Dow Jones futures were slightly higher early Friday, while S&P 500 futures and especially Nasdaq futures fell. JPMorgan Chase (JPM) jumped on earnings, with Wells Fargo, Citigroup, PNC Financial and UnitedHealth earnings also topping views. Boeing skidded on 737 woes. Retail sales fell more than expected.
The stock market rally rebounded strongly Thursday 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 Thursday. 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. Tesla announced further prices cuts in several more markets on Friday.
Investors should be taking part in this market uptrend. But big bank earnings loom large.
Dow Jones Futures Today
Dow Jones futures rose less than 0.1% vs. fair value, turning higher on JPM earnings. Boeing and UnitedHealth also are Dow components. S&P 500 futures edged lower and Nasdaq 100 futures declined 0.6%.
The 10-year Treasury yields climbed 8 basis points to 3.53%.
Retail sales fell 1% in March or 0.8% excluding autos, the Commerce Department reported at 8:30 a.m. ET. Both were down more than expected. The Federal Reserve will report March industrial production at 9:15 a.m. ET.
JPMorgan reported a slight increase in deposits at the end of Q1 vs. the end of 2022, as depositors rushed into the well-capitalized giant despite low savings rates. It raised its net interest income forecast for the full year.
Wells Fargo reported stronger-than-expected net income, while deposits fell slightly.
Superregional PNC Financial Services (PNC) reported better-than-expected fourth-quarter earnings, with revenue roughly in line. PNC deposits were flat. Net interest margins dipped vs. Q4 amid higher funding costs. But PNC did cut its provision for credit losses.
JPM stock rose sharply, while Wells Fargo and Citi were up modestly. All are below key levels.
PNC stock rose slightly. Shares rose 1.4% on Thursday, but after sliding intraday to their worst level since November 2020.
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 havens 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.
Boeing 737 Production Issue
Late Thursday, Boeing (BA) warned of lower 737 Max production and deliveries for the short term, citing a parts issue from a supplier, apparently Spirit Aerosystems (SPR). Analysts had expected Boeing to increase 737 Max output soon. BA stock tumbled more than 6%.
Also before the open, UnitedHealth Group (UNH) reported better-than-expected first-quarter earnings and revenue, kicking off results for health insurers. The Dow Jones giant raised its full-year EPS guidance slightly, roughly in line with Wall Street forecast.
UNH stock nudged higher in premarket trade. Shares climbed nearly 1% to 526.21 on Thursday, moving toward a 558.20 buy point. UnitedHealth has 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.
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%.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.55% on Thursday. 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%.
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%.
Tesla Price Cuts
Tesla announced price cuts in Europe, Israel and Singapore on Friday. The EV giant reduced prices in several European markets, including Germany and France, for all versions of the Model 3, S and X, as well as the Model Y Performance. In early March, Tesla had offered significant discounts in Europe, but not official price cuts.
Tesla cut some Model 3 prices in Israel, while reducing Model 3 and Y price tags in Singapore.
Last week, Tesla cut U.S. prices on all its EVs. It also reduced prices in Australia.
All of this follows sweeping price cuts worldwide in early January, which fueled record first-quarter deliveries but also likely hit margins. The latest wave of cuts suggest margins will come under further pressure.
Tesla earnings are due next week.
Tesla stock fell 1% before the open. Shares on Thursday rebounded 3%, but it was an inside day, below all moving averages.
TSLA stock has a 207.89 cup-with-handle buy point, but that entry is just below the 200-day moving average. Investors may want to wait for a decisive move above that key level.
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 techs 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. 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.
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, so long as 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.
YOU MAY ALSO LIKE: