Market Rally Rebounds: Dow Jones Futures

Dow Jones futures fell slightly after hours, along with S&P 500 futures and Nasdaq futures. JPMorgan Chase (JPM), Citigroup and UnitedHealth are big earnings reports on tap Friday.

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The stock market rally rebounded strongly following another slower-than-expected inflation reading, along with rising jobless claims. The major indexes recouped Wednesday’s losses or more. The S&P 500 hit its best level in nearly two months, joining the Dow Jones. The Nasdaq staged a subsequent follow-through day.

Leading stocks had solid gains, but not many flashed buy signals.

Megacap stocks had a strong session. Apple (AAPL), Amazon.com (AMZN), Google parent Alphabet (GOOGL), Meta Platforms (META), Microsoft (MSFT) and Tesla stock all rose more than 2%. Google stock rose back above a buy point. Apple stock and Microsoft rose within buy zones. Tesla (TSLA) and Amazon stock rallied within bases that formed just below the 200-day moving average. Meta stock hit an 11-month high.

Amazon is joining Microsoft and Google in the generative AI field, the e-commerce and cloud computing giant said Thursday.

Meta stock is on IBD Leaderboard and SwingTrader. MSFT stock is on IBD Long-Term Leaders.

Investors should be taking part in this market uptrend. But big bank earnings loom large.

Dow Jones Futures Today

Dow Jones futures declined 0.1% vs. fair value. S&P 500 futures edged lower and Nasdaq 100 futures fell 0.1%.

Late Thursday, Boeing (BA) warned of lower 737 Max production and deliveries for the short term, citing a parts issue from a supplier. BA stock fell more than 4%, weighing on Dow Jones futures.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Bank Earnings

JPMorgan, Citigroup (C) and Wells Fargo (WFC) along with superregional PNC Financial Services (PNC) all report Friday morning.

Amid the banking crisis, investors will likely be more concerned about the balance sheet: deposits, lending and more. They’ll be keenly interested in bank executives’ guidance going forward.

Bank deposits have fallen for 10 straight weeks, according to Fed data, though smaller banks saw a slight increase in the latest week. Fresh weekly figures will be released late Friday. Fears of bank failures have faded, but deposit rates — especially at the largest banks — are still well below money market funds and short-term Treasury bills.

If banks have to start paying substantially more for deposits, net interest margins will come under pressure. That’s especially true for smaller banks, as depositors still seek safer haven in too-big-to-fail giants. Lower and more-expensive deposits will also likely hit lending, and thus the economy. Bank loans were starting to come down in the past few weeks.

Federal Reserve staff saw a “mild recession” later this year due to banking stress, according to minutes from the Fed’s March 21-22 policy meeting released on Wednesday.

All of this explains why the broader market will pay close attention to Friday’s bank results and earnings calls.

The bank stocks are clear laggards.  JPM stock edged up 0.4% on Thursday, above its 200-day line but pinned below its 21-day line and well below its 50-day. Citi stock is modestly below its 50-day and 200-day. WFC stock is well below those key levels, but recently regained the 21-day line.

PNC stock rose 1.4% on Thursday, but after hitting its worst level since November 2020 intraday.

Several other major financials are due next week, including Bank of America (BAC), Charles Schwab (SCHW), Goldman Sachs (GS) and Morgan Stanley (MS), as well as several regionals and superregionals.

UnitedHealth Earnings

Also reporting before the open, UnitedHealth Group (UNH) is a Dow Jones giant like JPMorgan.

UnitedHealth earnings kick off results for health insurers. UNH stock climbed nearly 1% to 526.21 on Thursday, moving toward a 558.20 buy point. Shares have run up over the past two weeks, as Medicare reimbursements are expected to climb. UNH stock has a 558.20 buy point but isn’t far from a possible trendline entry. A pause around the trendline might be welcome.

UNH stock has rejoined Long-Term Leaders.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Stock Market Rally

The stock market rally bounced back from Wednesday’s downside reversal, with the major indexes gaining momentum during Thursday’s session, closing near intraday highs.

