by Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures. Tesla, Nvidia, On Holding, biogen (BIIB), Oracle (ORCL), Boeing (BA) and Caterpillar (CAT) are stocks to watch. But the focus will be on the Federal Reserve meeting amid two major inflation reports.
X
The stock market rally broadened last week, although it faded somewhat after Wednesday. Major indices were up slightly this week, with the Nasdaq and S&P 500 hitting their 2023 highs. But small caps and mid-caps still posted solid gains, with market breadth rising despite Friday’s losers.
With the Fed meeting just around the corner and the Nasdaq still on the verge of an extension, investors currently have reasons to be cautious about new purchases, especially in hot tech sectors. But some stocks continue to give buy signals.
Holding on (ON) made a bullish move on Friday. Nvidia (NVDA) has forged a new buying point. Can Tesla (TSLA) continue its win streak? A pause or pullback would be normal for Tesla stock, and perhaps help cool the Nasdaq.
ORCL stock has expanded, but Oracle earnings late Monday could be a benchmark for enterprise software and AI. Red hot Adobe (ADBE) will report later in the week.
Biogen’s Alzheimer’s Drug Wins Head Vote
Late Friday, an FDA advisory panel unanimously recommended approval for Leqembi, Biogen’s Alzheimer’s drug.
BIIB share rose 6.2% to 328 in late trading after being halted during Friday’s regular session. That indicates a breakout from a brand new flat base, which is part of a base-on-base formation. The buy point is 319.74,
Shares rose 2.9% to 308.88 in the week through Thursday, recovering from the 50-day line and breaking a downtrend on hopeful signs for the advisory panel’s vote. That offered an early entry.
Eli Lilly shares rose 0.1% Friday, not much on the FDA advisory panel vote just before the close. FDA approval of Biogen’s Leqembi should be good news for Lilly’s experimental Alzheimer’s treatment donanemab. LLY shares have been consolidating near highs for the past few weeks.
Meanwhile, investors should keep an eye on industrial stocks. Many are in the process of setting up or buying territories, including Dow giants Boeing and Caterpillar.
Tesla stock and Nvidia are on IBD Leaderboard, with ONON stock added to the Leaderboard watchlist on Friday. BA shares have been added to SwingTrader. Shares of Tesla and ORCL are listed on the IBD Big Cap 20. On Holding was Friday’s IBD Stock Of The Day.
The video embedded in this article discusses the market action over the past week and analyzes the shares of On Holding, Boeing, and Nvidia.
Fed meeting
Markets expect policymakers to leave interest rates unchanged at the end of the Fed’s June 13-14 meeting, but that is not certain. The May CPI inflation report is expected Tuesday morning, with producer price early Wednesday. They could be the deciding factor just before the announcement of the Fed meeting.
Assuming the Fed holds its ground, it could be a “hawkish” pause. The statement from the Fed meeting and Fed Chief Jerome Powell would likely highlight the possibility of renewed rate hikes at a subsequent meeting. Markets are indeed leaning towards a rate hike by the Fed at the end of July.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally this week showed broad progress, although indices and various sectors did not move in tandem during the week.
The Dow Jones Industrial Average rose 0.3% during last week’s stock trading. The S&P 500 index climbed 0.4%. The Nasdaq index rose 0.1%. The small-cap Russell 2000 popped 1.65%.
The yield on 10-year Treasury bills rose 5 basis points to 3.74%.
US crude oil futures fell 2.2% to $70.17 a barrel last week. Copper futures rose 1.8%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) was up 1.1% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) was up 1.9%. The iShares Expanded Tech-Software Sector ETF (IGV) closed marginally higher, with Oracle stocks a standout component. The VanEck Vectors Semiconductor ETF (SMH) was up 0.5%, with Nvidia stock a major stake.
SPDR S&P Metals & Mining ETF (XME) rose 1.7% last week. The Global X US Infrastructure Development ETF (PAVE) gained 2.4%. US Global Jets ETF (JETS) rose 3.6%. SPDR S&P Homebuilders ETF (XHB) soared 2.8% to its highest point since January 2022. The Energy Select SPDR ETF (XLE) rose 1.8%. The Health Care Select Sector SPDR Fund (XLV) gained 0.1%. Industrial Select Sector SPDR Fund (XLI) climbed 1.45% to hit a three-month high. Boeing and CAT stock are both large XLI holding companies.
