Dow Jones Futures: Huge AI Earnings, Fed Pivot Loom; Here's What To Do

Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. AI tech titans Apple (AAPL), Microsoft (MSFT), Meta Platforms (META) and Amazon.com (AMZN) headline a massive week of earnings. The Federal Reserve this week is expected to signal that rate cuts are coming soon.

↑ X NOW PLAYING These Magnificent Seven Stocks Have Earnings Due As Techs Sell Off

The stock market rally diverged last week, with small caps rising strongly and a large number of buying opportunities emerging from a variety of sectors. The Nasdaq tumbled below its 50-day line, though the S&P 500 regained that level on Friday.

Tesla (TSLA) and Google-parent Alphabet (GOOGL) tumbled on earnings, while the CEOs of Google and Meta Platforms voiced concerns that tech companies might be spending too much on artificial intelligence. That slammed Nvidia (NVDA).

So Apple, Microsoft, Meta Platforms and Amazon signals about AI capital spending and monetization will be huge this coming week.

For investors, the best buying opportunities and setups remain in nontech sectors.

Nvidia stock is on IBD Leaderboard, with Advanced Micro Devices (AMD) on the Leaderboard watchlist. Apple stock is on SwingTrader. Microsoft stock is on IBD Long-Term Leaders. AppFolio stock is on the IBD 50.

The video embedded in this article reviews the upcoming Apple, Microsoft, Meta and Amazon earnings in depth, while also previewing AMD stock, Arm Holdings (ARM), Arista Networks (ANET), Vertex Pharmaceuticals (VRTX), Sprouts Farmers Market (SFM) and Wingstop (WING).

Fed Meeting

The Federal Reserve meeting is on July 30-31, with markets expecting policymakers to leave rates steady. But the Fed statement at 2 p.m. ET, and Fed chief Jerome Powell's talk at 2:30 p.m. ET may signal a readiness to cut rates.

Investors have fully priced in at least a quarter-point rate cut in late September, and see at least two and perhaps three cuts this year as likely.

So if Powell doesn't give a clear green light for rate cuts on Wednesday, financial markets could react poorly.

Dow Jones Futures Today

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

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 diverged last week, though there was a broad bounce on Friday.

The Dow Jones Industrial Average rose 0.6% in last week's stock market trading, rebounding from a slide to the 21-day line with Friday's 1.5% jump. The S&P 500 index retreated 0.8%, but regained its 50-day moving average on Friday.

The Nasdaq composite fell 2.1% for the week, below its 50-day line even with Friday's rebound.

The small-cap Russell 2000 leapt 3.5%, near recent multiyear highs.

The Invesco S&P 500 Equal Weight ETF (RSP) climbed 0.8%, just below record highs.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) skidded 1.65%, to below its 50-day line as tech weakness extends beyond megacaps.

The upcoming earnings from Apple, Microsoft and other Big Techs this week — along with the Fed rate outlook — will go a long way to determining whether the Nasdaq can find its footing or if it will fall into a full-fledged correction.

While megacaps and AI plays generally struggled, there were a number of breakouts or stocks reclaiming buy points or flashing early entries, including in housing/construction, industrial/aerospace, financial, energy as well as some medicals and even some software.

The 10-year Treasury yield fell four basis points to 4.2%. The two-year yield slumped 12 basis points to 4.39%, with the yield curve continuing to turn less inverted.

U.S. crude oil futures fell 1.89% to $77.16 a barrel last week, down 7.2% over three weeks.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) slipped 1.3% last week. The iShares Expanded Tech-Software Sector ETF (IGV) lost a fraction, with Microsoft stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) gave up 3.2%, with Nvidia stock a dominant member and AMD also a key holding.

SPDR S&P Metals & Mining ETF (XME) rose 1% last week. The Global X U.S. Infrastructure Development ETF (PAVE) bounced 2.4%. U.S. Global Jets ETF (JETS) edged up 0.1%. SPDR S&P Homebuilders ETF (XHB) jumped 4.3%. The Energy Select SPDR ETF (XLE) dipped 0.2% and the Health Care Select Sector SPDR Fund (XLV) climbed 1.4%. The Industrial Select Sector SPDR Fund (XLI) rose 1.2%.

The Financial Select SPDR ETF (XLF) advanced 1.3% and the SPDR S&P Regional Banking ETF (KRE) jumped 5.75%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 1.8% last week and ARK Genomics ETF (ARKG) soared 7.4%.

Tesla stock is the No. 1 holding across Ark Invest's ETFs. TSLA stock tumbled 8.1% last week on an earnings miss and no positive surprises on moonshots from Elon Musk on the call.

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Big Tech AI Signals

Apple, Microsoft, Meta and Amazon each had a tough week, with only Apple stock above its 50-day line. They aren't broken yet, but need some repair work.

For now, investors will look for signs that tech companies are monetizing generative AI, including Apple hints on production orders for the upcoming AI-enabled iPhone 16 and Microsoft's Copilot efforts. Microsoft Azure and Amazon Web Services growth also are important.

Crucially, are these tech titans willing to keep spending heavily?

Meta CEO Mark Zuckerberg and Alphabet CEO Sundar Pichai last week conceded that tech firms may be investing too much in artificial intelligence. However, both said that AI underinvestment is a bigger risk than spending too much.

Tech firms feel pressure to spend heavily even if only to maintain their current market position and revenue. On that point, Microsoft-backed OpenAI on Thursday launched a new AI-powered search engine, SearchGPT, taking on Google.

Apple stock is below its 21-day line but above its 50-day. Microsoft, Meta and Amazon stock slumped below their 50-day lines last week.

Strong AI capex could revive Nvidia stock, along with results and guidance from AMD and Arm Holdings. Nvidia stock gave up 4.1% for the week, coming off Thursday's lows but below the 50-day line.

Arista Networks, in addition to its own results Tuesday night, will key off capital spending plans from major customers Microsoft and Meta. ANET stock also knifed below its 50-day last week, though it found support near a prior buy point.

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What To Do Now

The Federal Reserve and megacap techs will dominate headlines this coming week, and with good reason, but with some exceptions investors should be focusing on non-tech areas. Many industrials and construction firms will be reporting this week, along with some more aerospace names.

Investors have had opportunities to shift over from tech into the new leading sectors in the past few weeks. At the very least, tech exposure should be reduced significantly by this point.

Evaluate your portfolio and work on your watchlists. A broad market revival could spur a new wave of buying opportunities, but this week's headlines could also trigger a bigger slide.

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 and X/Twitter at @IBD_ECarson for stock market updates and more.

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