Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures.
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The stock market rally sent mixed messages during the week, but ended on a bearish one. The Nasdaq set a record close Thursday as Nvidia (NVDA) and other megacap and AI stocks rebounded. But the S&P 500, Dow Jones and Russell 2000 struggled from hot inflation and Mideast tensions, with the Dow and small-cap Russell below their 50-day lines. The Nasdaq just eked out a weekly gain
The CBOE Volatility index, the market fear gauge, spiked Friday to its highest levels since late October amid worries that Iran will directly attack Israel, raising the prospect of a much-bigger Mideast conflict. Disappointing JPMorgan Chase (JPM) guidance, a big Arista Networks (ANET) sell-off and China woes for Intel (INTC) and Advanced Micro Devices (AMD) took a toll too.
All of that spurred a risk-off shift, especially heading into the weekend.
Investors need to recognize Friday’s market expectations breaker and respond accordingly.
Late Friday, Tesla (TSLA) cut the price of Full Self-Driving subscriptions to $99 a month from $199. Shares edged higher.
Salesforce.com (CRM) is is in late-stage talks to buy data-management software maker Informatica (INFA), The Wall Street Journal reported Friday night
Key Earnings Ahead
Goldman Sachs (GS) and Charles Schwab (SCHW) report early Monday. Goldman stock fell below its 50-day line on Friday, while Schwab is holding in a buy zone.
Chip-equipment giant ASML (ASML) and Nvidia chipmaker Taiwan Semiconductor (TSM) may be the two most important earnings in the coming week. Their results and guidance will have big implications for the chip sector, including Nvidia, Broadcom (AVGO), Lam Research (LRCX), Applied Materials (AMAT) and KLA Corp. (KLAC).
All of these chip stocks have new bases or potential entries.
Nvidia stock is on IBD Leaderboard, SwingTrader and the IBD 50. KLA stock is on the IBD Long-Term Leaders list. Nvidia, ASML and Broadcom stock are on the IBD Big Cap 20.
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 doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze leading stocks and the market on IBD Live
Stock Market Rally
The stock market rally had a tough week on a hot CPI inflation report and Mideast fears, with Friday’s losses wiping out Thursday’s bullish signals.
The Nasdaq, which hit a record close Thursday, fell 1.6% in Friday’s stock market trading to end the week with a 0.45% loss. The composite finished below the 21-day line but just above the 50-day and 10-week lines. It’s also still trading with the big April 4 reversal day.
The rest of the market looked worse.
The S&P 500 index sank 1.55% for the week, below the 21-day. The benchmark index closed just above its 50-day line but below its 10-week.
The Dow Jones Industrial Average slumped 2.4% to the lowest level since late January while the small-cap Russell 2000 shed 2.9% to the lowest since late February. Both are clearly below the 50-day.
The Invesco S&P 500 Equal Weight ETF (RSP) fell 2.6%, knifing through the 50-day line Friday. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) slumped 1.7%, below the 50-day line to its worst levels since late February.
Crude oil fell 1.4% to $85.66 a barrel for the week, backing off Friday’s intraday high of $87.67. Gold climbed 1.3% to $2,356.20 an ounce, also well off Friday highs.
The 10-year Treasury yield leapt 12 basis points to 4.5%, with Thursday’s peak of 4.59% a five-month high. Investors only see a modest chance of a Fed rate cut in June and are only leaning toward a move in July.
Stock Market Fear Gauge Soars
The CBOE Volatility index shot up 16.1% to 17.31 on Friday, with a the 19.20 session peak the highest since late October. Excessive fear could foreshadow at least a short-term bottom. But the market fear gauge is still well off its October peaks, let alone its Covid highs.
Another sentiment gauge, notably the bulls vs. bears reading, had been near excessive bullish levels heading into this past week.
If Mideast tensions ease, there could be a snapback rally in stocks. But a direct Iran-Israel conflict could trigger a far-larger fear spike and a big retreat from equities.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) fell 1.7% for the week. The VanEck Vectors Semiconductor ETF (SMH) slipped 0.9%. Nvidia and Taiwan Semiconductor are the largest SMH holdings, with ASML, Lam Research, KLA and AMAT stock also members.
