On Monday morning, Dow Jones futures dropped alongside S&P 500 futures and Nasdaq futures following Moody's decision to downgrade the U.S. sovereign debt rating on Friday.
Last week witnessed a robust surge in the stock market as tensions between the U.S. and China eased, shifting sentiment back towards enthusiasm for artificial intelligence investments after periods of concern. This positive shift caused all key indices to confidently surpass their 200-day moving averages.
The S&P 500 and Nasdaq have now moved into power trend , indicating a particularly robust market upturn. While a powerful trend isn’t solely a reason to buy, it’s advisable to become notably more involved and inclined towards maintaining riskier growth investments.
Kindly view the video at Investors.com where upcoming retail and software earnings will highlight tariffs and artificial intelligence.
Broadcom , Construction Partners , Meta Platforms and Sprouts Farmers Market are setting near buy points .
NVIDIA CEO Jensen Huang delivered the keynote speech at the Computex technology exhibition in Taiwan, during which he highlighted plans for offer semi-custom AI solutions utilizing processors from competitors .
Dow Jones Futures Today
Dow Jones futures fell 0.6% vs. fair value. S&P 500 futures lost 1% and Nasdaq 100 futures declined 1.45%.
The 10-year Treasury yield jumped to 4.55%. Meanwhile, the 30-year Treasury yield reached 5.02%, marking its peak since November 2023.
Brent crude futures dropped approximately 1%.
In overnight news, China released its April economic figures, which may have been influenced by U.S. tariffs. The retail sector saw an increase of 5.1% compared to last year, marking a decline from March’s figure of 5.9%, and falling short of predictions at 6%. In terms of industrial output, growth stood at 6.1% relative to April 2023, decreasing from March’s rate of 7.7%, yet surpassing expectations of around 5.9%. Regarding investments up until this point in the year, they climbed only 4%, coming in under forecasts expecting approximately 4.2%.
Keep in mind the rapid move from last night. Dow futures And this isn't guaranteed to result in real trades in the subsequent regular session. stock market session.
Moody's Lowers U.S. Sovereign Credit Rating
Nevertheless, Moody's Investors Service lowered the U.S. government credit rating from its highest tier, Aaa, to Aa1, indicating that this decision "shows the rise over the past ten years in government debt and interest payment ratios, which have reached levels much higher compared to those of similar-rated sovereign nations."
This occurred over a year following Moody's downgrade of the U.S. debt rating outlook to negative. Previously, both Fitch Ratings and S&P Global Ratings had downgraded the highest credit ratings assigned to the U.S. government.
On NBC's "Meet The Press" on Sunday, Treasury Secretary Scott Bessent stated, “Moody’s reflects a delayed response.” He attributed the present economic difficulties to the Biden administration and emphasized, “Our aim is to reduce expenditures.”
A major tax and spending bill being crafted by the Republican-controlled Congress is anticipated to substantially increase federal deficits, which are already elevated and projected to continue rising sharply.
The downgrade from Moody's serves as a clear indication that America's steadily worsening financial situation might eventually lead to significant repercussions.
Participate with IBD specialists who will examine top-performing stocks and overall market trends on IBD Live.
Stock Market Rally
Once more, the stock market experienced significant weekly growth. Most of this progress occurred at the beginning of the week; however, both the indices and prominent stocks demonstrated minimal inclination to rest, not to mention experiencing any decline.
On Monday, the U.S. and China reduced tariffs. Earlier on Friday, President Donald Trump mentioned that the U.S. plans to establish tariff rates for other trading partners within the coming two to three weeks, stating that the administration does not have the capability to finalize agreements with everyone simultaneously.
The Dow Jones Industrial Average increased by 3.4% over the previous week. stock market trading The S&P 500 index rose by 5.3%. The Nasdaq composite climbed by 7.15%. The small-cap Russell 2000 increased by 4.5%.
The Dow Jones clearly rose above its 200-day moving average, despite UnitedHealth being a huge drag. S&P 500 and Nasdaq vaulted above that key level. More leading stocks broke out or flashed buy signals, with earlier movers continuing to climb.
The 10-year Treasury yield increased by six basis points to reach 4.44%, retreating from a four-month peak of over 4.5% at close.
U.S. crude oil futures or rose 2.4% to $62.49 a barrel last week.
