Dow Jones futures won’t begin trading until Sunday, along with S&P 500 futures and Nasdaq futures, ahead of a huge week for earnings, including Apple (AAPL), Amazon.com (AMZN), Advanced Micro Devices (AMD), Google parent Alphabet (GOOGL) and Facebook (FB), as well as Shopify (SHOP), ServiceNow (NOW) and PayPal (PYPL), Sprouts Farmers Market (SFM) and dozens more.
The coronavirus stock market rally had a volatile week but closing with modest losses. After the Nasdaq hit a record high Tuesday, the coronavirus stock market rally sold off sharply Thursday, fueled by the likes of Apple stock, Amazon stock, Google stock, Shopify stock and Tesla (TSLA).
The indexes extended losses Friday, but pared loses. The Nasdaq suffered its first back-to-back daily and weekly losses for at least two months. Many big winners from the coronavirus market rally suffered serious losses to support levels.
Stock Market Rally Action Bullish
But here are three reasons why last week’s action was positive for the coronavirus stock market rally.
First, the stock market rally was getting too extended. The Nasdaq was running to top of short-term and decade-long channel lines. And that short-term channel was already too steep to be sustainable. A stock market pullback or sideways action would be normal and healthy. If the Nasdaq slows to a steady jog from an uphill sprint, it’s likely to keep rising for longer.
The S&P 500 and “real economy” stocks are gaining ground. The Nasdaq had diverged too much from the S&P 500 during the coronavirus stock market rally, reflecting the huge outperformance by Apple, Amazon, Shopify and other tech leaders. Those gains couldn’t continue week after week. But homebuilders, discounters and a few other retailers are coming on, such as LGI Homes (LGIH), Ollie’s Bargain Outlet (OLLI), Lululemon (LULU) and Sprouts stock, sharing the burden of carrying the coronavirus stock market rally. It also reflects optimism in an economic recovery.
A stock market rally pause and some new sectors joining the leadership also gives a chance for tech giants and highfliers to take a break. Many are finding support at their 50-day or 10-week lines, including Shopify stock, offering the first traditional buying opportunities in weeks or months. Those stocks and many others might go on to form new consolidations, perhaps even full-fledged bases.
In other news, the CEOs of Apple, Facebook, Amazon and Google reportedly will testify before the House Judiciary antitrust subcommittee on Wednesday. The hearing had been pushed back from Monday.
Apple stock, Amazon stock, Shopify stock and PayPal stock are all on IBD Leaderboard. Soar are LGI Homes stock, Ollie’s stock, Lululemon stock and Sprouts stock, along with Tesla stock. PYPL stock, AMD stock, Facebook stock, Sprouts stock and ServiceNow stock are on IBD 50. NOW stock and PayPal stock are on the IBD Long-Term Leaders list, while Google stock is on the Long-Term Leaders watchlist.
Dow Jones Futures Today
Dow Jones futures will begin trading on Sunday afternoon, 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.
Coronavirus cases worldwide have topped 16.19 million. Covid-19 deaths are at 648,000.
Coronavirus cases in the U.S. have reached 4.31 million, with deaths above 149,000. The U.S. added 78,009 Covid-19 cases on Friday, a new record. Coronavirus deaths have topped 1,100 for four straight days, though that’s well off their April peaks.
Coronavirus Stock Market Rally Last Week
The coronavirus stock market rally had a volatile week. The Nasdaq hit a record high Tuesday but reversed lower. By Friday morning the tech-heavy index had broken below its 21-day exponential moving average, but rallied to close just below that line.
The Dow Jones Industrial Average fell 0.8% in last week’s stock market trading. The S&P 500 index dipped 0.3%. The Nasdaq composite retreated 1.3%.
Apple stock fell 3.85%, coming close to testing its 10-week moving average on Friday. After tumbling in the prior week, Amazon stock extended losses before rallying for a slim weekly gain, just above its 21-day line. Facebook stock fell below its 50-day and 10-week lines.
Tesla stock fell 5.6%, reversing lower after earnings but holding support at its 21-day moving average. TSLA stock is still up 31% in July after June’s 29% jump.
Shopify stock had some big swings, coming within a whisker of its 10-week line before closing the week with a tiny gain. PayPal stock edged lower while ServiceNow stock tilted higher, after both tested their 10-week lines in the prior week.
AMD stock was the standout, spiking 26% last week, finally breaking out of a long consolidation as rival Intel (INTC) said it would delay next-generation chips.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.6%, but closed well off its weekly high. The iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.3%. The VanEck Vectors Semiconductor ETF (SMH) retreated 0.45%. The iShares U.S. Home Construction ETF (ITB) jumped 3.9%.
What’s Next For Coronavirus Stock Market Rally
The coronavirus stock market rally may be embarking on a new, more sustainable pace, with a broader leadership. That would provide fertile ground for investors.
But the stock market could race to new highs in very little time, reviving all the concerns of overheating. The Nasdaq could suffer a more serious pullback. Tech leaders may not rebound, or perhaps “real economy” stocks will falter.
This week’s barrage of earnings reports will provide an idea of how leading companies are handling the pandemic. That may drive the coronavirus stock market rally for several weeks. But it also could mean huge gains or losses for individual stocks.
What You Should Do Now
If you have stocks with earnings on tap, you’ll have to decide whether to hold, sell or take partial profits. That may depend on the size of your position, your current gain on the stock and your conviction in the company.
From a broader perspective, the coming days may offer a chance to buy leading stocks — or you may be forced to take a more defensive posture if the market trend sours further.
Bottom line: Stay engaged and flexible.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
AMD stock has earnings late Tuesday. Shopify stock is early Wednesday. Facebook stock is Wednesday night, along with Sprouts stock, ServiceNow stock and PayPal stock. Apple stock, Google stock, Amazon stock are Thursday.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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