Dow Jones futures will open on Sunday evening, along with S&P 500 futures and Nasdaq futures.
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The overall stock market rally eased last week. The S&P 500 and Nasdaq hit all-time highs on Friday before pulling back on an off-day.
Nvidia (NVDA) was the obvious culprit on Friday, as it staged a bearish reversal after the AI chipset leader became historically extended. This reversal hit the broader market but especially such as stocks of artificial intelligence companies Advanced micro devices (AMD), Taiwan Semiconductor Manufacturing Co., Ltd (TSM), Holding arm (Armenia) and Super micro computer (Samsi).
Nvidia's reversal — which continued Friday night — could be a bit of a shake-up or a change in character after a massive run. It is certainly a wake-up call for satisfied and euphoric investors.
It's time to be cautious and review your portfolio, especially if you have significant exposure to AI plays.
Square parent roadblock (SQ) and Brazilian brokerage XP company (XP) Buy signals flashed on Friday. Kings Project (DKNG) is well standardized.
Nvidia and Arm Holdings are on the IBD Leaderboard, with SQ on the Watch List. Taiwan Semiconductor Stock and Parent Square Block are on SwingTrader. Nvidia, DraftKings and ARM stocks are in the IBD 50. Nvidia, AMD and Super Micro stocks are in the IBD Big Cap 20. XP was the IBD stock of the day Friday, with Square Wednesday's pick.
The video embedded in the article discusses the weekly market action and analyzes Nvidia, Square-parent Block, and XP stocks.
Dow jones futures today
Dow Jones futures open at 6pm EST, along with S&P 500 futures and Nasdaq 100 futures.
Remember, an overnight move in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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Stock market pool
The stock market's rally paused, and it generally retreated last week after a pair of massive technology-led sell-offs.
The Dow Jones Industrial Average fell 0.9% in stock market trading last week. The S&P 500 fell 0.3% and the Nasdaq Composite fell 1.2%, both down from their record highs on Friday. The Nasdaq suffered three distribution days during the week.
The small-cap Russell 2000 index gave up gains on Friday but rose 0.5% on the week, hitting a 23-month high. Along with sector ETFs, small caps reflect strong market breadth.
Heading into Friday, the Nasdaq was stretched while Nvidia was largely flat. Bullish sentiment was close to excessive levels. So the stop was not a surprise
A market decline may be constructive, creating new opportunities to enter leading stocks. And Nvidia's decline, if it lasts more than a day or two, may make investors less risky of complacency.
The 10-year Treasury yield fell 9 basis points to 4.09%, the third straight weekly decline. The two-year Treasury yield, closely tied to Fed policy, fell 5 basis points to 4.48%. Fed Chairman Jerome Powell said last week again that there is no rush to cut interest rates. The jobs report and other economic data did not change that, but may have eased concerns that the Fed may taper interest rate cuts.
US crude oil futures fell 2.45% to $78.01 per barrel last week.
Nvidia stock is up in 2024, but these 8 stocks are far from great
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) was down 2.3%, despite pulling back from Tuesday's lows. The VanEck Vectors Semiconductor ETF (SMH) rose 2% on the week, despite a 3.9% bearish reversal on Friday led by Nvidia's holding company. Taiwan Semiconductor Corporation and AMD are also huge SMH holdings.
The SPDR S&P Metals & Mining ETF (XME) rose 2.1% last week. The Global US Global Jets (JETS) stock closed flat. The SPDR S&P Homebuilders ETF (XHB) rose 0.35%. The Energy Select SPDR ETF (XLE) rose 1.2%, and the Healthcare Sector SPDR ETF (XLV) rose 0.1%.
The Industrial Sector SPDR Fund (XLI) rose 0.6%, extending a long winning streak. The Financial Select SPDR ETF (XLF) rose 0.8%, and the SPDR S&P Regional Banking ETF (KRE) jumped 4.1%.
In a reversal of stocks with more speculative stories, the ARK Innovation ETF (ARKK) fell 0.8% last week and ARK Genomics (ARKG) fell 4%.
Time the market with IBD's ETF market strategy
Nvidia stock
On Thursday, Nvidia stock closed 41.9% above its 50-day line, the biggest rise since 2003. On Friday morning, shares rose as high as 974 before reversing in a major bearish outside reversal. Shares closed down 5.55% to 875.28 in the highest volume of their current career.
Nvidia stock still jumped 6.4% on the week, its ninth straight weekly advance.
The index remains 32.5% above its 50-day line and 11.1% above its fast-rising 21-day line.
Nvidia stock fell modestly on Friday night.
Nvidia's deeper withdrawal will have huge implications for the AI sector. This would of course include AMD, Taiwan Semiconductor, Arm Holdings, and Super Micro Computer, all of which reversed lower on Friday. It all went down a bit on Friday night with Nvidia.
ARM shares will be in focus on Tuesday, as the IPO lock-up period expires.
Feeling the effects will also be like running programs Service now (now), Palantir Technologies (belter), Cloudflare (NET) and Datadog (DDOG), along with dozens of other AI plays. ServiceNow and Cloudflare were flashing strong entries Friday morning before the Nvidia-led market reversal.
Given Nvidia's size and clear leadership in AI, Nvidia's decline could have a significant impact on the market's rally — as Friday's action showed.
Nvidia has clearly been a big winner this year just after massive gains in 2023. NVDA stock could rebound quickly and resume its race to 1,000. Shares could move sideways, or advance at a slower pace, as they did for a few months after they expanded dramatically in… Late May.
Perhaps ideally, Nvidia will gradually retreat to the 21-day line or even form a new base.
But if Friday marks a change in character for Nvidia, even if only for a short time, the AI stock's losses could be massive.
AI Stocks: Tech giants, cloud giants, and chipmakers battle for advantage
Stocks near buy points
The square block rose 4.6% on Friday to 80.74. While SQ stock has an official entry high of 83.29, shares have broken the downtrend of the handle and topped the original buy point of 80.29. There is a lot of general resistance just above 80 years.
XP stock jumped 5.9% to 25.31 during the week on strong trading volume, rebounding from its 200-day moving average. Shares moved slightly above the 50-day mark on Friday, providing a solid entry. XP stock has an official buy point of 27.02 from a cup-with-handle base. The relative strength line has lagged for several months as the Brazilian brokerage consolidates.
DraftKings stock fell 4.1% to 41.74 last week. Shares have been consolidating for a few weeks around the 21-day line, just above a buy zone from a double-bottom base. Ideally, DKNG stock will form a new formation based on a flat base. This would also allow the 10-week line to close the gap further.
What are you doing now
What comes next could depend a lot on how Nvidia stock trades in the coming days.
Investors who make huge gains in AI stocks can choose to take some profits or ride out any potential pullback. Investors in AI stocks that haven't risen much recently may have bigger decisions to make.
It's time to be careful about new purchases. But a number of sectors are performing well outside of AI. So, use this weekend to update your watchlists, and cast a wide net.
Remember, while AI stocks may be the most at risk, most stocks will fall in a market downturn.
Read The Big Picture every day to stay on top of market trend and leading stocks and sectors.
Please follow Ed Carson on Threads at @edcarson1971, and X/Twitter at @IBD_ECarson And Bluesky at @edcarson.bsky.social for stock market updates and more.
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