Dow Jones futures fell slightly Sunday evening, along with S&P 500 futures and Nasdaq futures. The current stock market rally is at 2019 highs, but is it a bull market? Chip-sector strength, including Advanced Micro Devices (AMD) and Intel stock, is a good sign, and could fuel Apple stock. But will software names such as ServiceNow (NOW) and Salesforce.com (CRM) continue to lead the current stock market rally? Finally, will investors reassess Boeing stock as Boeing 737 Max production falls?
Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures dipped about 0.1%. Nasdaq 100 futures were just below fair value. Boeing (BA) is a member of the Dow Jones Industrial Average along with Apple (AAPL) and Intel (INTC).
Larry Kudlow, President Donald Trump’s top economic adviser, said a China trade deal, is “closer and closer.” He told CBS’ “Face The Nation” on Sunday that high-level China trade talks will continue this week via “a lot of teleconferencing.”
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Is The Current Stock Market Rally A Long-Term Bull Market?
The current stock market rally has made a remarkable run since Christmas. The Dow Jones, S&P 500 index and Nasdaq composite closed Friday’s stock market trading within 2.5% of record highs.
Since early February, the stock market has been in a tradable rally, with many top stocks breaking out of proper bases. However, it’s been unclear if the current stock market rally is a long-term bull market, either a new bull run or part of the longer-term bull that began in 2009.
Look for the major indexes to convincingly clear their late 2018 peaks. That could happen soon, though the current stock market rally also could face resistance near the old highs. The fate of China trade talks and the upcoming earnings season likely will play a key role over the next few weeks.
It’s bullish that that chip stocks are doing well. Xilinx (XLNX) was an early leader. Intel stock, AMD stock and several other top chip stocks have moved into buy range too. Some breakouts, including AMD stock, are from very deep bases, which is a concern. Investors could play the VanEck Vectors Semiconductor ETF (SMH) to avoid stock-specific risk
A chip stock rally also is a positive sign for Apple iPhone demand. Apple stock, once again the world’s most valuable company, closed Friday at 197. That’s just below an Apple stock buy point of 197.79 from a cup-with-handle base.
Will Software Still Lead Stock Market Rally?
Software led much of the current stock market rally, with a slew of top names clearing buy points. But since the end of February, top software stocks have suffered three or four big selling days, with the latest on Thursday. The iShares Expanded Tech-Software Sector ETF (IGV), a top ETF in the current market, is not far from highs, but its relative strength line has moved sideways for the past five weeks. The RS line tracks a stock or ETF’s performance vs. the S&P 500 index.
Many top software names, such as ServiceNow stock, found support at their 50-day line in Thursday’s sell-off. ServiceNow is an IBD Leaderboard stock along with a few other software stocks. Salesforce stock, which has seen its RS line trend lower over the past two months, closed just below its 50-day line Friday.
A few good days could have software stocks back at record highs. Conversely, further selling pressure could confirm a sector rotation.
Boeing 737 Max Production Cuts Weigh On Boeing Stock
After Friday’s stock market close, the Dow Jones aerospace giant said it would cut Boeing 737 Max production from 52 a month to 42. That’s not a shock, given that the Boeing 737 Max is grounded indefinitely after two deadly crashes. But it may force investors to reassess. Boeing stock rebounded for a second week, but hit resistance at the 50-day late last week.
Boeing stock fell 2.3% late Friday. Remember that Boeing stock is the biggest weight on the price-weighted Dow Jones. It’s likely why Dow Jones futures lagged Nasdaq futures Sunday.
Revenue and cash flow will take a serious hit for several months, if not longer, due to Boeing 737 Max woes. A smaller production run also will mean lower profit margins.
