Dow Jones futures rose slightly Monday morning, along with S&P 500 futures and Nasdaq futures. Tesla cut Model Y prices in China while U.S. Steel rejected a takeover bid.
Workplace management software maker Monday.com crushed EPS views and also topped on revenue. MNDY stock jumped more than 5% before the open.
The stock market rally had a mixed week, but the action was generally negative, with resurgent Treasury yields and mixed earnings weighing on growth.
The Nasdaq fell through the 50-day and 10-week moving averages last week. Tesla stock and Nvidia are decisively below their 10-week lines. Nvidia stock's decline is especially important as it's the leader of the AI-led market rally.
The S&P 500 edged lower, but found support around its 10-week line Friday. The Dow Jones rose slightly for the week.
The market rally is in danger of falling into a correction. While techs arguably already are in a correction, industrials, infrastructure, housing and energy sectors are holding up or gaining ground. So are some retail, travel, medical, transportation and financial names.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures advanced 0.1% and Nasdaq 100 futures climbed 0.1%.
The 10-year Treasury yield held at 4.17%.
Crude oil futures fell 1%. Copper prices edged lower.
Hong Kong's Hang Seng fell 1.6% as property sector woes continued.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Stocks Near Buy Points
Arista Networks, Tenaris, Visa, SLB, Lennar, Martin Marietta, Delta Air Lines, Flowserve, Lululemon Athletica and JPMorgan Chase are all setting up or holding up.
Meanwhile, Cardinal Health, Cava Group, Home Depot, StoneCo and On Holding are trading around buy zones with earnings due this coming week.
Still, investors should be thinking defensively in the current market environment.
Tesla stock, Nvidia and Martin Marietta are on IBD Leaderboard. SLB stock is on SwingTrader. Tesla, SLB, Applied Materials and ANET stock are on the IBD Big Cap 20. Flowserve was Friday's IBD Stock Of The Day.
The video embedded in this article discussed the weekly market action in depth, while also analyzing Flowserve, JPM stock and Nvidia.
Tesla Cuts Model Y China Prices
The EV giant cut China prices of the Model Y Long Range and Performance variants by RMB14,000 ($1,930), adding to pressure on Tesla margins. The Model Y faces several new crossover rivals in China. The base Model Y, the most popular variant in China, was left unchanged.
Meanwhile, Tesla is offering an insurance subsidy of RMB 8,000 for Model 3 buyers. It may be trying to clear out inventory. An updated Tesla Model 3 reportedly is imminent in China.
Tesla Stock
TSLA stock fell more than 2% early Monday, signaling a two-month low.
Last week, Tesla stock declined 4.4% to 242.65. Shares fell below their 50-day line on Monday and then kept losing ground. TSLA stock is now 6.7% below its 10-week line. Finishing the week more than 2% below the 10-week is a significant sell signal. Recent buyers should likely get out.
Those with big cushions can consider taking partial profits depending on your investing strategy and conviction in the stock.
U.S. Steel Rejects Takeover Bid, But...
Cleveland-Cliffs offered $17.50 a share plus 1.02 CLF shares for each U.S. Steel share, worth $32.53 a share as of Friday's close. U.S. Steel rejected the deal, Cleveland-Cliffs said Sunday. Earlier Sunday, U.S. Steel said it was mulling strategic options after "receiving multiple unsolicited proposals." Options include the sale of key assets or even the entire company.
U.S. Steel stock soared more than 25% early Monday. CLF stock reversed slightly higher.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally had a mixed week that was damaging for the Nasdaq and growth names.
The Dow Jones Industrial Average rose 0.6% in last week's stock market trading. The S&P 500 index dipped 0.3%. The Nasdaq composite slumped 1.9%. The small-cap Russell 2000 gave up 1.65%.
Market breadth is weakening on the Nasdaq, but much less so on the NYSE.
The 10-year Treasury yield jumped 11 basis points to 4.17%, close to the 2023 high of 4.21% set Aug. 4. The yield rocketed from a Thursday morning low of 3.96%.
With Treasury yields rising and overseas economies ailing, the U.S. dollar is coming up to 2023 highs.
U.S. crude oil futures climbed 0.45% to $83.19 a barrel, the seventh straight weekly gain. But copper prices fell 3.4%, and it's off 5.2% in two weeks.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF tumbled 4.9% last week. The iShares Expanded Tech-Software Sector ETF slid 1.7%. The VanEck Vectors Semiconductor ETF plunged 5.2%. Nvidia stock is the No. 1 SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF gave up 5.8% last week and ARK Genomics ETF sold off 6.15%. Tesla stock is the No. 1 holding across Ark Invest's ETFs.
The SPDR S&P Metals & Mining ETF slipped 1.4% last week. The Global X U.S. Infrastructure Development ETF edged up 0.2%, with MLM stock a holding.
U.S. Global Jets ETF edged down 0.5%, with DAL stock a notable component. SPDR S&P Homebuilders ETF dipped 0.7%, with LEN stock a member.
The Energy Select SPDR ETF popped 3.5%. SLB is one of the top XLE components. and the Health Care Select Sector SPDR Fund rose 2.45%, with CAH stock advancing. The Industrial Select Sector SPDR Fund nudged 0.6% higher.
The Financial Select SPDR ETF rose a fraction, with Dow Jones giants Visa and JPM stock both notable holding. The SPDR S&P Regional Banking ETF slid 1.65%.
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Nvidia Stock
Nvidia fell below its 50-day line on Wednesday, reversed lower on Thursday and extended losses Friday. Shares finished down 8.6% to 408.55, their worst weekly decline of the year, and in higher volume. NVDA stock is now 5.1% below its 10-week line. Recent investors likely should be out.
Longer-term investors could take profits or not. If you're going to hold a winner for its big run, you're going to have to sit through corrections. Nvidia is the leading stock of the AI-led rally, but are you willing to sit through the downturn?
Also note: Nvidia earnings are due on Aug. 23.
The overall chip sector is falling back, with fellow leaders such as Broadcom and Marvell Technology tumbling below the 50-day line this past week. More broadly, AI plays had a tough week.
Market Rally Analysis
The stock market rally is on the verge of a correction.
The Nasdaq fell through its 50-day and 10-week lines on Wednesday, and those are now starting to separate. But it's not decisively below those levels.
The S&P 500 touched its 10-week line on Friday, but is holding that for now. The Russell 2000 nearly touched its 10-week. Both have hit resistance at the 21-day line.
The Dow Jones is holding its 21-day.
Many growth leaders are decisively below the 10-week line, with Tesla and Nvidia stock just two notable names. A large number of tech plays suffered huge losses in the past couple of weeks.
On the other hand, the S&P 500 is holding the 50-day line, even with tech losses. Many sectors look fine, with Visa, SLB, JPMorgan, Flowserve and Lululemon among the names in those fields. That could continue even if the market enters a mild correction. But most aren't really booming either.
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What To Do Now
Investors should be increasingly defensive, especially with regards to growth plays. Overall and tech exposure should have been coming down in the past couple of weeks, even if only by addressing holdings on a case-by-case basis.
You can still make buys outside of tech, but those areas are generally holding up or giving ground grudgingly vs. making real advances. One exception is the energy sector, fueled by weeks of higher oil prices. SLB stock is among the few names noted in this article that is actually in a buy zone.
It's still possible that the market rally revives, especially if Treasury yields ease.
The ongoing pullback is letting leading stocks pull back to key levels and work on new bases. So a slew of buying opportunities could develop, whether that's in a few days or several weeks.
Investors need to prepare for that moment. Build up those watchlists, keeping an eye on stocks showing strong relative strength.
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