Dow Jones Futures: Stocks Run While Microsoft Roars, But That Risk Grows; Adobe welcomes “AI era”

Dow Jones futures fell slightly overnight, as did S&P 500 futures and Nasdaq futures. Adobe (ADBE) rose overnight on strong earnings results and earnings forecasts.




X



After showing resilience after the Fed's dovish hike outlook on Wednesday, equity markets staged a rebound on Thursday with strong, broad-based gains. The Nasdaq and S&P 500 made new 52-week highs, while the Dow Jones finally surpassed 2023 highs. Microsoft (MSFT) was a big driver for the major indices Apple (AAPL) and metaplatforms (META) also contributes to this. But the market breadth was strong.

Cava (CAVA) surged 99% in its debut on Thursday after CAVA stock priced its IPO at 22 per share, ahead of the expected range. CAVA stock opened at 42 and closed at 43.78. The Mediterranean fast-casual restaurant isn't profitable yet, but it's growing fast.

snowflake (SNOW), Monday.com (MNDY) and Smith & Nephew (SNN) issued buy signals. But the risks of a market decline increase the risks of new purchases in the short term.

The Nasdaq and Nasdaq 100 appear increasingly wide, and the S&P 500 also appears stretched.

META stock is on the IBD Leaderboard. MSFT stock is among the IBD Long-Term Leaders. MNDY stock is at IBD 50.

Dow Jones futures today

Dow Jones futures fell 0.1% from fair value. S&P 500 futures were down 0.25% and Nasdaq 100 futures were down 0.35%. Adobe stock is a constituent of the S&P 500 and Nasdaq 100.

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


Adobe revenue

Adobe's earnings beat guidance for the fiscal second quarter as revenue came in ahead of guidance. CEO Shantanu Narayen announced a “new era of generative AI” in the press release. The software giant posted slightly higher EPS guidance and flat revenue.

ADBE shares are up 3.5% in late trade. Shares rose 2.4% in Thursday's regular session to 490.91, hitting their best level in 16 months. Adobe stock has skyrocketed over the past few weeks as it pushes artificial intelligence efforts and alliances.

stock market rally

The stock market rally started off unevenly but rose steadily and posted strong gains.

The Dow Jones Industrial Average rose 1.3% in trading on Thursday, hitting its best level since December's 52-week high. The S&P 500 index rose 1.2% and the Nasdaq Composite index rose 1.15%, both at their best in more than a year. The Russell 2000 small-cap index rose 0.8%.

Microsoft was up 3.2% to 348.10, hitting an all-time close high. So far this week, it's up 6.5%. Apple stock rose 1.1% to a record high. Meta Platforms was up 3.1%, a 52-week high. Microsoft shares and Apple are included in the Dow Jones, S&P 500 and Nasdaq Composite, while META shares are included in the S&P 500 and Nasdaq.

US crude prices rose 3.4% to $70.62 a barrel.

The 10-year government bond yield fell 7 basis points to 3.73%.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) was up 2%, with MSFT stock playing a key role. The VanEck Vectors Semiconductor ETF (SMH) is down 0.75%.

The ARK Innovation ETF (ARKK) climbed 1.1% and the ARK Genomics ETF (ARKG) rose 2.2%, reflecting more speculative story stocks.

The SPDR S&P Metals & Mining ETF (XME) added 1.6% and the Global X US Infrastructure Development ETF (PAVE) added 1.2%. The US Global Jets ETF (JETS) rose 0.9%. SPDR S&P Homebuilders ETF (XHB) is up 1.6%. The Energy Select SPDR ETF (XLE) was up 1.1% and the Health Care Select Sector SPDR Fund (XLV) rallied 1.55%.

The Financial Select SPDR ETF (XLF) is up 1.3%. The SPDR S&P Regional Banking ETF (KRE) rose 1.9%.


The five best Chinese stocks to watch right now


Stocks in buying areas

SNOW stock rose 5.5% to 190.98, clearing the key 185 resistance level in a consolidation that stretched back to late August. The volume was above average. Snowflake stock plummeted May 25 after the data analysis software maker lowered its full-year guidance, but shares immediately bounced back. This isn't normal, but it's happened at a variety of growth stocks over the past few weeks.

The MNDY fell 0.1% to 182.77 but recovered from a morning low of 168.88 just above the 21-day moving average. Monday.com posted an earnings gap on May 15, offering a first early entry. Another entry came a week later when MNDY stock surpassed a not quite reached level. Shares moved above the official consolidation buy point of 171.89 on May 31st but were well above the moving averages. The recent break in June has caused the 21-day moving average to catch up a bit. Investors could buy Monday.com stock from the 21-day moving average or use 184.60 as a high handle entry.

SNN stock rose 1.4% to 32, breaking a downtrend line and allowing for an early entry. On Wednesday, Smith & Nephew stock rose 5.55%, beating the 50-day moving average. It's one of several medical device companies showing strength this week. SNN stock has an official buy point of 33.09 from a flat base.

Analysis of the market rally

The stock market rally could have easily sold off on Thursday after the Federal Reserve's rate hike outlook either on Wednesday or in a second day reaction. Instead, shares held up relatively well on Wednesday and then rallied sharply on Thursday.

Apple, Meta, and Microsoft stocks helped boost big-cap indices.

The Dow Jones led while the Nasdaq and S&P 500 climbed for a sixth consecutive month.

The movers outperformed the movers 3-1 on the NYSE and more than 2-1 on the Nasdaq.

The Invesco S&P 500 Equal Weight ETF (RSP) rose 1.2% to 148.95.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) was up 1.2%. It is now 7.4% above its 50-day moving average.

The Nasdaq has risen sharply since late April, especially over the last month. It is now 10.1% above its 50-day moving average, while the Nasdaq 100 is 11.6% above that level. The S&P 500 is 6% above its 50-day index, which is rising for this benchmark index.

This increases the likelihood of a short-term decline and the risk of a larger decline occurring. Of course, this does not have to happen immediately, as the last few days have shown.


Plan the market with IBD's ETF market strategy


What now

The market rally shows strength again, but investors need patience.

If you've owned some big winners for a long time, the prospect of the Nasdaq falling to, say, the 21-day moving average probably wouldn't be worrisome. There's also the possibility of a bigger correction, or that your stocks fall much further. If you are heavily exposed, you might choose to take partial profits to lock in some profits on heavily expanded names.

For new positions, especially in the technology sector, a retreat would be a bigger deal.

SNOW stock, for example, would likely struggle to sustain Thursday's breakout if the Nasdaq slipped 4% to 5% over the next few sessions. MNDY stock could easily drop below the official buy point, although earlier entries could be safe.

You can gradually move into new roles here, perhaps focusing on non-technology areas. However, there is a good case for waiting for a market decline in order to create safer buying opportunities for new stocks or to add to existing holdings.

There aren't many stocks with buying opportunities right now. Chip, software, and megacap names like Apple, Microsoft, and Meta are expanding heavily. Even newer leaders in travel and industry are looking further after a race from the bottom. All of this is another sign that the market could use a breather.

A market decline or pause is likely to create a number of new buying opportunities.

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.

YOU MAY ALSO LIKE:

Why this IBD tool makes finding top stocks easy

Catch the next big winner stock with MarketSmith

Want to make quick profits and avoid big losses? Try SwingTrader

IBD Digital: Unlock IBD's premium stock lists, tools and analysis today

Tesla vs. BYD: EV giants vie for the crown, but which is the better buy?

Leave a Reply

Your email address will not be published. Required fields are marked *