Dow Jones futures showed slight increases on Sunday evening, with modest rises reported for S&P 500 and Nasdaq futures. Reflecting on the previous week, the stock market enjoyed a strong rally, capitalizing on significant gains from the prior week. The Federal Reserve’s recent announcement of a significant rate cut contributed to this momentum, driving the S&P 500 and Dow Jones to record heights while the Nasdaq and Russell 2000 surpassed their 50-day moving averages confidently.
Many leading stocks seized the opportunity, posting breakouts or signaling buying opportunities. Key players like Meta Platforms (META), Royal Caribbean (RCL), Spotify (SPOT), Apple (AAPL), Evercore (EVR), and Tesla (TSLA) became actionable as their stock charts exhibited varying patterns of readiness.
Noteworthy is Nvidia (NVDA), which saw a modest decline last week, hovering around support levels. While Nvidia remains an essential stock for the market, especially in the AI sector, it hasn’t been leading as it previously did.
For investors, now appears to be an opportune moment to gradually increase exposure to growth stocks, shifting portfolios toward more aggressive options. Notably, Meta Platforms and Nvidia are featured on IBD Leaderboard, while Spotify and Royal Caribbean rank on SwingTrader. Meta Platforms was highlighted as IBD’s Stock of the Day recently.
In the latest updates, Dow Jones futures have slightly surpassed fair value, while S&P 500 futures have climbed by 0.2% and Nasdaq 100 futures by 0.5%. However, trading during the overnight hours does not guarantee the same trends will follow when regular trading resumes.
The past week saw solid market performance, particularly after Thursday’s impressive jump due to the Fed’s rate cut. In the last week’s trading, the Dow Jones Industrial Average rose by 1.6%, the S&P 500 advanced 1.4%, and the Nasdaq composite gained 1.5%. Additionally, the small-cap Russell 2000 surged 2.1%. Both the S&P 500 and Dow Jones set new records, although some modest pullbacks occurred on Friday.
Current indicators show that the Nasdaq and Russell 2000 are well above their 50-day moving averages, having broken through late-August peaks. It’s reasonable to anticipate a pause at these levels, allowing top stocks to form new bases or handles.
The market is experiencing a shift from defensive sectors to growth-oriented sectors, encompassing thriving industries such as homebuilders, financials, and several industrials. Meanwhile, the 10-year Treasury yield has risen by 8 basis points to 3.73%, having reached a 52-week low earlier in the week, while the two-year Treasury yield remained stable at 3.57%.
Investors have seen a notable uptick in growth ETFs, with the Innovator IBD 50 ETF (FFTY) rebounding 3.7% last week, and the iShares Expanded Tech-Software Sector ETF (IGV) gaining 2.1%. The VanEck Vectors Semiconductor ETF (SMH) experienced a slight increase of 0.4%, while funds emphasizing more speculative strains like ARK Innovation ETF (ARKK) and ARK Genomics (ARKG) reported gains of 2.45% and 0.5%, respectively.
As we further analyze the individual stocks, Nvidia’s stock fell 2.6% last week, closing just below its 50-day moving average while struggling to maintain the lead it once held. Investors are advised to monitor its performance closely, especially given its past influence on the broader AI and chip sectors.
Meta Platforms has emerged as a standout, rising 7% over the past week, surpassing key buy points. Similarly, Tesla’s shares increased by 3.5%, showcasing resilience with upcoming announcements that could further impact investor sentiment in October.
Apple stock rebounded as well, climbing 2.6% and clearing significant moving averages amid positive news surrounding its new iPhone 16, while Spotify surged by 8.1% and Royal Caribbean jumped 3.6%.
As we look ahead, with the S&P 500 and Dow Jones at new heights and the Nasdaq finding renewed strength, there’s potential for additional buying opportunities. The current economic climate appears supportive, especially with the Fed’s recent metrics showing rate cuts while the economy grows modestly.
The forthcoming week will feature important earnings reports from companies like Micron Technology (MU), KB Home (KBH), and Costco Wholesale (COST), alongside crucial economic indicators including the core PCE price index, which remains a closely watched measure of inflation.
In summary, with a wealth of actionable stocks and a favorable market environment, investors should consider maintaining a heavier investment stance, particularly in aggressive growth domains. Watchlists should be cultivated diligently, while remaining adaptable and prepared for shifts in market trends. Close attention to the Nasdaq’s performance will be essential, especially if it approaches its 50-day moving average, signaling a possible recalibration of growth strategies.