Market Rally Awaits Earnings Wave Led By Microsoft, Meta, Amazon, Google; How To Prep

The stock market rally had another sideways week, with the Dow Jones, S&P 500 and Nasdaq composite all drifting lower in continued tight action. Investors await a flood of earnings headlined by Microsoft (MSFT), Amazon.com[ticker symb=AMZN], Meta Platforms (META) and Google parent Alphabet (GOOGL).

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Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures.

Buying opportunities haven’t been plentiful, and many have fizzled or failed. Earnings season will hit full force in the coming week, offering the potential for the market rally to break out of its rut.

Microsoft, Amazon, Meta and Google are especially important. Microsoft and, arguably, Amazon stock are actionable now. Google stock is close to a buy point while Facebook parent Meta is pulling back after a massive run.

By themselves, they have a big impact on the major indexes. And their comments about future growth in key markets such as cloud computing, artificial intelligence, e-commerce and PCs will have a major influence on the tech sector and beyond.

Meanwhile, First Solar (FSLR), Dexcom (DXCM), Mobileye (MBLY), Boeing (BA), ServiceNow (NOW), Cloudflare (NET), Align Technology (ALGN), Fair Issac (FICO), Visa (V) and Chipotle Mexican Grill (CMG) are just some of the notable companies reporting this coming week with stocks in or near buy zones.

MBLY stock in particular has an action-packed week, with its IPO lockup expiration on Monday followed by earnings on Wednesday.

Meanwhile, keep an eye out for weekend news on Shockwave Medical (SWAV). SWAV stock spiked Friday on a report that Boston Scientific (BSX) is mulling a Shockwave takeover bid. But the companies haven’t said anything.

The video embedded in this article reviewed Arista Networks (ANET), TJX Cos. (TJX) and JPMorgan Chase (JPM).

Microsoft stock is on IBD Long-Term Leaders.

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 actionable stocks in the stock market rally on IBD Live

Stock Market Rally

The stock market rally didn’t have a lot of direction this past week.

The Dow Jones Industrial Average dipped 0.2% in last week’s stock market trading. The S&P 500 index edged down 0.1%. The Nasdaq composite fell 0.4%. The small-cap Russell 2000 rose 0.6%.

The 10-year Treasury yield rose 5 basis points to 3.57%.

U.S. crude oil futures tumbled 5.5% to $77.87 a barrel last week.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) climbed 2.7% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) dipped 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) nudged down 0.1%, with MSFT stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) slid 1.5%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 3% last week and ARK Genomics ETF (ARKG) climbed 1%.

SPDR S&P Metals & Mining ETF (XME) tumbled 4.2% last week. The Global X U.S. Infrastructure Development ETF (PAVE) rose 0.55%. U.S. Global Jets ETF (JETS) ascended 1.8%. SPDR S&P Homebuilders ETF (XHB) rallied 3.4%. The Energy Select SPDR ETF (XLE) slumped 2.6% and The Health Care Select Sector SPDR Fund (XLV) dipped 0.2% after five weekly gains.

The Financial Select SPDR ETF (XLF) climbed 1%, with JPM stock a major holding. The SPDR S&P Regional Banking ETF (KRE) advanced 1.5%, but has a long way to go to recover.

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Market Rally Analysis

The stock market rally continues to move sideways, with the major indexes falling slightly. The S&P 500 and Nasdaq composite effectively have four-weeks-tight patterns. The Nasdaq tested support at the 21-day line and the 12,000 level late in the week.

More broadly the major indexes are stuck in a range between their early 2023 highs and their 50-day moving averages.

Market breadth remains lackluster, especially on the Nasdaq. It’s no longer falling apart, but not improving much either.

The Invesco S&P 500 Equal Weight ETF (RSP) ended fractionally higher this past week, holding tightly to its 50-day line.

Homebuilders look strong, with more reporting this coming week. Medical products firms also have been leading, including Boston Scientific and SWAV stock.

Chip stocks have been pulling back all month, with the SMH ETF closing just below its 50-day line on Friday. This could be a healthy pause, but it’s been difficult for chip investors. Other tech hardware names struggled this past week on IT spending concerns.

Microsoft, Google, Amazon and Meta will provide some insight into broader IT spending plans. Their own spending plans and growth outlooks will be important for key suppliers, such as Arista Networks.

At some point, the market rally will break out of its recent range, for better or worse. Earnings season over the next few weeks, along with major economic data and the Fed meeting in early May could provide the catalyst for a decisive rally or sell-off. Or, they could offer a slew of mixed signals that add more volatility to a rangebound market.

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What To Do Now

The market rally hasn’t been doing anything wrong, but isn’t doing anything special at the moment.

Sideways action and short-lived rallies, along with sector rotation, is not a great environment for buying stocks, especially on traditional breakouts. By the time a stock makes a strong move, flashing buy signals, there’s a good chance it’ll come back down.

Truth be told, it’s probably a positive that the market rally and leading stocks didn’t take off just ahead of earnings from Microsoft, Google and hundreds of others.

Now with earnings season about to head full force ahead, it’s not only important to know which holdings have results on tap, but also which rivals, suppliers and customers are reporting.

If the market reacts well to earnings, a number of buying opportunities could arrive. Even then, investors should increase exposure gradually. The risks of specific stocks or the broader market giving back gains may remain high.

But be ready to jump on early entries. Have watchlists up to date. Keep track of a large list of stocks acting well or setting up, putting special focus on stocks right around buy points.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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