Dow Jones futures, which will focus on an interim debt ceiling deal between President Joe Biden and House Republicans, will open Sunday night alongside S&P 500 futures and Nasdaq futures. Saturday night’s deal will likely avert a looming sovereign default. How will the stock market rally react to the debt ceiling resolution?
X
Last week’s market rally ended on a mixed but hopeful note. As of Wednesday, the index was firmly down.Then technology boomed like Nvidia (NVDA) surged, sending chips and playing artificial intelligence. Meanwhile, signs of progress on Friday’s debt ceiling deal also energized the market. Still, the overall week has been mixed, with the breadth sometimes surprisingly poor and many major stocks struggling.
Debt ceiling deal
After weeks of negotiations, Mr. Biden and House Speaker Kevin McCarthy struck an agreement on a debt limit in principle Saturday night. The deal includes a two-year increase in the debt ceiling, leaving non-defence discretionary spending for non-veterans roughly flat at current levels for two years. It would also impose new limits on certain government aid.
“We still have a lot of work to do, but I believe this is a valuable deal in principle for the American people,” McCarthy told reporters.
McCarthy said he plans to have a House vote on the bill on Wednesday, but expects opposition from the right and left. A vote will then be taken in the Senate. Treasury Secretary Janet Yellen said Friday night that the U.S. could run out of cash as early as June 5.
Featured stock
Tesla (TSLA), Netflix (NFLX), Arista Networks (ANET), ON Semiconductor (upon), NetEase (NTES), Mobileye (MBLY), smart seat (smart), Aehr test system (AEHR) and Mackeson (Mac) is trading near the buy point.
ANET shares, Netflix, ON Semiconductor, NetEase and Mobileye all posted buy signals on Friday. Tesla, Air Test Systems, Smartseat, and MCK stock are all close to being viable.
NVDA stock is on IBD Leaderboard. MBLY Stock, Smartsheet Featured IBD50. Arista Networks was his IBD Stock Of The Day on Friday. The stock chosen on Thursday was SMAR stock.
Videos embedded in this article discuss weekly market trends and analyze Arista Networks, Smartsheet, and Tesla stocks.
dow jones futures today
Dow Jones futures open at 6 p.m. ET along with S&P 500 and Nasdaq 100 futures.
How will the futures market react to this debt relief deal? A default would have been devastating, but the market had already recoiled somewhat from optimism that a compromise could be reached in time. And the debt-restriction pact is still absorbing 500 basis points of the Fed’s rate hikes, with more rate hikes likely, one of several imminent fiscal drag on the struggling economy. is.
Keep an eye on government bond yields and the US dollar. Yields have risen in recent days, partly due to fears of a massive issuance of U.S. Treasuries after the debt ceiling deal. Meanwhile, fears of default have counter-intuitively prompted a large safe haven inflow into the dollar. In addition to strong US economic data and rising expectations for Fed rate hikes, weaker overseas data also pushed the dollar higher.
US stock markets will be closed on Monday for a holiday. However, other exchanges around the world are due to open. Dow futures will also trade normally on Monday.
Note that overnight trading such as Dow Futures does not necessarily translate into actual trading in the next regular stock market.
IBD experts analyze hot stocks during the stock market rally on IBD Live.
stock market rise
The stock market rally struggled mid-week on debt ceiling concerns, but rebounded after Nvidia sparked an AI revolution that eased debt default fears. Still, the index ended mixedly.
The Dow Jones Industrial Average fell 1% in last week’s stock market trading. The S&P 500 index rose 0.3%. The Nasdaq Composite rose 2.5%. The small-cap Russell 2000 closed flat.
Yields on 10-year Treasuries rose 13 basis points in the week to 3.82%, the highest since early March. The odds of the Fed raising rates next month jumped to 70%.
Last week, US crude futures rose 1.4% to $72.67 a barrel. Copper prices fell 1.3%, but bounced back from 2023 lows and rose 2.6% on Friday.
ETFs
Among growth ETFs, the iShares Expanded Technology Software Sector ETF (IGV) rose 3.4%, narrowing its holdings in SMAR shares. VanEck Vectors Semiconductor ETF (SMH) exploded up 10.55% as Nvidia is the leading holding and ON shares are also included in the ETF.
A stock that reflects a more speculative story, the ARK Innovation ETF (Arkuk) was up 1% last week, and the ARK Genomics ETF (Argu) 3%. Tesla shares are the number one holding of all Ark Invest ETFs.
SPDR S&P Metals & Mining ETF (XME) fell 2.9% last week to a nine-month low. Global X US Infrastructure Development ETF (pave) fell 0.8%. US Global Jets ETF (Jets) fell 1.25%. SPDR S&P Homebuilders ETF (XHB) fell 2% after hitting a 52-week high last week. Energy Select SPDR ETF (XLE) fell 1.1%. Healthcare Select Sector SPDR Fund (XLV) fell 2.9%. The MCK strain is part of XLV.
Financial Select SPDR ETF (XLF) fell 1.5%, below the 50-day line. SPDR S&P Regional Banking ETF (KRE) rose 2.75% but hit 50-day resistance
Top 5 Chinese stocks to watch right now
tesla stock
Tesla shares rose 7.2% on the week to 193.17, including a 4.7% gain on Friday. The EV giant definitively cleared the 50-day line and is now approaching a buy point of 207.89, according to Marketsmith analysis. Its buy points are 8-week cup-based or 3-month double-bottom consolidation. Either way, TSLA stock has been holding just below the 200-day line for a long time. However, the 200-day line is currently at the 200 level, below the buy point. Therefore, the breakout is valid and the exit will be a decisive drop below the 200-day line.
