Dow Jones Futures: Nasdaq Rebounds as AI and Cloud News Boost Amazon; Is the market downturn over?

Dow Jones futures trended higher in after-hours trading, as did S&P 500 futures and Nasdaq futures. The Nasdaq Composite and S&P 500 rose on Thursday, but it was a mixed session for the stock market's weak breadth rally.




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Megacaps were strong. Amazon.com (AMZN) took the lead as Amazon Web Services announced new efforts in artificial intelligence. AMZN stock surged to a nine-month high after the AWS cloud unit announced a $100 million investment in generative AI to help customers. Loop Capital expects the AWS growth slowdown to bottom soon. This sentiment could also be good news for cloud competitors Microsoft (MSFT), Google parent company alphabet (GOOGL), both of which had solid sessions.

MongoDB (MDB), super microcomputer (SMCI) and Lam Research (LRCX) posted an uptrend on Thursday. The trio offered aggressive entries despite hitting intraday highs.

A number of software and chip games made solid progress on Thursday.

C3.ai (AI) and samsara (IOT), two AI stocks, hosted Investor Day events. AI stock fell 4.1% on Thursday, testing its 21-day moving average. IOT stock gained 1.2% after a four-day decline. However, it's unclear if Investor Day events had a significant impact on either stock. Analyst reaction could move shares of C3.ai and IOT on Friday.

Bank stocks were noticeably weak, from PacWest Bancorp (PACW) to JPMorgan Chase (JPM). There has been no clear trigger or obvious sign of renewed deposit flight, but banks face long-term problems that could hurt profitability over the long term.

Don't think about it too much. Thursday was likely a modest mixed bounce within a modest pullback with a solid tech-led stock market rally.

MDB stock was added to the IBD Leaderboard on Thursday and is in the IBD Big Cap 20. LRCX stock has joined SwingTrader. MongoDB and IOT shares are in the IBD 50. Lam Research was the IBD stock of the day on Thursday.

Dow Jones futures today

Dow Jones futures were slightly above fair value, with 3M (MMM) encounters major agreement over chemicals in drinking water. S&P 500 futures edged higher. Nasdaq 100 futures were up 0.1%.

Keep in mind that nightly action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular trading session.


Join IBD experts as they analyze actionable stocks from the stock market rally on IBD Live


stock market rally

The stock market rally was a mixed bag as tech giants and AI stocks rallied. The Dow Jones Industrial Average closed slightly lower in trading on Thursday. The S&P 500 index rose 0.4%. The Nasdaq Composite gained 0.95%. The Russell 2000 small-cap index fell 0.8%.

Amazon shares rose 4.3% to 130.15.

Apple (AAPL), Microsoft, Google, Tesla (TSLA), Taiwan Semiconductor (TSM) and Salesforce.com (CRM) were all up 1.5% to just over 2%.

US crude prices fell 4.2% to $69.51 a barrel. The 10-year government bond yield rose 8 basis points to 3.8%.

ETFs

Among growth ETFs, innovator IBD 50 ETF (FFTY) is up 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) is up 0.55%. The VanEck Vectors Semiconductor ETF (SMH) is up 0.55%. LRCX stock is a notable SMH stock.

Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) closed just above breakeven and ARK Genomics ETF (ARKG) fell 1%.

The SPDR S&P Metals & Mining ETF (XME) and Global X US Infrastructure Development ETF (PAVE) were both down 0.6%. The US Global Jets ETF (JETS) maintained its high. SPDR S&P Homebuilders ETF (XHB) is down 0.5%. The Energy Select SPDR ETF (XLE) was down 1.3% and the Health Care Select Sector SPDR Fund (XLV) was up 0.7%.

The Financial Select SPDR ETF (XLF) was down 0.8%. JPM shares are down 1.9% and close to its 50-day moving average after testing a buy point on Wednesday. The SPDR S&P Regional Banking ETF (KRE) plunged 3.2% and fell back below its 50-day moving average. PACW stock plummeted 5.9%.


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Stocks to watch

MDB shares rose 4.1% on strong volume on Thursday to 388.36, breaking a trendline in a three-week tight pattern that could represent a high-tight flag. That offered an early entry at around 385 or maybe 389. It came after the company initially tested the bottom of its recent range since the huge earnings differential on June 2nd. MongoDB stock surged as high as 396.84. The database software maker announced an expanded collaboration with Google Cloud as well as several AI initiatives. MongoDB also works with Amazon Web Services, among others.

SMCI shares rose 3% to 226.46, pulling away from its 21-day moving average in heavy trading. An aggressive trader could have used a move above Wednesday's high of 227 as an early entry. However, the stocks encountered resistance at the 10-day moving average and recovered sharply from the highs of 241.97 to close just below the aggressive buy point.

LRCX shares rose 2.3% to 619.87 after initially breaching the 21-day moving average and the 600 mark. Investors could have used a move above Wednesday's high of 615.80 as an entry point. Shares fell off their intraday high of 624.48, which is exactly what a short-term trend line is. LRCX stock is trading like MongoDB on a three-week tight with an official buy point of 644.60. A few other chip giants rallied off their 21-day lines.

Analysis of the market rally

The stock market rally halted its recent decline on Thursday with a slight bounce. The Nasdaq and S&P 500 both rebounded from their 10-day moving averages, led by Amazon and other growth giants.

So is the Nasdaq decline over after three days? If it does, it would quickly be rolled back, raising expectations of a further decline. The Nasdaq closed 7.8% above its 50-day moving average on Thursday, and the Nasdaq 100 9.1%.

The breadth was noticeably weak given the strong Nasdaq rally. The losers outperformed the winners 2-1 on the NYSE and 8-5 on the Nasdaq.

The Dow Jones and Russell 2000 tested their 21-day moving averages on Thursday.

The Invesco S&P 500 Equal Weight ETF (RSP) fell 0.4%, to just above its 21-day level, although the S&P 500 posted a modest gain. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) climbed 0.25%, well behind the Nasdaq 100's 1.2% gain.

Technology hot stocks bounced off support levels including MDB shares and SMCI. This is what you want to see when the Nasdaq rises. When the Nasdaq starts to plummet again, you want these names to resist the selling pressure.

Several stocks are consolidating around traditional buy points, such as Monday.com (MNDY) and Parker-Hannifin (PH).


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What now

On Thursday, if you're an aggressive trader, you could have bought shares in MongoDB, Lam Research, SMCI, or a few other stocks that are recovering. Adding a few stocks to an existing holding is much less risky than opening a new position. If the Nasdaq decline continues, many of these top performers could fall behind. If you're buying a bounce near intraday highs, it doesn't take much to be underwater.

A swing trader mindset makes sense when making new or additional purchases, as losses are quickly reduced and partial profits are taken early to lock in profits. If stocks continue to rise strongly, you could hold the remaining stocks as position trades.

Regardless of whether you pull the trigger now or not, you definitely want to keep an eye on the big winners and be on the lookout for those holding or recovering from support. Keep your watch lists from a wide variety of industries up to date. It remains important to take advantage of early market entries and buy near those market entries.

Read The Big Picture daily to stay up to date on market direction and the leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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