, are both growth and recovery plays.)
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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