The Dow Jones Industrial Average rose 1.1% in Thursday’s stock market trading. The S&P 500 index popped 1.3%. The Nasdaq composite jumped 2%. The small-cap Russell 2000 advanced 1.3%.

U.S. crude oil prices fell 1.1% to $82.16 a barrel, retreating from their best levels in nearly five months.

The 10-year Treasury yield rose 3 basis points to 3.45%.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.55%. The iShares Expanded Tech-Software Sector ETF (IGV) bounced 1.9%, with ServiceNow and MSFT stock big holdings. The VanEck Vectors Semiconductor ETF (SMH) advanced 0.8%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) popped 4% and ARK Genomics ETF (ARKG) 5.6%. Tesla stock is a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) climbed 2.2%, with FCX stock a notable holding. The Global X U.S. Infrastructure Development ETF (PAVE) edged up 0.3%. U.S. Global Jets ETF (JETS) nudged 0.2% higher. SPDR S&P Homebuilders ETF (XHB) rose 0.4%. The Energy Select SPDR ETF (XLE) climbed 0.6% and the Health Care Select Sector SPDR Fund (XLV) climbed 1.3%.

The Financial Select SPDR ETF (XLF) closed up 0.9%. JPM stock, Wells Fargo and Citigroup are all big XLF holdings. The SPDR S&P Regional Banking ETF (KRE) gained 1.5%. PNC stock is a KRE component.

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Market Rally Analysis

The stock market rebounded from Wednesday’s downside reversal with even stronger gains.

The Nasdaq led the way Thursday. The tech-heavy index rebounded back above the 12,000 level. It’s close to its March 31 high, with a 2023 peak just above that. Volume rose slightly on the Nasdaq, giving the tech-heavy index an accumulation day after three distribution days in the prior five sessions.

The strong gain in higher price marked a subsequent follow-through day for the Nasdaq.

NYSE volume fell vs. Wednesday. Still, the S&P 500 rallied above early April peaks to its best level since mid-February, not from its 2023 highs. The Dow Jones reclaimed the 34,000 level with the 2023 highs above that. The Russell 2000 moved above its 21-day line but is well below 50-day and 200-day lines.

Winners beat losers by nearly 5-to-2 on the NYSE and Nasdaq

But despite broad breadth and the major indexes’ strong price gains, there weren’t a lot of stocks flashing buy signals.

Southern Copper (SCCO) and Freeport McMoRan (FCX) showed bullish action, while ServiceNow (NOW) is flirting with a breakout. STMicroelectronics (STM), HubSpot (HUBS) and Flywire (FLYW) all reclaimed buy points.

The Invesco S&P 500 Equal Weight ETF (RSP) rose 0.8%, a decent gain but definitely lagging the S&P 500. And RSP is still below its falling 50-day.

Megacap stocks were strong performers Thursday and have been throughout 2023. AMZN stock jumped 4.7%, reclaiming its 50-day line. Apple stock gained 3.4% while Meta rose 3%. Google stock advanced 2.7% as the tech titan moved back above its buy point. Tesla stock rebounded 3%, but it was an inside day for the EV giant, which is below all its moving averages. Microsoft stock lagged with a 2.2% advance.

Breaking out to 2023 highs would be a big step for the market rally. Ideally, breadth would continue to improve, with RSP gaining some ground on SPY.

Friday’s earnings reports, especially JPMorgan and fellow banks, could be big market movers up or down.

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What To Do Now

Thursday’s action was a positive step for the stock market rally, despite the relatively few buying opportunities.

Investors can add exposure gradually, assuming the market trends higher. It wouldn’t take much for the major indexes and leading stocks to look damaged once again.

The market is still in a sideways pattern, with sectors and individual names prone to big swings at times. Try to build a portfolio with positions in leading stocks from a variety of sectors or themes.

Be ready to take profits and cut losses quickly. Investors should always remain flexible, but this is definitely not a time to be locked into a bullish or bearish mindset.

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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