Stock market rally paused Tuesday; Microsoft, Tesla, ASML, Boeing, Apple on tap. Investors should add exposure gradually and focus on building watchlists. Read The Big Picture to stay in sync with market direction.
The stock market rally has continued in 2021, with the major indexes making new highs. Tuesday the Dow Jones Industrial Average rose 0.3%, the S&P 500 index dipped 0.1% and the Nasdaq composite declined 0.3%. Microsoft (MSFT) reported better-than-feared earnings, but gave weak guidance, leading to a sell-off in the stock and a decline in Dow Jones futures. Other tech giants such as ASML (ASML), Boeing (BA) and Tesla (TSLA) are set to report this week, with investors expecting to see further indications of the strength of the market rally.
Microsoft earnings edged past views on strong cloud-computing growth, but the software giant gave weak guidance, causing MSFT stock to reverse lower. Intuitive Surgical (ISRG) and Texas Instruments (TXN) also reported, with ISRG earnings missing and TXN slightly beating but guiding lower.
The DOJ sued Google (GOOGL) over its online ad dominance, seeking to force the company to divest certain assets. Google stock fell 2.1% to 97.70 on Tuesday, although that’s after running 10% higher in heavy volume in the prior three sessions.
ETFs saw mixed results, with growth ETFs such as the Innovator IBD 50 ETF (FFTY) and Innovator IBD Breakout Opportunities ETF (BOUT) edging higher, while the VanEck Vectors Semiconductor ETF (SMH) fell 0.7% and the ARK Innovation ETF (ARKK) sank 1.6%. Tesla stock is a major holding across Ark Invest’s ETFs, with Cathie Wood’s Ark having been beefing up its TSLA position in recent weeks.
The S&P 500, Dow Jones and Nasdaq all face resistance levels, but the market rally is looking strong. Tech has been leading the market in 2021, but now investors are expecting a barrage of tech earnings. Microsoft could just be the start, with Apple (AAPL), Facebook parent Meta Platforms (META), Amazon (AMZN), AMD (AMD), Google and many more due to report next week.
Investors should be adding exposure gradually and not getting too concentrated into a specific stock or sector. One option is to buy market or sector ETFs, along with individual names. It’s important to focus on building up watchlists and to be aware of key earnings for the market and holdings. Staying in sync with the market direction and leading stocks and sectors is also essential. If the market rally has cleared late-2022 highs at the end of next week, it would be a strong signal that a sustained uptrend is underway.
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