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Dow Jones futures rose slightly on Sunday evening, along with S&P 500 futures and Nasdaq futures. AI tech titans Apple (AAPL), Microsoft (MSFT), Metaplatforms (META) And Amazon.com (AMZN) headlined a huge profit week. The Federal Reserve is expected to signal this week that interest rate cuts will happen soon.
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These great seven stocks will deliver gains as technology sells off
The stock market rally has varied over the past week, with small caps rising sharply and creating a slew of buying opportunities from a variety of sectors. The Nasdaq fell below the 50-day mark, although the S&P 500 returned to that level on Friday.
Tesla (TSLA) and Google parent Alphabet (GOOGL) earnings fell, while the CEOs of Google and Meta Platforms expressed concern that tech companies may be spending too much on artificial intelligence. That hit Nvidia (NVDA).
The signals from Apple, Microsoft, Meta Platforms and Amazon on AI investments and monetization will be huge in the coming week.
For investors, the best buying opportunities and setups remain in non-tech sectors.
The video embedded in this article provides an in-depth look at Apple, Microsoft, Meta, and Amazon’s upcoming earnings, while also providing a sneak peek Advanced micro devices (AMD), Arm (ARM), Arista Networks (A NET) and more.
Dow Jones futures today
Dow Jones futures rose 0.25% from fair value. S&P 500 futures rose 0.25% and Nasdaq 100 futures rose 0.3%.
Remember, overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading during the next regular stock market session.
Fed meeting
The Federal Reserve meeting takes place on July 30 and 31, with markets expecting policymakers to leave interest rates steady. But the Fed’s statement at 2:00 PM (ET) and Fed chief Jerome Powell’s speech at 2:30 PM (ET) may indicate a willingness to cut rates.
Investors have fully priced in a rate cut of at least a quarter point at the end of September and consider at least two and perhaps three cuts likely this year.
So if Powell doesn’t give a clear green light for rate cuts on Wednesday, financial markets could react badly.
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Stock market rally
The stock market rally disintegrated last week, although there was a broad rebound on Friday.
The Dow Jones Industrial Average rose 0.6% in stock trading last week, recovering from a slide to the 21-day line with a 1.5% jump on Friday. The S&P 500 index fell 0.8% but regained its 50-day moving average on Friday.
The Nasdaq index fell 2.1% this week, below the 50-day mark, even with Friday’s recovery.
The small-cap Russell 2000 rose 3.5%, near recent multi-year highs.
The Invesco S&P 500 Equal Weight ETF (RSP) climbed 0.8%, just below record highs.
The first Trust Nasdaq 100 equal-weighted index ETF (QQEW) fell 1.65% to below the 50-day line as tech weakness extends beyond the megacaps.
The upcoming gains from Apple, Microsoft and other Big Techs this week – along with the Fed’s interest rate outlook – will go a long way in determining whether the Nasdaq can find its footing or whether it will enter a full-fledged correction.
While megacaps and AI generally struggled, there were a number of breakouts or stocks that regained buy points or made early entries, including in residential/construction, industrial/aerospace, financial, energy, as well as some medical sectors and even in some software.
The yield on ten-year government bonds fell by four basis points to 4.2%. The two-year yield fell by 12 basis points to 4.39%, while the yield curve became less inverted.
U.S. crude futures fell 1.89% to $77.16 a barrel last week, down 7.2% over three weeks.
ETFs
Among the growth ETFs is the Innovator IBD 50 ETF (FFTY) fell by 1.3% last week. The iShares Expanded Tech-Software Sector ETF (IGV) lost a fraction, while Microsoft shares had a significant stake. The VanEck Vectors Semiconductor ETF (SMH) lost 3.2%, with Nvidia stock a dominant member and AMD also a major holding.
SPDR S&P Metals & Mining ETF (XME) rose 1% last week. The Global X US Infrastructure Development ETF (PAVE) rose by 2.4%. US Global Jets ETF (JETS) rose by 0.1%. SPDR S&P Home Builders ETF (XHB) rose by 4.3%. The Energy Select SPDR ETF (XLE) fell 0.2% and the Health Care Select Sector SPDR Fund (XLV) rose by 1.4%. The Industrial Select Sector SPDR fund (XLI) rose by 1.2%.
The Financial Select SPDR ETF (XLF) advanced 1.3% and the SPDR S&P Regional Banking ETF (KRE) rose by 5.75%.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) fell 1.8% last week and ARK Genomics ETF (ARKG) rose by 7.4%.
Tesla stock is the #1 stock in Ark Invest’s ETFs. TSLA stock plunged 8.1% last week due to an earnings miss and no positive surprises from Elon Musk’s moonshots on the call.
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Big Tech AI Signals
Apple, Microsoft, Meta and Amazon each had a tough week, with only Apple shares above the 50-day mark. They are not broken yet, but need some repair work.
For now, investors will be looking for signs that tech companies are making money from generative AI, including Apple tips on production orders for the upcoming AI-enabled iPhone 16 and Microsoft’s Copilot efforts. The growth of Microsoft Azure and Amazon Web Services are also important.
Apple Intelligence will be released in iOS 18.1 in October, Bloomberg reported on Sunday, later than the expected launch in September. However, developers will get access to Apple’s new AI features as early as this week.
The crucial question is: are these tech titans willing to continue spending heavily?
Meta CEO Mark Zuckerberg and Alphabet CEO Sundar Pichai admitted last week that tech companies may be investing too much in artificial intelligence. However, both said that investing too little in AI poses a greater risk than spending too much.
Technology companies feel the pressure to spend a lot of money, if only to maintain their current market position and turnover. On that note, Microsoft-backed OpenAI on Thursday launched a new AI-powered search engine, SearchGPT, to take on Google.
Apple stock is below the 21-day line, but above the 50-day line. Shares of Microsoft, Meta and Amazon fell below their 50-day line last week.
Strong AI investments could revive Nvidia shares, along with results and guidance from AMD and Arm Holdings. Nvidia shares fell 4.1% this week, off Thursday’s low but below the 50-day mark.
Arista Networks will, in addition to its own results, scale down the investment plans of major customers Microsoft and Meta on Tuesday evening. ANET stock also fell below the 50-day mark last week, although it found support near a previous buy point.
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What to do now
The Federal Reserve and mega-cap tech companies will dominate the news this coming week, and for good reason, but with a few exceptions, investors should focus on non-tech areas. Many industrial and construction companies will report this week, along with several more names from the aerospace sector.
Investors have had opportunities in recent weeks to move from technology to the new leading sectors. At the very least, exposure to technology at this point should be significantly reduced.
Evaluate your portfolio and work on your watchlists. A broad market rally could trigger a new wave of buying opportunities, but this week’s headlines could also trigger a bigger drop.
Nvidia stock is on IBD rankings, with AMD on the Leaderboard Watchlist. Apple shares are listed on SwingTrader. Microsoft stock is listed at IBD Long-Term Leaders.
Read The Big Picture every day to stay informed about market direction and the most important stocks and sectors.
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