Other stocks near the buy point
NFLX rose 5.5% to 378.88 on Friday, clearing the buy point of 375.97 for alternative handles from a double bottom base to a 52-week high.
ANET stock surged more than 18% over the week to 170.35 amid the AI frenzy. The stock touched the trend line above the 50-day line on Thursday before hitting a record closing price of 9.1% on Friday, with huge volumes in both sessions. Arista shares are now slightly extended from the early entry of the 50-day/trendline, but are also approaching the official buy point of 171.54. Ideally, the stock pauses to form a handle. ANET’s share price has recovered since it plunged on May 2 after management failed to raise guidance enough to please investors.
ON shares rebounded from the 50-day line on Thursday, rising 5.6% to 86.62 on Friday. The stock broke the steep handle downtrend, offering early entry. The official buy point was 87.17, which ONSEMI temporarily surpassed during the day on Friday. Note that ON Semiconductor’s stock price has a history of skyrocketing and then rebounding to old levels. On Semiconductor is the supplier of Tesla chips.
AEHR shares fell 0.6% to 32.76 for the week, but found support at the 50-day line and rose strongly in the second half of the week. A bit too low a handle to be good, but investors may use his 33.40 as an early entry. Probably safer than waiting for the traditional breakout above 40.79. On Semiconductor is Aehr Test Systems’ largest customer.
MBLY shares climbed 10.6% for the week to 45.14, re-above the 50-day line. That allowed for aggressive entries on Thursday and Friday mornings, but Mobileye shares are now gaining further from there. We are approaching trendline entry around 46 and 47.04 is yet another significant level. The official buy point is 48.21. Ideally, the MBLY stock suspends and forges the handle. Like ANET stock, Mobileye also plunged following earnings results a few weeks ago.
SMAR shares pause just below the 49.09 buy point from the cup base, right next to another short consolidation. Smartsheet shares rose 2.2% to 47.86 on the week, with all the gains and more on Friday. Work planning software makers have rebounded following strong results announced earlier this month. monday.com (Mundi). Smartsheet earnings will be announced on June 7th.
MCK shares fell 2.4% last week to 387.95, near a six-month high. A drug dealer forged a handle on his 401.53 buy point. McKesson stock is a defensive growth strategy. So if the risk-on growth recovery takes hold, McKesson could be a late starter.
The NTES stock rose 2.4% on the week to 89.51. Shares rebounded from the 200-day line on Thursday after the results. On Friday, NetEase shares regained the 50-day line and suggested early entries. The Chinese mobile gaming giant’s buy point for this flat base is 95.09.
Tesla vs. BYD: EV giants vie for the throne, but which one is better to buy?
market rise analysis
After Thursday’s surprisingly divergent session, tech companies took the lead again on Friday, but their progress was more widespread. Optimism about a debt ceiling deal helped boost investor sentiment, despite some mid-week trepidation.
Still, this is a divisive stock market rally. The Nasdaq is surging towards its August highs, and the Nasdaq 100 has already reached that high. The Nasdaq 100 is 8.8% above the 50-day line and the Nasdaq Composite is 6.8% above the same level.
The S&P 500 Index returned to a flat range midweek, but is again approaching 2023 highs.
But while the Dow Jones regained the 200-day line on Friday, it slipped below the 50-day and 200-day lines last week. The Russell 2000 retreated from the 200-day line, but erased losses and closed above the 50-day line.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 1.6% for the week. On Friday, QQEW rose 2.5% to hit a 2023 high and nearly surpassed its August high. This was a sign of broader participation, at least among growth stocks.
Invesco S&P 500 Equal Weight ETF (RSP) fell 1.2% this week, again below all moving averages despite a firm gain on Friday.
In the AI and chip space, many stocks have seen significant week-to-week gains, with many competing beyond the buy point.
But in other regions, market leadership is narrow. Many stocks and groups suffered heavy losses midweek. Some have recovered, but some may need to be reconfigured.
Debt ceiling deals are premised on passing Congress, averting a catastrophic default. However, the market rebound held or rebounded until the default deadline in early June. So even if there is an actual deal to remove the debt ceiling, there may not be much extra benefit. Dow futures will also depend on the reaction of the Treasury and FX markets to news of the debt ceiling.
Fed interest rate hike fears may be back in the spotlight. On the plus side, it coincided with relatively strong economic data, easing recession fears.
Timing the Market with IBD’s ETF Market Strategy
what to do now
There were some buying opportunities last week, but investors needed to get on board quickly. It is also possible that various signals in the market caused some caution.
While this week has been “fortune favors the brave,” the last few months have been wise to say that “cautiousness is part of being brave.”
Ideally, a market rally will provide a clear signal to be more or less aggressive. It hasn’t happened since early February.
Meanwhile, many of the AI and chip stocks ran through the buy zone and never looked back, while many others are either picking out or giving clear sell signals.
Assuming the market continues to move higher and more stocks send buy signals, you can increase your exposure. But do it gradually. If this uptrend takes hold, it won’t take long to be fully exposed. Should this split market turn out to be Hyde’s turn, losses will be minimal.
Run screens this weekend. A big change in the past week can result in big changes to your watchlist. Please come back on Tuesday. Flexible and ready to act.
Read “The Big Picture” daily to stay on top of market direction and key stocks and sectors.
Follow Ed Carson on Twitter. @IBD_ECarson Stock market updates and more.
You’ll probably also like:
Why this IBD tool simplifies your search for top stocks
Want to profit quickly and avoid big losses? Try SwingTrader
Best growth stocks to buy and watch
IBD Digital: IBD’s Premium Stock Listings, Tools and Analysis Now Available
Debt ceiling agreement completed. An economic recession and stock market declines are likely to follow.
AI plays lead 5 stocks close to buy point