Stock Market Power Trend
A powerful trend has started on the S&P 500 and Nasdaq, fulfilling all four requirements.
The low has been above the 21-day exponential moving average for a minimum of 10 consecutive days. The 21-day EMA has remained above the 50-day simple moving average for at least five days. The 50-day line shows an upward trend. The market finishes higher for the day.
A power trend typically concludes when the 21-day line crosses beneath the 50-day line once again.
ETFs
In the realm of growth ETFs, the Innovator IBD 50 ETF climbed 5.6% over the past week. The iShares Expanded Tech-Software Sector ETF jumped 5.5%, while the VanEck Vectors Semiconductor ETF soared 10.3%. Broadcom stands out as a significant component within the SMH index.
The ARK Innovation ETF surged by 13.4% over the past week, while the ARK Genomics ETF increased by 3.3%.
The SPDR S&P Metals & Mining ETF gained 1.8% over the past week. The Global X U.S. Infrastructure Development ETF surged by 5.6%, while the U.S. Global Jets ETF rose 4.3%. Additionally, the SPDR S&P Homebuilders ETF increased by 4.7%, the Energy Select SPDR ETF went up by 3.7%, and the Health Care Select Sector SPDR Fund saw a slight increase of 0.3%.
The Industrial Select Sector SPDR Fund increased by 5.6%, whereas the Financial Select SPDR ETF rose by 3.5%.
Timing The Market Using IBD's ETF Trading Approach
Stocks Near Buy Points
Last week, Broadcom’s stock surged by 9.8%, closing at $228.61, marking its fourth consecutive gain and its fifth increase within the latest six trading sessions. The company's shares are moving closer to a potential buy point at 251.88. Over the past several days, the price has remained relatively stable, possibly forming a handle that could adjust this target buy point downward. This consolidation phase is occurring slightly beneath significant resistance around the 238 mark.
After the broader sector experienced a downturn beginning in late January due to expenditure concerns sparked by DeepSeek, Broadcom is now capitalizing on the surge in demand for AI hardware. Nvidia Last week plans to sell over 18,000 advanced processors to Saudi Arabia, which is among multiple encouraging factors driving artificial intelligence advancements.
The share price of Construction Partners increased by 5.6%, reaching $101.14, which is slightly under $103.69. cup-base Purchase signal. The ROAD stock rose above the entry level on Tuesday but did not end within the buying range. Despite this, earnings remain robust with sales growth speeding up over the last two quarters to reach 54% in the quarter ending in March.
Last week, Meta's stock surged by 8.1%, reaching $640.34, and it seems to be forming a possible handle. Currently, the shares have a buy point of 740.91 within a cup formation that is about 35% deep, as indicated. MarketSurge .
The share price of Sprouts surged by 4.3%, reaching $168.68, after successfully testing its support level over a period of ten weeks. On Friday, the stock climbed back above its 21-day moving average and broke through the downward trendline within the handle formation, providing an initial buy signal. The target for SFM stock stands at $178.16. cup-with-handle Purchase point. The natural foods grocery store has reported multiple consecutive quarters featuring increasing profits and revenue growth.
Top S&P 500 Titans, With Tesla’s Key Competitor at Forefront, Highlight 5 Stocks Close to Purchase Levels
What To Do Now
The surge in the stock market has initiated a strong upward trend. This is an opportune moment to maintain significant investments, possibly going all-in, and showing greater inclination towards purchasing high-growth stocks with the aim of holding onto them for substantial profits.
Avoid being hasty. Do not pursue outstretched stocks. The chances of a downturn would be significant. Moreover, numerous premium stocks remain in purchase zones or forming up, such as Broadcom and Meta. Thus, strengthen your watchlist.
Earnings season continues , with Snowflake , TJX Cos. and Trip.com Among the software options, retail and China travel present attractive nearby buying opportunities.
Broadcom shares are currently performing as such IBD Leaderboard Watchlist. The stock for Sprouts is being monitored. IBD 50 Both are included in this category. IBD Big Cap 20 Construction Partners was mentioned on Friday. IBD Daily Stock Pick .
Read The Big Picture each day to remain aligned with the market trend and prominent stocks and industries.
Please follow Ed Carson onThreads at @edcarson1971 and X/Twitter at @IBD_ECarson for updates on the stock market and additional information.
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