Dow futures were little changed early Thursday, along with S&P 500 futures and Nasdaq futures. synopsys (SNPS) and Cisco systems (CSCO) reported Wednesday evening with Walmart (WMT). Ali Baba (BABA) before the market opens.
The stock market rebounded Wednesday on optimism that President Joe Biden and Congress will reach an agreement to raise the debt ceiling.
The Nasdaq hit a 2023 high while the Dow Jones is back above the 50-day line after hitting a key level.
Several stocks broke out or flashed buy signals on Wednesday, including from Broadcom (AVGO), service now (now), Fresh remains (NEWR), Taiwan Semiconductor (TSM), Royal Caribbean (RCL) f Darden Restaurants (DRI). These areas reflect the strength of the market: chips, software, travel and restaurants.
Dow jones futures today
Dow Jones futures were just below fair value, with CSCO and Walmart stock both components of the Dow. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.2%.
The 10-year Treasury yield rose 2 basis points, to 3.6%.
Crude oil prices fell. Copper futures fell 1%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
SNPS stock rose modestly after Synopsys earnings and revenue topped fiscal views for the second quarter of the year. The chip and electronics design software maker has also bumped up the guidance. Shares advanced 0.5% to 377.08 in the Wednesday session, extending slightly to Tuesday’s move above the 50-day line. It would have provided an early entry if it weren’t for the profits. Synopsys stock has 392.89 buy points with a flat bottom. competition Cadence Design Systems (CDNS) rose after hours but below the 50-day line. It’s on its way to having its flat bottom after this week.
CSCO stock fell strongly overnight on weak orders even though Cisco’s earnings beat third-quarter financial views and the networking giant raised fourth-quarter guidance slightly. Shares rose 1.5% on Wednesday, to 47.63. Cisco stock has a flat-base 52.66 buy point, but just above the 200-day line and below the 50-day line.
WMT stock rose slightly in pre-market trade. Wal-Mart’s profits and sales are comfortably outperforming. Discount giant Dow Jones raised guidance for the full year, but gave mixed goals for the second quarter. WMT shares fell 0.2% to 149.53 on Wednesday, the fourth consecutive decline. Stocks exceeded 148.44 double bottom buy point. Investors may want to focus on a fresh entry of 154.45, a record low. Track Walmart’s earnings Goal Results (TGT) early Wednesday.
BABA stock rose modestly after the Chinese e-commerce giant topped EPS views. Alibaba shares rose 2.2% to 90.68 on Wednesday, reclaiming the 50-day and 200-day lines.
Optimism about the debt ceiling
Biden said he was “confident” that “America will not default.” The president made these remarks before leaving on a trip to Japan. His decision on Tuesday to cut short his Asian trip and return on Sunday helped drive the stock market to session lows near the close. House Speaker Kevin McCarthy criticized Biden for leaving the country during debt-ceiling talks, but remained hopeful he could reach a deal to avoid default in early June. “I think in the end, we have no debt default.”
The White House and congressional staff continue to work on a debt reduction deal behind the scenes. Wall Street strategists are increasingly confident that political leaders will avoid default in a destabilizing US.
Stocks in buy zones
Broadcom and TSM join a number of chip stocks that have either broken up or made early entries in the past few days.
Stocks have now erupted from the base of a teacup with handles, with an AI push and first-ever buyback providing the latest oomph, as software names are quietly returning, too.
NEWR rose 11% to 83.84, surpassing the base of 80.98 buy points. Private equity firms considering trying to buy Fresh remains (NEWR), The Wall Street Journal reported just before Wednesday’s close. The database software stock was already flashing early buy signals.
RCL stock broke out on Wednesday. Meanwhile, a competitor carnival corp. (CCL) and major carriers United Airlines (UAL), American Airlines (AAL) f Delta Airlines (DAL) All Early Buys also flashed on Wednesday.
DRI stock raced above a flat-based buy point. Many other restaurant stocks have already outgrown the buy territory, with takeout still strong. but Tesla (TSLA) remains below key levels.
Separately, TSLA stock took a strong move after Wednesday’s event for Tesla shareholders. But it is not close to a point of purchase.
Investors should consider adding exposure with caution. Be prepared to pull back if the market falters again.
RCL stock is on the IBD Leaderboard watchlist and on SwingTrader. AVGO and Royal Caribbean are in the IBD 50. SNPS shares and Peer Cadence Design are among IBD’s long-term leaders. Broadcom and AVGO stocks are in the IBD Big Cap 20.
