Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures.
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The stock market rally technically closed mixed Thursday. The Nasdaq nudged higher, setting fresh 2023 highs as Google parent Alphabet (GOOGL) and Amazon.com (AMZN) led the charge. TSLA stock popped shortly before the close as Tesla (Tesla) CEO Elon Musk said he will be stepping down as CEO of Twitter.
But the S&P 500, Dow Jones and most stocks retreated modestly.
PacWest Bancorp (PACW) reported significant deposit flight took place last week. PACW stock plunged while regional banks generally retreated. Western Alliance Bancorp (WAL) held up.
Shockwave Medical (SWAV) nudged into a buy area, continuing its post-earnings advance.
SWAV stock is on the IBD Leaderboard watchlist as well as the IBD 50 list. Shockwave Medical was Thursday’s IBD Stock Of The Day.
The video embedded in this article discussed the megacap-led market action, while also analyzing Meta Platforms, Shockwave Medical and AMZN stock.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures advanced 0.2% and Nasdaq 100 futures climbed 0.3%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Tesla Stock Rises As Elon Musk Finds Twitter CEO
Tesla CEO Elon Musk tweeted shortly before Thursday’s market close that he’s found a new leader for his social site: “Excited to announce that I’ve a new CEO for X/Twitter. She will be starting in ~6 weeks! My role will transition to being exec chair & CTO, overseeing product, software & sysops.”
Musk didn’t say who the new leader will be.
The Wall Street Journal reported Thursday night that Linda Yaccarino, NBCUniversal’s advertising chief, is in talks to be Twitter’s CEO. Yaccarino played a key role in launching the Peacock streaming service. An ad chief could help revive Twitter’s advertising revenue.
Yaccarino was a rare big media exec publicly backing Musk in the weeks after he took control of Twitter late last year.
Musk had previously pledged to step down as Twitter CEO. Many Tesla stock investors have worried that Twitter has distracted Musk, with his time already split between Tesla, SpaceX and other ventures. A new Twitter CEO won’t stop Musk from making polarizing tweets.
Tesla stock rose 2.1% to 172.08 on Thursday, with nearly all of the gain coming after Musk’s late afternoon tweet. TSLA stock is back above the 21-day moving average, but still below the 50-day and 200-day moving averages. Tesla has a potential double-bottom base buy point of 207.89, which would be just above the 200-day line.
TSLA stock added more than 1% in active after-hours trade.
Meanwhile, Tesla archrival BYD (BYDDF) is currently in a buy zone. China EV startup Li Auto (LI) has raced through a buy zone this week on booming earnings and strong delivery guidance.
Debt-Ceiling Talks Delayed
A debt-ceiling meeting between President Joe Biden and congressional leaders will be postponed from Friday to next week. That follows initial debt-ceiling talks on Tuesday.
White House and congressional staff continue to meet on hashing out an agreement.
The U.S. could default on its debt around June 1 if there’s no agreement to raise the debt limit by then.
House Republicans want spending cuts as part of a debt-ceiling limit increase and recently passed a plan to do just that. Former President Donald Trump said in a CNN town hall event Wednesday night that the GOP should “do a default” if Biden and Democrats don’t agree on spending cuts.
JPMorgan Chase CEO Jamie Dimon ripped Trump’s default stance. “It’s one more thing he doesn’t know very much about,” Dimon told Bloomberg Television Thursday. “Anyone who’s anyone knows that is potentially catastrophic.”
Most economists say a debt default would cause major disruptions to financial markets and the economy, which is already in danger of falling into a recession.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally retreated for the first hour or so of trading Thursday, weighed down by bank fears. But the major indexes then gradually improved.
The Dow Jones Industrial Average fell 0.7% in Thursday’s stock market trading, with Disney (DIS) tumbling nearly 9%. The S&P 500 index dipped 0.2%. The Nasdaq composite edged up 0.2%. The small-cap Russell 2000 sank 0.8%.
U.S. crude oil prices fell 2.3% to $70.87 a barrel. Copper prices tumbled 3.4% to their lowest close since late November. Gold futures slipped 0.8% while silver plunged 4.7%.
The 10-year Treasury yield fell 3 basis points to 3.4%.
Initial jobless claims hit their highest level since October 2021, as the labor market finally starts to ease. Wholesale inflation also cooled slightly more than expected in April. Meanwhile, concerns are growing about China’s economic recovery. All that spurred drops in commodities and yields, along with a stronger U.S. dollar.
