Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures, after a strong session before the stock market rally.
Major indices posted sharp gains on Wednesday. Bank fears continue to ebb as Micron technology (MU) offered some hope for a chip low, despite a gloomy report and near-term outlook.
A number of stocks are sending buy signals, including Micron stocks, Microsoft (MSFT), Shift4Payments (FOUR), Mobileye Global (MBLY), ST Microelectronics (STM), Wynn Resorts (WYNN), design kings (DKNG), Rambus (RMBS), Skyline champion (HEAVEN) and Business day (WDAG).
Microsoft, Rambus, Workday and STM stocks are above traditional buy points. MU Shares, Shift4Payments, Wynn, DraftKings, and Skyline are recovering from key areas and breaking down trendlines for early entry. MBLY shares have recaptured key levels.
SKY shares, Rambus and Wynn Resorts are on IBD Leaderboard. WYNN Stocks and DraftKings are listed on SwingTrader. MSFT shares are listed on IBD Long-Term Leaders. STMicro, DraftKings, Shift4Payments, and WDAY stocks are listed at IBD 50. MBLY stocks are listed at IBD Big Cap 20. Skyline Champion was also Wednesday’s IBD stock of the day, while FOUR stocks were Tuesday’s goods.
Regional banks haven’t risen much this week, but at least they’re not tumbling. Controversial First Republic (FRC) has bounced. Bigger banks like JPMorgan Chase (JPM) and bank of America (BAC) rallied this week after reaching at least the 2023 lows on Friday.
Investors should be looking for additional exposure given the action in major indices and leading stocks. But don’t rush in.
Dow Jones Futures Today
Dow Jones futures lost a fraction of their fair value. S&P 500 futures were flat and Nasdaq 100 futures fell 0.1%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally opened solidly higher, with major indices contributing to gains in the late afternoon.
The Dow Jones Industrial Average rose 1% during Wednesday trading. The S&P 500 index rose 1.4%, with Micron stocks among the best performing stocks. The Nasdaq composite jumped 1.8%. The small-cap Russell 2000 gained 1.1%.
US crude oil prices fell 0.3% to $72.97 a barrel.
The yield on 10-year government bonds was essentially flat at 3.565%.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) was up 2.2%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.7%, with MSFT stock a major stake and Workday also a component. The VanEck Vectors Semiconductor ETF (SMH) was up 1.7%, with MU stocks and STMicro, both SMH components.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) rose 3.8% and ARK Genomics ETF (ARKG) rose 3.2%.
SPDR S&P Metals & Mining ETF (XME) was up 1%, while US Global Jets ETF (JETS) was up 2.15%. SPDR S&P Homebuilders ETF (XHB) rose 0.8%. The Energy Select SPDR ETF (XLE) was up 1.5% and the Health Care Select Sector SPDR Fund (XLV) was up 0.3%
The Financial Select SPDR ETF (XLF) rallied 1.5%, with JPM stock and Bank of America both significant holdings. The SPDR S&P Regional Banking ETF (KRE) gained 1.1%. FRC shares, a KRE component, were up 5.6% on Wednesday and 15.4% year-to-date this week. It’s still down 88% in March.
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Analysis of the market rally
A day after major indices had significant support, the stock market’s rally attempt picked up steam, erasing some notable levels.
The Nasdaq composite led the way, with a strong rebound after moving close to the 50-day line at Tuesday’s lows. The 12,000 level looms as the next challenge, with the market rally peaking on February 2 not far above that.
The S&P 500 rebounded above the 4,000 level and the 50-day moving average and broke a descending trendline.
The Dow Jones closed above its 21-day line for the first time since March 6, but is still below the 200-day line. The Russell 2000 is bouncing off Friday’s 2023 lows, but has some distance from the 50-day and 200-day lines.
Nasdaq volume was higher than on Tuesday. NYSE volume appeared slightly up. The exchange volume was lower than normal.
On the NYSE and Nasdaq, the frontrunners resolutely led the laggards, with the width increasing slightly this week. However, market leadership remains relatively narrow.
Chip stocks were big gains on Wednesday, after pulling back on Tuesday ahead of Micron’s earnings report. In addition to MU stocks, Mobileye, Rambus, and STM are chipplays with flashing buy signals. Several others showed bullish action.
Microsoft and WDAY stock are among a number of software names in buy zones, while SKY stock is one of several homebuilders advancing. Investors place their bets on gaming games such as Wynn Resorts and DKNG stocks.
FOUR stocks are among the few payment stocks that are doing well, including fly wire (FLY). Free market (MELI), which has a similar card action to Shift4, is an e-commerce giant with a thriving payment business.
While fears for banks are at a low ebb, government bond yields are not rising. The recent banking woes, even after the worst is over, are likely to lead to less lending and generally tighter financial conditions, slowing the economy and reducing the need for rate hikes by the Fed. At the moment, markets are leaning towards a Fed interest rate break in early May. Friday’s PCE inflation report, the Fed’s favorite price gauge, could change that dynamic.
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What to do now
The stock market is picking up steam now that the banking crisis seems to have reached its peak while the Fed’s rate hikes are almost over. Major indices have shown a mix of resilience and strength this week, with a number of stocks sending buy signals.
So it’s a good idea to gradually add some exposure. If the market has real legs, it won’t take long to gradually build up to 100% invested. If the market is rapidly declining or dying out, it will be mechanically and psychologically a lot easier to quit if you are not fully committed.
But it’s important to get ready by updating your watchlists and staying engaged.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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