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Stock market rise
The stock market rally started with small gains but quickly gained momentum.
The Dow Jones Industrial Average was up 1.2% in stock market trading Wednesday, along with the S&P 500. The Nasdaq Composite was up 1.3%. Small cap Russell 2000 jumped 2.2%.
US crude oil prices rose 2.8% to $78.23 a barrel.
Copper futures rebounded 2.4% after sliding on Tuesday to the lowest close since November 29.
The 10-year Treasury yield rose 3 basis points to 3.58%, up 18 basis points over four sessions.
Exchange Traded Funds
Among growth ETFs, the iShares Expanded Tech-Software Sector (IGV) ETF (IGV) jumped just over 2%, with NOW stock trailing significantly. VanEck Vectors Semiconductor Index (SMH) rose 2.7%, with TSM stock and large components of Broadcom.
CDNS and Synopsys stocks are part of the IGV and SMH ETFs.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) rebounded 2.55% and ARK Genomics ETF (ARKG) 1.7%.
Tesla stock is Ark Invest’s No. 1 stock across its ETFs. Tesla shares jumped 4.4% to 173.86, bouncing back above the 21-day line, as Elon Musk reiterated that a Cybertruck is coming this year while saying Tesla will “try” advertising to boost sales. TSLA stock is still below its 50-day moving line, some distance from the 200-day line.
The SPDR S&P Metals & Mining ETF (XME) rose 1.8%. US ETF Global Gates (JETS) rose 4.3%, with UAL, US and Delta shares all components. The SPDR S&P Homebuilders ETF (XHB) advanced 1.6%. The Energy Select SPDR ETF (XLE) rose 1.9% and the SPDR Health Sector Fund (XLV) rose 0.1%.
The Financial Select SPDR (XLF) ETF popped up 2%. The SPDR S&P Regional Banking Index (KRE) jumped 7.4%. Western Alliance Bancorp The (WAL) revealed that deposits have risen by $2 billion since the end of March. WAL stock jumped 10%. Backwest Bancorp (PACW) is up nearly 22%.
Top five Chinese stocks to watch now
Market rally analysis
The stock market rebounded again from a disappointing Tuesday, with strong gains in larger volume.
The Nasdaq Composite Index hit a 2023 high after falling reluctantly on Tuesday. The S&P 500 rebounded from the 21-day line, just below its 2023 highs, although the 50-day line is also not far to the downside. The Dow Jones Index retraced the 50-day line.
Russell 2000 jumped out, regaining the 50-day streak for the first time in two months.
The market’s breadth was strong after a particularly dismal Tuesday.
The Nasdaq 100 rose 1.2%, after rising 0.1% on Tuesday. Even better, the First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rebounded 1.2%, moving to its highest level in nearly a month. It was an upward move, but QQEW could easily pull back in 50 days.
The Invesco S&P 500 Equivalent Weight ETF (RSP) rose 1.3%, though after slipping 1.4% on Tuesday. The RSP remains below the major moving averages. A decisive move above those levels would be a sign of an improving market breadth.
Market leadership expanded slightly. Chips, software, travel and restaurants all have a number of stocks showing strength, with Taiwan Semi, ServiceNow, Royal Caribbean and Darden joining them. The homebuilders pause after the big run, but they look pretty healthy.
Biotech companies have rebounded after the FTC’s move to ban Amgen (AMGN) Grab Horizon treat (HZNP) raised broader concerns about mergers and acquisitions.
Markets rebounded amid optimism about the debt ceiling, along with calming banking concerns. In the event of a deal, stocks can jump, but investors can also sell on the news. Remember, it is not the news that matters, it is the market’s reaction to the news.
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What are you doing now
With the market in a tight sideways pattern, it doesn’t take much to trigger upward or downward movements. Tuesday’s action was concerning, as the Dow fell below the 50-day line and a number of metrics looked bleak. Wednesday’s strong rebound was encouraging, with the Nasdaq once again reaching high levels and a number of stocks breaking out.
Wednesday could be the start of a strong rally for the market, either for a short period or for a longer term uptrend. But it can also be a short-term picture within a spotty pattern.
Investors can add some exposure on Wednesday. They can continue to do so if the market rally continues to make headway. But do it gradually, and be prepared to roll back if the market or your individual positions falter again.
It’s definitely time to get ready to take action. So prepare your watchlists.
Read the big picture every day to stay in sync with market trend, leading stocks and sectors.
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