Dow Jones futures will open on Sunday evening, with U.S. markets closed Friday. The Federal Reserve’s favorite inflation report was largely in line, with Fed chief Jerome Powell sounding pleased with Friday’s data.

decisions on interest rates impact both the economy and the stock market. IBD News Editor Ed Carson shares how reactions by each can differ and what investors need to know.” vid-name=”Fed Interest Rate Decisions: Market Influence And Investor Psychology Impact Of Cuts And Hikes” vid-cat=”Industry Insights” vid-date=”03/20/2024″ vid-date-tmsp=”1710938202″ vid-image=”https://www.investors.com/wp-content/uploads/2024/03/cReAVOpP-640×360.jpg” vid-authors=”MEREDITH HEYMAN”>
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The stock market rally enjoyed a solid, holiday-shortened week. Growth stocks, especially AI leaders such as Nvidia (NVDA), fell back somewhat, though they generally held above support. The market showed strength shrugging that off, with robust breadth. Small caps led with strong gains, with the Dow Jones and S&P 500 right at record highs. The Nasdaq edged lower as many tech giants retreated.

Nvidia needs more time, but Microsoft (MSFT), Meta Platforms (META) and CrowdStrike (CRWD) are tech leaders pulling back bullishly.

Meanwhile, new AI chip IPO Astera Labs (ALAB) is pulling back from Tuesday’s record high. A continued pause in Nvidia stock and AI plays could let ALAB stock forge a short IPO base.

Meanwhile, China EV makers Nio (NIO), Li Auto (LI) and XPeng (XPEV) are due to report March and first-quarter deliveries early Monday, April 1. EV giant BYD (BYDDF) should report a big rebound in March, either on Monday or Tuesday. Tesla (TSLA) will likely release first-quarter deliveries on Tuesday. Expectations are low for Tesla while Nio and especially Li Auto cut delivery targets in recent days.

Nvidia and META stock are on IBD Leaderboard. Microsoft stock is on the IBD Long-Term Leaders list. Nvidia, Meta Platforms and CrowdStrike stock are on the IBD 50 list.

PCE Inflation

The February PCE price index rose 0.3% vs. January, the Commerce Department reported Friday, just below views for a 0.4% rise. January’s PCE gain was revised up to a 0.4% rise. PCE inflation came in at 2.5% vs. a year earlier, in line and just above January’s 2.4%.

The core PCE price index, the Fed’s top inflation gauge, advanced 0.3% vs. January as expected, with the unrounded figure at 0.26%. January’s reading was revised to a 0.5% gain. Core PCE inflation came in at 2.8% vs. a year earlier, meeting estimates and down from an upwardly revised 2.9% in January.

Inflation has proved sticky in recent months, making the Federal Reserve less eager to reduce interest rates.

However, the relatively in-line PCE inflation report should keep a June Fed rate cut in play. The odds of a June Fed rate cut were about 64% on Thursday.

Fed chief Jerome Powell on Friday said it was “good” that there were no ugly surprises in the PCE data, adding that the report “was more or less in line with want we want to see.” He reiterated that policymakers want to be more confident before cutting rates. He noted that cutting rates too soon could be “very disruptive,” but he also said waiting too long could mean “unneeded damage to the economy and the labor market.”

Investors won’t get a chance to respond until Dow Jones futures open Sunday evening, with the real test coming Monday.

The PCE inflation data came as part of the income and spending report. Personal income grew 0.3%, shy of 0.4% forecasts. Consumer spending popped 0.8% vs. views for 0.5%.

Dow Jones Futures Today

Dow Jones futures will open at 6 p.m. ET Sunday, along with S&P 500 futures and Nasdaq 100 futures.

U.S. markets are not trading Friday in observance of the Good Friday holiday. European markets and Hong Kong also were closed Friday and will remain shut on Easter Monday.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

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Stock Market Rally

The stock market rally saw modest-to-strong weekly gains outside of some growth plays.

The Dow Jones Industrial Average rose 0.8% in weekly stock market trading, setting a record close Thursday. The S&P 500 index gained 0.4%, just setting an intraday all-time high Thursday. The Nasdaq composite dipped 0.3%, just below peaks. For the quarter, the Dow gained 5.6%, the S&P 500 jumped 10.2% and the Nasdaq leapt 9.1%.

Market breadth was impressive during the week. The small-cap Russell 2000 jumped 2.5%, hitting a two-year high. The Invesco S&P 500 Equal Weight ETF (RSP) gained 1.6%, setting a record high. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 0.4% vs. the Nasdaq 100’s 0.5% slide.

The 10-year Treasury yield fell 3 basis points to 4.19% for the week, dipping below the 200-day line.

