Dow Jones futures fell Tuesday morning, along with S&P 500 futures and Nasdaq futures after the Labor Day weekend.
The stock market rally showed mixed action last week. The Dow Jones hit a record high while the S&P 500 edged higher and Russell 2000 edged lower. The Nasdaq composite lagged, as Nvidia earnings failed to impress. But the tech-heavy composite did recover its 50-day line in a solid Friday bounce.
The S&P 500, just below a record high, has entered a power trend, a positive sign for the market rally. A number of stocks broke out or set up in the past week.
ServiceNow, Netflix, AppLovin, Comfort Systems, NextEra Energy and Spotify are all in buy areas.
So is China EV giant BYD. The Tesla archrival broke out Friday, with BYD reporting a big jump in sales on Sunday. Several other China EV makers reported August deliveries as well.
Broadcom, Samsara and Dick's Sporting Goods are around buy points with earnings due this coming week.
On Friday, investors will get the August jobs report.
Nvidia and ServiceNow stock are on IBD Leaderboard. Comfort Systems is on IBD SwingTrader. Nvidia stock, Netflix, Samsara and Comfort Systems are on the IBD 50.
The video embedded in this article discussed the market action on Friday and for the week. It also analyzes Broadcom stock, Comfort Systems and NextEra Energy.
Dow Jones Futures Today
Dow Jones futures fell 0.5% vs. fair value. S&P 500 futures retreated 0.5% and Nasdaq 100 futures declined 0.6%.
Crude oil futures fell more than 1%.
U.S. stock markets were closed Monday for Labor Day, though other exchanges around the world were open.
The official China manufacturing index dipped 0.3 point in August to 49.1, further below the break-even 50 level and under views for an unchanged 49.4. However, the Caixin manufacturing index edged up 0.6 point to 50.4 vs. views for 50.
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 mixed action during the week, but had a strong finish Friday.
The Dow Jones Industrial Average rose 0.9% in last week's stock market trading. The S&P 500 index climbed 0.2%. The Nasdaq composite fell 0.9%, but gained 1.1% on Friday. The small-cap Russell 2000 lost a fraction.
The S&P 500 closed Friday a fraction below the top of its recent range and less than 0.4% below all-time highs. On Friday, the benchmark index entered a power trend. It's a positive sign, but not a buy signal itself. Mike Webster, IBD's chief market strategist, said on IBD Live Friday:
"It's very important to know that (the start of a power trend) ... is not a buy signal. It is just a different phase. So what it does is you treat additional buy signals differently. Doesn't mean you take extra action today but if we get more buy signals next week or the week after while the power trend is still going, if you were going to go on margin, if there's stuff to buy, if you're making progress and the power trend is still on, that would be the time to do it."
The Nasdaq has some work to do before getting to its own power trend. Right now, it needs to decisively reclaim the 50-day line, then clear its recent range and the 18,000 level. On the flip side, there's the risk that the Nasdaq could break below its 21-day line.
Nasdaq futures suggest the composite will fall back below the 50-day line and perhaps test the 21-day line at Tuesday's open.
More broadly, the recent action in the Nasdaq, Nvidia and megacaps suggests that the tech sector may lag the non-tech sector for a while.
The 10-year Treasury yield rose 10 basis points to 3.91%, but it's down 77 basis points over the last four months.
U.S. crude oil futures fell 1.7% to $73.55 a barrel last week.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF fell 1.85% last week. The iShares Expanded Tech-Software Sector ETF advanced 0.5%. ServiceNow stock is a big IGV position, with Samsara also in the ETF. The VanEck Vectors Semiconductor ETF slumped 2%. Nvidia stock is the dominant SMH holding, with Broadcom also a key member.
SPDR S&P Metals & Mining ETF edged up about 0.1% last week. The Global X U.S. Infrastructure Development ETF climbed 0.5%. The SPDR S&P Homebuilders ETF declined 1.5%. The Energy Select SPDR ETF rose 1% and the Health Care Select Sector SPDR Fund gained 1.1%.
The Industrial Select Sector SPDR Fund rallied 1.7% while the Financial Select SPDR ETF leapt 2.95%.
Reflecting more-speculative story stocks, ARK Innovation ETF slumped 3.1% last week and ARK Genomics ETF declined 2.15%. Tesla stock is still a major holding across Ark Invest's ETFs. Cathie Wood also has built up a significant position in Nvidia and owns a small stake in BYD stock.
Time The Market With IBD's ETF Market Strategy
Nvidia Stock
NVDA stock sold off 7.7% last week to 119.37. Shares rose 1.5% on Friday but still closed just below its 50-day line.
Nvidia fell modestly Tuesday morning.
Nvidia reported a 152% EPS gain late Wednesday and guided up for Q3 revenue. But the beat-and-raise wasn't as large as in prior quarters.
After Friday's close, Nvidia stock has a handle, giving it a lower official buy point of 131.26.
Stocks In Buy Zones
ServiceNow rose 3.2% to 855 last week, continuing a rebound from the Aug. 5 low. On Friday, NOW stock broke out past an 850.33 buy point from a new flat base.
AppLovin stock climbed 3% to 92.87. On Friday, APP stock finally closed above a 91.91 buy point from a V-shaped consolidation after several intraday attempts. The relative strength line, which tracks a stock's performance vs. the S&P 500, is almost at a multiyear high.
Netflix stock climbed 2.1% to 701.35 last week, just above a 697.49 cup-base buy point.
Comfort Systems stock climbed 4.4% to 353.52. The AI-adjacent heating and cooling play on Friday closed above a 347.73 handle buy point as well as an alternate entry at 352.47, the top of the base.
NextEra stock rose 1.1% to 80.51, just reclaiming an 80.47 buy point on Aug. 26.
Spotify stock edged up 0.1% to 342.88, but held support at the 21-day line and remains within range of a 331.08 flat-base buy point, according to MarketSurge. Shares have been trading tightly for weeks. Investors could use 350.32 as a de facto four-weeks-tight entry within an emerging consolidation.
BYD stock broke out of a cup-with-handle base on Friday, jumping 5.2% to 30.50 for the week. Up 10.2% in 2024, BYD is the only EV maker that's positive this year.
China EV Sales
On Sunday, BYD reported August sales of373,083, a big jump vs. July's record 342,383, though there had been buzz that it would get closer to 400,000.
Among fellow China EV makers, Li Auto reported August deliveries fell vs. July's record. Nio deliveries edged down, but held above 20,000 for a fourth straight month. XPeng and Zeekr reported big month-to-month gains. All four EV stocks are down sharply in 2024.
Tesla stock popped 3.8% Friday, but fell 2.8% for the week to 214.11, dropping below its 50-day. Shares rose slightly early Tuesday.
On Monday, industry data showed Tesla China sold 86,697 EVs in August, including exports, up 17% vs. July and 3% vs. a year earlier.
Stock Market Analysis
While the market rally is pausing, it's made a lot of progress from the Aug. 5 low. More stocks are setting up bases that are no longer so V-shaped, with handles also coming into shape.
The S&P 500 entering a power trend reflects this broader picture.
Investors who made a series of buys since the Aug. 13 follow-through day may want to be cautious about significantly adding exposure until the current pause resolves itself.
If the S&P 500 and Nasdaq can clear their recent short-term ranges, that would be highly bullish, almost certainly coinciding with a number of breakouts.
But if the Nasdaq breaks clearly below the 50-day and 21-day lines, many recent buys and setups would falter, especially in tech.
Don't be too exposed to AI and tech. Finance, utility and some retail and footwear stocks are showing strength, along with a variety of medicals.
Make sure you have your watchlists up to date and review your portfolio.
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