Dow Jones futures were little changed Sunday evening, along with S&P 500 futures and Nasdaq futures. Chevron (CVX) reported better-than-expected profit with Microsoft (MSFT), Google parent Alphabet (GOOGL) and Meta Platforms (META) headlining a huge earnings week, with the Federal Reserve set to raise rates again.
XTesla (TSLA) continues to expand discounts and financing options to boost demand, despite the possible impact on margins.
The stock market rally saw big weekly gains for the Dow Jones, which is on its longest win streak in nearly six year. The S&P 500 also had a solid advance. But the Nasdaq reversed lower after a big sell-off Thursday led by Tesla. Growth stocks suffered losses, often hefty, but generally still look healthy.
Bank stocks, meanwhile, are roaring back. Industrials, travel and some drug stocks showed strong or resilient action.
The market could use a breather and there aren't a lot of setups at the moment. So it's not a great time to be adding exposure.
Chevron on Sunday reported earnings per share of $3.08 a share, down 47% vs. a year earlier but beating views of $2.97. The Dow Jones energy giant, which will presumably still release full results on July 28, also said it produced a record 772,000 barrels of oil equivalent at the Permian Basin. Meanwhile, CFO Pierre Breber will retire, with Chief Technology Officer Eimear Bonner succeeding him starting in March 2024.
Microsoft, Google and Meta earnings loom large over the market rally. Not only do these three tech titans boast nearly $5 trillion in market cap combined, but their results, guidance, spending plans and comments will be important for cloud computing, artificial intelligence, digital advertising and more.
That will have a big impact on cloud software plays as well as Nvidia (NVDA) and other suppliers. It'll also be key for Amazon.com (AMZN), which reports Aug. 3.
Meanwhile, ServiceNow (NOW), General Electric (GE), Visa (V), Chipotle Mexican Grill (CMG), Boeing (BA), General Motors (GM) are just a few of the other important companies on tap.
Tesla, Nvidia and Meta stock are on IBD Leaderboard, with CMG stock on the Leaderboard watchlist. Microsoft stock is on the IBD Long-Term Leader list. Tesla and NOW stock are on the IBD 50. TSLA stock is on the IBD Big Cap 20.
The video embedded in the article discussed the weekly market action and analyzed Dow giants Microsoft, Boeing and Visa stock.
Fed Meeting
The Fed meets for two days this coming week with a policy announcement due 2 p.m. ET on Wednesday. After a June pause, the Fed is overwhelmingly expected to raise rates by a quarter point. But the real question is the rate hike outlook for the rest of the year. Fed policymakers in June forecast two more rate hikes this year, but tame inflation reports have reinforced investor expectations that there's only a modest chance of another move after Wednesday.
Fed chief Jerome Powell comments at 2:30 p.m. ET will likely offer clues about the rate outlook.
Dow Jones Futures Today
Dow Jones futures fell 0.1% vs. fair value. S&P 500 futures lost a fraction. Nasdaq 100 futures were little changed.
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 market rally on IBD Live
Stock Market Rally
The stock market rally started the week off with broad strength, but then diverged.
The Dow Jones Industrial Average jumped 2.1% in last week's stock market trading, finally moving above 2023 highs. The Dow is riding a 10-day win streak, its longest since August 2017. The S&P 500 index rose 0.8%, but did pare gains. The Nasdaq composite fell 0.6%, thanks to Thursday's 2.05% tumble. The small-cap Russell 2000 climbed 1.5%, closing in on 2023 highs as well.
The Invesco S&P 500 Equal Weight ETF (RSP) climbed 1.35%, nearly double the S&P 500's gain and just shy of 2023 highs,
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 0.9%, the mirror image of the Nasdaq 100's 0.9% slide.
The 10-year Treasury yield climbed 2 basis points to 3.84%, but with some big daily moves.
U.S. crude oil futures rose 2.3% to $77.07 a barrel, the fourth straight weekly gain.
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ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.35% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.1%, slashing weekly gains. Microsoft stock and ServiceNow are big IGV holdings. The VanEck Vectors Semiconductor ETF (SMH) slumped 2% after the prior week's 5.4% spike.