The Financial Select SPDR ETF (XLF) was up 1.0%. The SPDR S&P Regional Banking ETF (KRE) was up 3%.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) gained 2.1% last week and ARK Genomics ETF (ARKG) rose 0.2%. Tesla stock is the top holding of Ark Invest’s ETFs.
Five best Chinese stocks to watch right now
ONON stock
The ONON share rose 5.4% to 30.24 on Friday. Shares reached 31.45, above the 50-day moving average, but closed just below that key level. Intraday offered On Holding an early entry, but investors must now wait for a decisive move above the 50-day mark, such as the clearing of Friday’s spike. On Holding skyrocketed at the end of March on strong earnings in the fourth quarter of 2022 and continued to climb into early May. Shares of the Swiss athletic shoemaker sold hard in late May despite strong first-quarter earnings amid concerns about slowing growth later this year.
Nvidia stock
NVDA shares fell 1.4% to 387.70 last week and continued to consolidate after a higher gap on May 25 following strong earnings and burst in demand for AI-powered chips. The graphics chip maker is now tight for three weeks, offering an opportunity to add a few more stocks. The official buy point is 419.38, at the top of the tight pattern, but a move above Friday’s high of 397.11 could provide entry. Even better, a break of another week or two would make up for the 21-day line.
Tesla stock
Tesla shares rose 14% last week to 244.40, an eight-month high, extending the win streak to 11 sessions. Even more impressive is that TSLA stock has increased in volume for 10 consecutive days. A deal to rent out General engines (GM) Using Tesla charging stations, and the entry-level Model 3 being eligible again for the full $7,500 US IRA tax credit, were key drivers. Yes, bears may point to rising US and European stocks despite several discounts, but the market is not listening to that right now. According to MarketSmith’s analysis, TSLA stock has now expanded significantly from a buy point of 207.79. After such a strong run, a short break at least seems likely, but it doesn’t have to happen immediately.
Dow Stocks Boeing, Caterpillar
Shares of Boeing rose 1.9% to 217.31 last week, recovered from the 50-day line on Wednesday and cleared a trendline on Thursday, offering early entry. BA stock is just below a buy point of 221.33 from a flat base.
CAT shares rose 3.7% last week to 235.03 and are up 14% year-to-date in June. The heavy equipment giant broke a trendline stretching back to late January and offered an early entry. Caterpillar shares have an official buy point of 227.04.
Terex (TEX), Parker-Hannifin (PH), Rockwell automation (Smoking W. W. Grainger (GWW) are among many other industry names showing some strength.
Analysis of the market rally
The stock market rally offered reasons to be optimistic in the longer term, but also reasons to be cautious in the short term.
The market breadth has improved significantly in recent weeks, although the losers ahead of the winners on Friday. The small-cap Russell 2000 and the S&P MidCap 400 posted solid gains to quarterly highs, though they pulled back late in the week. The Invesco S&P 500 Equal Weight ETF (RSP) climbed 1%.
Major indices ended with small weekly gains. The S&P 500 is right at its 2023 high, pulling back from just 3 points below its August high during the week Friday. The Dow Jones found support at the 50-day line during the week and is moving toward 2023 highs.
The Nasdaq is now up for seven consecutive weeks, right at its 52-week high. The Nasdaq is 5.9% above its 10-week line and the Nasdaq 100 is 6.8% above that key level. Those aren’t extreme levels, but suggest technicians may have limited room to run before being stretched. So Friday’s pullback from the morning highs wasn’t much of a surprise. A pause would give moving averages time to catch up with the Nasdaq, and perhaps some leaders could create new buying opportunities.
Ideally, the rest of the market would pick up the slack. That seems to happen, but not on Friday.
Chips and software remain market leaders, with generally recent gains. Industrialists join building materials, home builders, medical products, travel companies, as well as some biotech companies and several restaurants and other leading groups.
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What to do now
This may be a time to be cautious about new purchases, especially in technology as the Nasdaq is nearing a stretch and the Fed meeting is approaching. If you’re making new purchases, make sure you have your exit strategies ready.
But the outlook seems optimistic for the stock market rally. Improving market breadth helps build a wider range of stocks. Some are giving buy signals while others are moving into position.
Will this trend continue? Don’t try to predict where this market will go. Pay attention to what the market is doing right now.
So make sure your watchlists are ready. Be sure to cast a wide net so you can catch industrial stocks and other emerging strengths.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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