Dow Jones futures edged higher on Sunday night, along with S&P 500 futures and Nasdaq futures, as US officials urged Israel to show restraint after rebuffing Iran's drone and missile strikes.
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Israel, the US and other allies shot down 99% of some 350 Iranian drones and missiles. An Israeli military base was slightly damaged in Saturday's attack.
Tehran vowed to respond to Israel's April 1 attack on its embassy in Damascus. Iran told the UN on Saturday that the issue “can be considered closed”. A well-telegraphed attack appears to be an attempt to mount a strong response while minimizing the risk of too wide an escalation.
President Biden and his fellow Group of Seven leaders “strongly condemned” Iran's attack in a statement on Sunday, but appealed for calm. Israel's War Cabinet met to discuss its options.
Biden told Israeli Prime Minister Benjamin Netanyahu to think carefully about expansion. US officials have said they will not participate in an offensive against Iran.
Dow Jones Futures Today
Dow Jones futures rose 0.3% versus fair value. S&P 500 futures rose 0.35% and Nasdaq 100 futures rose 0.4%.
Crude oil futures were little changed.
The 10-year Treasury yield rose to 4.53%.
Bitcoin rose above $65,500 on Sunday, but below pre-attack levels of $67,000. Bitcoin price fell 5.1% to $66,870.29 on Friday.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
This may be especially true as futures traders are still trying to digest emerging geopolitical news.
Stock markets sold off Friday on fears of an Iran attack. Despite hitting a record Thursday, the Nasdaq fell on the week Nvidia (NVDA) and other megacap and AI stocks rebounded. The S&P 500, Dow Jones and Russell 2000 posted big weekly losses.
The CBOE Volatility IndexThe VIX, or VIX, rose on Friday to its highest level since late October on concerns about Iran.
Nvidia 5 shares lead near buy points
Other news
Late Friday, Tesla (D.S.L.A) to drop the price of full Self-Drive subscriptions from $199 to $99. According to online chatter over the weekend, Tesla has stopped Cyberdrug deliveries.
Salesforce.com (CRM) is in late-stage negotiations to buy the data management software maker Informatica (INFA), The Wall Street Journal reported Friday night.
Main income is loom
Goldman Sachs (GS) and Charles Schwab (SW) report early Monday. Goldman stock fell below its 50-day line on Friday, while Schwab remains in a buy zone.
The chip-equipment giant ASML (ASML) and Nvidia Chipmaker Taiwan Semiconductor (TSM) could be the two most important earnings of the week. Their results and guidelines have major implications for the chip industry, including Nvidia. Broadcom (AVGO), Lam Research (LRCX), Utility items (Big) and KLA Corporation (Clutch)
All these chip stocks have new fundamentals or potential entries.
Nvidia stock is on the move IBD LeaderboardSwingTrader and IBD 50. KLA stock is on the IBD Long-Term Leaders list. Nvidia, ASML, and Broadcom have shares IBD Big Cap 20.
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Stock market rally
The stock market rally had a tough week on a tepid CBI inflation report and Middle East fears, with Friday's losses erasing Thursday's bullish signals.
The Nasdaq, which hit a record close on Thursday, fell 1.6% in stock market trading on Friday and ended the week with a loss of 0.45%. The combination ended below the 21-day line, but slightly above the 50-day and 10-week lines. It is still trading with a big April 4 reversal.
The S&P 500 index fell 1.55% to a 21-day low for the week. The benchmark index closed slightly above its 50-day line but below its 10-week.
The Dow Jones industrial average fell 2.4% to its lowest level since late January, while the small-cap Russell fell 2.9% since late February 2000. Both are clear below 50 days.
Invesco S&P 500 Equal Weight ETF (RSP) fell 2.6%, scraping through the 50-day line on Friday. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 1.7%, below the 50-day line for its worst level since late February.
Crude fell 1.4% on the week to $85.66 a barrel, off Friday's intraday high of $87.67. Gold rose 1.3% to $2,356.20 an ounce, also higher on Friday.
The 10-year Treasury yield rose 12 basis points to 4.5%, from Thursday's peak of 4.59%, a five-month high. Investors see little chance of a Fed rate cut in June and are leaning toward a move in July.
Stock market fear levels will rise
The CBOE Volatility Index rose 16.1% on Friday, hitting its highest level since late October. Excessive fear predicts at least a short-term bottom. But the market fear gauge is still well above its October peak, let alone its Covid high.
If Middle East tensions ease, stocks may have a snapback rally. Various indicators that indicate the market is oversold also bolster that optimistic case.
But an escalating Iran-Israel conflict could trigger much bigger fears and cause a bigger pullback from stocks.
ETFs
Among growth ETFs, the iShares Expanded Technology-Software Sector ETF (VAT) fell 1.7% on the week. VanEck Vectors Semiconductor ETF (SMH) fell 0.9%. Nvidia and Taiwan Semiconductor are the largest SMH holdings, with ASML, Lam Research, KLA and AMAT stocks also being members.
Time the market with IBD's ETF Market Strategy
ASML, Taiwan Half Revenue
Dutch chip-equipment giant ASML reports Wednesday morning and Taiwan Semiconductor is due early Thursday.
Analysts expect ASML revenue to decline in Q1, but see a recovery in the second half. Earnings in the Taiwan half are expected to be flat, although the foundry giant reported better-than-expected Q1 sales on April 10.
Taiwan Semi is benefiting from strong demand for AI chips. TSMC's revenue and capital expenditure guidance will be key for the industry.
ASML stock fell 1.8% last week to 961.84, which was right on the 50-day and 10-week lines. It now has a flat base with a buy point of 1,056.34. Investors can use a trendline entry around 1000 to initiate a position at the 10-week or April 1 high of 1002.66.
TSM stock rose 0.85% for the week to 142.56. Stocks have been consolidating for a few weeks now, but need another week for the perfect platform. Investors could use the April 10 high of 148.43 as an entry point if Taiwan shares rally in the semi-revenue.
Chip stocks
Nvidia shares rose 0.2% to 881.86 on the week. Stocks rebounded from a 10-week line on Wednesday-Thursday before pulling back on Friday, and still holds a 21-day. NVDA stock now has a flat base with a 974 buy point. Investors can use Thursday's high of 907.39 as an initial entry.
Broadcom has an integration platform with a single point of purchase. Lam Research and KLA have flat platforms Market rise. Applied materials have a defacto flat base and three weeks of tight shape.
What to do now
After Thursday's strong move, there were expectations that the market would rise, especially with leaders like the Nasdaq and Nvidia.
Instead there was a big pullback on Friday in anticipation of an Iranian attack. Although Treasury yields fell on Friday, the weekly surge — and the Fed's rate cut further — is a broader headwind.
Now is the time to work on watch lists. If the battle cry fades and the upcoming earnings reactions are positive, you should be ready. But you have to be willing to scale more seriously.
As earnings season begins, know when your holdings report, as well as when key competitors, customers and suppliers are tapping.
Read the big picture every day to stay in tune with market direction and leading stocks and sectors.
Follow Ed Carson on Threads @edcarson1971 and on X/Twitter @IBD_ECarson For stock market updates and more.
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