SPDR S&P Metals & Mining ETF (XME) nudged 0.2% higher last week. The Global X U.S. Infrastructure Development ETF (PAVE) rose 0.4%, right at all-time highs%. U.S. Global Jets ETF (JETS) ascended 1.9%. SPDR S&P Homebuilders ETF (XHB) fell 1.5%. The Energy Select SPDR ETF (XLE) popped 3.5% and the Health Care Select Sector SPDR Fund (XLV) leapt 3.45% to the best levels since early January. The Industrial Select Sector SPDR Fund (XLI) climbed 0.9%, hitting a fresh high.
The Financial Select SPDR ETF (XLF) leapt nearly 3% and the SPDR S&P Regional Banking ETF (KRE) surged 7.5%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 1.3% last week and ARK Genomics ETF (ARKG) climbed. Tesla stock is No. 1 holding across Ark Invest's ETFs. TSLA stock fell 7.6% in an big outside, downside week in higher volume, but is still comfortably above the 10-week line.
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Tesla Discounts Expand
Tesla has now increased U.S. discounts on Model 3 inventory, with the EV sedan going as low as $37,040 with zero miles. That's vs. the build-to-order starting price of $40,240. With the $7,500 federal tax credit, the price tag undercuts $30,000, with some state incentives further reducing the cost.
Meanwhile, Tesla is now offering 84-month auto loans, after previously offering financing for up to 72 months.
On the Q2 earnings call, CEO Elon Musk announced that Tesla would offer a one-time free Full Self-Driving transfer from an existing Tesla to a new one bought in the third quarter. That could provide a one-time sales boost, though without the $15,000 FSD revenue.
All of this points to further margin pressure in the third quarter.
Tesla earnings per share topped views, with revenue soaring 47% thanks to ongoing price cuts and easy year-earlier comparisons. But operating profit fell 2.6% while margins weakened further. Tesla stock tumbled 7.6% last week in an outside week in above-average volume. It was ugly action, though the EV giant could use a lengthy handle or short base within a much-larger consolidation. TSLA stock has more than doubled in 2023.
Microsoft, Google, Meta Earnings
Microsoft earnings and Google earnings are due Tuesday night with Meta earnings Wednesday night.
Microsoft and Google will provide insight into cloud computing. Google and Meta will offer clues about online advertising and social media, with Snapchat parent Snap (SNAP) also on tap next week.
All three will provide color on artificial intelligence. Microsoft will be especially important because it's seen as an AI leader and has just announced pricing for various AI features to enterprises. How quickly will "AI" be a real growth driver for Microsoft? If Mr. Softy doesn't see meaningful revenue for quite some time, that could chill "AI stocks" broadly, especially the more-speculative names.
Cloud-related comments from these three titans will be key for Amazon, which relies on Amazon Web Services for the bulk of profits. Along with ServiceNow earnings, they could swing leading software plays such as Datadog (DDOG), Dynatrace (DT), Cloudflare (NET) and MongoDB (MDB).
Meanwhile, megacap guidance, especially on spending, will be key for suppliers such as Nvidia, Broadcom (AVGO), Arista Networks (ANET) and more.
Market Rally Analysis
The stock market rally still looks strong, with the major indexes right at 52-week highs with breadth robust and leadership diverse. The Nasdaq's sell-off Thursday was fierce, but it closed the week finding support at the 10-day line.
The Nasdaq and S&P 500 are on the edge of being extended, so an orderly pause or pullback would be healthy.
A market pause would forge new buying opportunities. Many leading stocks are extended. A number of others look OK after big losses Thursday but may need a few days or weeks to set up again.
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What To Do Now
This is not a great time to be adding exposure. The Nasdaq took a hit but also isn't far from being extended again. Not many stocks are in position. And earnings this week, along with the Fed meeting, could roil individual stocks, sectors and the market rally.
Investors should be looking at their portfolio and noting which holdings have earnings on tap — and which big results from related companies are due. Consider whether to hold various stocks through earnings season, or to take full or partial profits.
The stock market rally remains strong. Investors should be looking for how stocks react to earnings and other news this week. It wouldn't take much for a number of names to look interesting again.
Nasdaq 100 Special Rebalance
Before Monday's market open, a Nasdaq 100 special rebalance will take place, reducing the dominance of the "Magnificent Seven" of Microsoft, Apple, Nvidia, Google, Amazon, Meta Platforms and Tesla stock. MSFT stock and Nvidia will see the biggest weighting declines in the index.
The special rebalance likely will not have a big impact on these titans. The news has basically been out for two weeks.
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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