Markets continue to expect Fed rate cuts to begin in September, if not in July.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.3%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 0.5%. The VanEck Vectors Semiconductor ETF (SMH) declined 0.9%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) edged up 0.2% and ARK Genomics ETF (ARKG) declined 1.8%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs. Ark also owns a small stake in BYD stock.
SPDR S&P Metals & Mining ETF (XME) slumped 2.8%. U.S. Global Jets ETF (JETS) descended 0.7%. SPDR S&P Homebuilders ETF (XHB) stepped down 0.1%. The Energy Select SPDR ETF (XLE) gave up 1.2% and the Health Care Select Sector SPDR Fund (XLV) fell 0.3%
Bank Stocks
PacWest disclosed early Thursday that its deposits fell by 9.5% in the week ended May 5, with most of that coming on May 4-5. That followed news reports May 3 that PacWest was exploring strategic options, including a possible sale. California-based PacWest pledged another $5.1 billion in loans to the Federal Reserve to obtain $3.9 billion in additional borrowing to bolster its balance sheet.
But PACW stock plunged 23% to 4.70. Shares hit a record-low 2.48 on May 4.
Western Alliance, shortly after Thursday’s open, disclosed that deposits as of May 9 had increased slightly from a week earlier. WAL stock edged down just 0.8%.
The Financial Select SPDR ETF (XLF) edged down nearly 0.2%. The SPDR S&P Regional Banking ETF (KRE) slumped 2.4%, just above a multiyear closing low. KRE is off 5.7% so far this week. PACW stock and Western Alliance are among the many KRE components.
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SWAV Stock
Shockwave Medical stock jumped 4.7% to 302.68, the third straight high-volume advance since reporting strong Q1 earnings Monday night. SWAV stock cleared a 300.10 cup-with-handle buy point, according to MarketSmith analysis.
The relative strength line for SWAV stock is already above its handle high to a six-month best. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500.
Market Rally Analysis
The stock market rally moved back to “confirmed uptrend” Wednesday with the Nasdaq hitting 2023 highs. But there were a lot of reasons to curb your enthusiasm.
Market divergence, generally weak breadth and few stocks to buy remain issues. The Nasdaq moved slightly higher.
The S&P 500 dipped though it found support at 21-day line. The Dow Jones tested its 50-day line before paring losses.
Even the Nasdaq’s gain was fueled by megacap outperformance, specifically Google stock, Amazon and Tesla on Thursday.
Google stock jumped 4.3% after popping 4.1% in the prior session. On Wednesday, Google touted its AI efforts, and explained how AI search will still carry advertising. GOOGL stock is now extended after flashing buy signals Wednesday. Amazon stock climbed rose 1.8%, clearing a 110.96 cup-with-handle bottoming base buy point.
The Nasdaq 100 climbed 0.3%, approaching its August highs. But the First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) dipped 0.15%, though it did find support at its 50-day.
The Invesco S&P 500 Equal Weight ETF (RSP) slumped 0.5%, below all its moving averages. RSP is down 1.1% this week after sliding 1.45% last week.
Losers outpaced decliners significantly, including on the Nasdaq. New lows also easily bested new highs once again.
With all of these signs of weak market breadth, it’s not surprising that buying opportunities are scarce, and some of those fell back. Yes, there were some nice winners Thursday, but also downside reversals such as Trade Desk (TTD). Catalyst Pharmaceuticals (CPRX), which had been setting up, dived 19% Thursday.
New Relic (NEWR) may work out fine, but shares fell modestly Thursday, back below a trendline entry that it just cleared on Wednesday.
Market fears about inflation and Fed rate hikes have switched to recession risks. Meanwhile, PacWest revived bank worries.
Debt-ceiling default fears are likely to mount. They haven’t gripped financial markets yet, but as June 1 nears that could abruptly change. As Jamie Dimon said Thursday, “the closer you get to it, you will have panic.” The cost to insure against a U.S. sovereign default has already spiked to the most since 2009.
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What To Do Now
While the market rally is in a confirmed uptrend, market leadership and breadth is narrow. With few buying opportunities, investors shouldn’t be pushing hard to add exposure.
If you want to nibble at one of the stocks flashing buy signals, you can. But definitely have your exit strategy when entering the trade.
Again, there’s nothing wrong with standing pat, nearly all in cash.
But if the market rally shows broad strength, you’ll want to be ready. So have your watchlists ready.
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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