SPDR S&P Metals & Mining ETF (XME) declined 1% last week. The Global X U.S. Infrastructure Development ETF (PAVE) tumbled 3.4%. U.S. Global Jets ETF (JETS) descended 2.6%. SPDR S&P Homebuilders ETF (XHB) stepped down 4%. The Energy Select SPDR ETF (XLE) retreated 2% and the Health Care Select Sector SPDR Fund (XLV) lost 3%. The Industrial Select Sector SPDR Fund (XLI) gave up 2.2%.
The Financial Select SPDR ETF (XLF) slumped 3.6%, with JPMorgan a major component. The SPDR S&P Regional Banking ETF (KRE) fell back 3.5%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) declined 1.25% last week and ARK Genomics ETF (ARKG) slid 3%.
Time The Market With IBD’s ETF Market Strategy
ASML, Taiwan Semi Earnings
Dutch chip-equipment giant ASML reports Wednesday morning and chip foundry giant Taiwan Semiconductor is due early Thursday.
Analysts expect ASML earnings to tumble in Q1, but see a recovery in the second half. Taiwan Semi earnings are expected to be flat, though unofficial targets may be higher after the foundry giant reported better-than-expected Q1 sales on April 10.
Taiwan Semi is benefitting from strong demand for AI and other advanced chips. TSMC’s guidance on earnings and capital spending will be key for the industry.
ASML stock fell 1.8% to 961.84 last week, closing right around the 50-day and 10-week lines. It now has a flat base with a 1,056.34 buy point. Investors could use a trendline entry around 1000 to start a position off the 10-week, or the April 1 high of 1002.66.
TSM stock rose 0.85% to 142.56 for the week. Shares have been consolidating for a few weeks, but need another week for a proper base. Investors could use the April 10 high of 148.43 as an entry if Taiwan Semi stock rallies on earnings.
Chip Stocks
Nvidia stock edged up 0.2% to 881.86 for the week. Shares rebounded from the 10-week line on Wednesday-Thursday before paring gains Friday, still holding the 21-day. NVDA stock now has a flat base with a 974 buy point. At this point, investors could use Thursday’s high of 907.39 as an early entry.
Broadcom stock edged up 0.35% to 1,344.07 for the week, finding support at the 21-day and 10-week lines amid continued tight closes but hitting resistance near the 1,400 level. AVGO stock now has a consolidation, with the April 4 high of 1,403.98 serving as a handle buy point.
Lam Research stock fell 1.2% to 957.04 for the week, finding support at the 10-week line. Shares have a 1,007.39 flat-base buy point, according to MarketSurge. Lam has its own earnings due on April 24.
Applied Materials stock was unchanged at 207.86 for the week, trading tightly around the 21-day line. Investors could treat the recent consolidation as de facto flat base with a 214.91 buy point. A three-weeks-tight pattern gives a slightly lower entry of 213.33 based on the April 11 high.
KLAC stock dipped 0.3% to 680.78, right around the 50-day and 10-week lines. KLA has a 729.15 flat-base buy point. A decisive move from the 50-day line could offer an early entry. KLA earnings are due April 25.
What To Do Now
After Thursday’s strong action, the expectation was that the market would continue to rise, especially the Nasdaq and leaders such as Nvidia.
Instead there was a big retreat Friday. A direct Iran-Israel conflict is a wild card, while JPMorgan and Arista didn’t help.
But whatever the reason, this is still a sideways market for the Nasdaq, and those are tough to handle. For the Dow and Russell 2000 — and perhaps the S&P 500 — it’s looking more and more like a pullback or emerging correction.
Investors have to reassess after Friday and the past week. If you took new positions on Wednesday-Thursday, you may need to cut them back or exit entirely.
It’s still a time to be working on watchlists. If the drumbeat of war fades and upcoming earnings reactions are positive, you’ll want to be ready. But you also have to be prepared to scale out more aggressively.
With earnings season kicking in, know when your holdings report. You also need to know when key rivals, customers and suppliers to your holdings are on tap.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
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