U.S. crude oil futures climbed 3.15% to $83.15 a barrel last week, surging 16.1% in the first quarter.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) fell 0.8% for the week. Microsoft stock is a huge holding, with CrowdStrike also in IGV. The VanEck Vectors Semiconductor ETF (SMH) retreated 1.2%. But these were inside weeks, giving up just a portion of the prior week’s strong gains.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) climbed 1.3% last week and ARK Genomics ETF (ARKG) advanced 2.1%. Tesla stock is a major holding across Ark Invest’s ETFs.

The Industrial Select Sector SPDR Fund (XLI) edged up 0.6%, the Financial Select SPDR ETF (XLF) rose 1.7% and SPDR S&P Homebuilders ETF (XHB) climbed 1.2%, all to record highs.

SPDR S&P Metals & Mining ETF (XME) jumped 4% last week. U.S. Global Jets ETF (JETS) ascended 3.3%, both to a multimonth best. The Energy Select SPDR ETF (XLE) gained 2.15% to a 52-week high. The Health Care Select Sector SPDR Fund (XLV) rose to 1.6%, just below all-time high levels.

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Nvidia Stock

Nvidia stock fell 4.2% this week to 903.56, ending a 92% run in an 11-week win streak. Shares haven’t tested their 21-day moving average and are trading within a three-week range. After such a strong run, it makes sense for Nvidia to consolidate for a while. A new base could come in a couple of weeks, but NVDA stock could pause for an extended time, as it did for several months in late 2023.

Many other AI stocks may take their cue from Nvidia, especially chip plays. Longer pauses to forge bases and let moving averages catch up would be constructive.

Astera Labs Stock

Astera Labs came public at 36, soaring 72% in its March 20 debut. The AI chip IPO spiked to 95.21 on Tuesday before reversing lower. ALAB stock has continued to pull back. Shares rose 5.9% to 74.15 for the week.

It’s usually a good idea to wait for an IPO stock to find its footing and forge some sort of consolidation over a few weeks. An IPO base can be very short, as little as two weeks and perhaps unofficially a couple days shorter than that. But they often form over several weeks, depending on market conditions. IPO bases can deliver powerful returns.

Astera Labs enjoys rapid revenue growth from a relatively low base. It lost money in 2023, but is expected to turn a profit in 2024 with continued strong earnings growth in 2025.

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Stocks Near Buy Points

Microsoft stock is on a five-session losing streak, but the losses have been slim and the volume very light. Shares have drifted just below a 420.82 buy point, but are holding above the 21-day line. A rebound would be actionable.

Meta stock fell 4.7% to 485.58 last week, but on anemic volume. Shares fell slightly below the 21-day line. Shares are pulling back toward a fast-rising 10-week line, which might be roughly even with Meta on Monday. That would be the first real 10-week line test of 2024. A rebound from that level would offer a buying opportunity. Meta stock also could have a new base in a couple weeks.

CrowdStrike stock fell 2.1% to 320.59 in the latest week, finding support around the 21-day and 10-week lines. The cybersecurity leader has a messy consolidation, but investors could use a draw-the-line buy point around 338.45, or possibly use Wednesday’s high of 333.84 as an early entry.

In truth, a number of software stocks are hovering near support levels and possible entries. Those include CrowdStrike peer CyberArk Software (CYBR) as well as Cloudflare (NET), Monday.com (MNDY), ServiceNow (NOW) and HubSpot (HUBS).

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Tesla Stock

Tesla stock rose 2.9% last week to 175.70, though it hit resistance at the 10-week line. Bulls are pinning hopes that Full Self-Driving will show big improvements, with CEO Elon Musk mandating FSD test drives before new purchases or after service visits. But in the short term, analysts continue to slash Tesla earnings and delivery estimates. That’s largely due to weak EV demand generally. In China, competition continues to heat up, with smartphone maker Xiaomi making a big entry into the EV market Thursday.

Tesla will release first-quarter production and delivery numbers on Tuesday, April 2, with Q1 earnings later in the month.

What To Do Now

The stock market rally appears to be broadening out and rotating in a constructive way. While this story generally looked at tech names, investors can find actionable or promising stocks in the housing, financial, medical, travel and consumer sectors.

Eli Lilly (LLY), Medpace (MEDP), Uber Technologies (UBER), ELF Beauty (ELF), Nextracker (NXT), XP (XP), Royal Caribbean (RCL), East West Bancorp (EWBC), Axon Enterprise (AXON), On Holding (ONON), M/I Homes (MHO) and Warren Buffett’s Berkshire Hathaway (BRKB) are just a few.

It’s possible that tech growth leaders like Nvidia, Microsoft and Meta will consolidate for an extended period.

So cast a wide net, adding promising names to your watchlists. Use the long weekend to run your screens and do some research on some specific targets.

Don’t forget defense. Several leading stocks flashed sell signals for recent buyers this past week. While a number of stocks are setting up or pulling back in seemingly bullish fashion, it wouldn’t take much selling to start looking a lot worse.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Threads at @edcarson1971, X/Twitter at @IBD_ECarson and Bluesky at @edcarson.bsky.social for stock market updates and more.

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