The stock market rally staged a bullish reversal on Friday, with the major indexes recovering from early losses and closing higher. The Dow Jones futures, along with the S&P 500 futures and Nasdaq futures, rose on Sunday evening, signaling a positive start for the week. Several leading stocks, including Nvidia (NVDA), Meta Platforms (META), Arista Networks (ANET), and Eli Lilly (LLY), broke out of buy points or early entries on Friday, showing strong relative strength.
Market Rally Reverses Higher
The stock market rally had a volatile week, with the Dow Jones Industrial Average and the S&P 500 index undercutting their recent lows and ending their rally attempts. The Nasdaq composite, however, held above its prior low and continued its rally attempt. On Friday, the major indexes opened lower but reversed higher in higher volume, closing near their session highs. The Dow Jones gained 0.9%, the S&P 500 rose 0.8%, and the Nasdaq climbed 1%. The small-cap Russell 2000 index also rebounded from its five-month low, adding 0.7%.
The market breadth improved on Friday, but it has been weak for weeks or months, reflecting the lack of participation from many sectors and stocks. The 10-year Treasury yield surged to 4.78% last week, hitting a 12-year high of 4.89% on Friday morning, before easing slightly. The rising bond yields have put pressure on growth stocks, especially those with high valuations and low profitability.
Investors should be cautious and selective in this market environment, as the rally is not broad-based or confirmed. They should focus on stocks that are showing strong fundamentals and technicals, and avoid chasing extended or lagging names. They should also be ready to cut losses quickly and lock in profits when they have them.
Nvidia Leads 11 Stocks Breaking Out
Among the stocks that showed bullish action on Friday, Nvidia was a standout performer. The chip giant soared 5.6% to a new high of $1,005.88, clearing a cup-with-handle buy point of $989.10. Nvidia has been a leader in the semiconductor industry, benefiting from strong demand for its graphics cards, data center solutions, and artificial intelligence products. The company also announced a four-for-one stock split last week, which could attract more investors.
Another leader in the tech sector was Meta Platforms, formerly known as Facebook. The social media giant rose 2.9% to $354.70, breaking out of a flat base with a buy point of $351.23. Meta has been facing regulatory scrutiny and public backlash over its impact on society and democracy, but it has also been investing heavily in its vision of building the metaverse, a virtual reality platform that could revolutionize online interactions.
Arista Networks was another tech stock that broke out on Friday. The cloud networking company jumped 4.4% to $496.49, clearing a consolidation pattern with a buy point of $489.10. Arista has been growing its revenue and earnings at double-digit rates, driven by strong demand for its cloud-based solutions from enterprise customers and cloud service providers.
Eli Lilly was one of the few health care stocks that showed strength on Friday. The pharmaceutical giant gained 3% to $268.01, breaking out of a flat base with a buy point of $266.09. Eli Lilly has been benefiting from its diversified portfolio of drugs, especially its diabetes and oncology products. The company also has several potential blockbusters in its pipeline, including treatments for Alzheimer’s disease and Covid-19.
Other stocks that cleared buy points or early entries on Friday included Qualys (QLYS), CME Group (CME), Vertiv Holdings (VRT), CrowdStrike Holdings (CRWD), Cadence Design Systems (CDNS), and Palo Alto Networks (PANW). All of these stocks have relative strength lines at or near highs, indicating their outperformance versus the S&P 500 index.
Tesla (TSLA) was another notable mover on Friday. The electric vehicle maker rebounded from its 50-day moving average and rose 2.6% to $802.81, closing near its record high of $804.82. Tesla has been resilient despite facing several challenges last week, including a fatal crash in Texas, a protest in China, and a production halt in Germany.
Nvidia, LLY stock, Arista Networks, Vertiv and Meta Platforms are on IBD Leaderboard, with Tesla stock on the Leaderboard watchlist. PANW stock and Meta Platforms are on SwingTrader. CDNS stock is on IBD Long-Term Leaders. Meta stock, Nvidia, Qualys, Arista Networks, Cadence Design, Palo Alto Networks, Tesla and Eli Lilly are on the IBD 50. Nvidia, Tesla, Palo Alto and ANET stock are on the IBD Big Cap 20. Eli Lilly was Friday’s IBD Stock Of The Day, with CrowdStrike, Arista Networks and PANW stock also selections during the week.