Dow Jones futures fell modestly early Friday, along with S&P 500 futures and Nasdaq futures, as Intuitive Surgical and especially Snap weighed on several online giants. The stock market rallied, with Tesla (TSLA) and lower Treasury yields driving the Nasdaq higher.
There’s growing optimism that the market bottomed in mid-June. The Nasdaq could be ready for a pullback, however, especially with so many earnings coming next week.
In Thursday’s session, Tesla stock surged on earnings, blasting higher. Shares cleared an aggressive buy area, but now look extended while still being well off highs.
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SNAP stock crashed 27% in after-hours trading, not far from its mid-June bottom. Shares had closed up 5.6% to 16.38. Snap reported a Q2 loss that was slightly worse than expected, while revenue fell short. The Snapchat parent also wouldn’t offer Q3 guidance. While announcing a $500 million buyback program, Snap will slow hiring and curb operating expenses. All that is a bad sign for social media firms and online ad-dependent firms. Facebook parent Meta Platforms (META) lost nearly 5% and Google parent Alphabet (GOOGL) sank 3% ahead of their earnings next week. Trade Desk (TTD) retreated 7%.
Twitter earnings are due Friday morning. TWTR stock fell only 2% late Thursday, with Elon Musk’s contested takeover deal providing some support.
Intuitive Surgical earnings fell for a second quarter, while revenue growth slowed for a fourth straight quarter, to just 4%. Both missed views as the robotic surgery giant blamed Covid’s ongoing impact on elective procedures. ISRG stock dived 13%, set for a tumble back below its 50-day line. The Intuitive Surgical earnings and commentary could be a bad sign for other medical device, products and systems makers.
Stocks Near Buy Points
Ollie’s Bargain Outlet and PWR stock are on the IBD Leaderboard watchlist. OLLI stock is on SwingTrader. FTNT stock is on the IBD Long-Term Leaders list. ULTA stock is on the IBD 50 list. Neurocrine Biosciences was Thursday’s IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures dipped 0.1% vs. fair value. S&P 500 futures sank 0.4%. Nasdaq 100 futures fell 0.8%. ISRG stock is on the Nasdaq 100, along with Meta Platforms and Google stock.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Stock Market Rally
The stock market rally kept moving higher, with Tesla and the Nasdaq leading the way.
The Dow Jones Industrial Average climbed 0.5% in Thursday’s stock market trading. The S&P 500 index rallied 1%, with TSLA stock the biggest gainer. The Nasdaq composite popped 1.4%. The small-cap Russell 2000 gained 0.5%.
U.S. crude oil prices fell 4.1% to $95.80 a barrel. Gasoline futures tumbled 4.9%, suggesting that retail prices at the pump will keep falling for at least the next couple of weeks.
The 10-year Treasury yield tumbled 13 basis points to 2.91%. The two-year Treasury yield dived 16 basis points to 3.09%. Jobless claims rose to an eight-month high while the July Philly Fed manufacturing index showed activity declining at a faster pace. Both raise recession fears but also bolster expectations that the Federal Reserve will raise rates by 75 basis points next Wednesday, not a full point.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) climbed 0.4%, while the Innovator IBD Breakout Opportunities ETF (BOUT) also edged up 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 1.8%. The VanEck Vectors Semiconductor ETF (SMH) climbed 1.7%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) picked up 1.75% and ARK Genomics ETF (ARKG) 1.8%, adding to big gains this week. Tesla stock is a major holding across Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) edged up 0.1% and the Global X U.S. Infrastructure Development ETF (PAVE) 1.5%. U.S. Global Jets ETF (JETS) descended 2.7%, with United Airlines (UAL) and American Airlines (AAL) hammered on Q2 results. SPDR S&P Homebuilders ETF (XHB) popped 2.1%. The Energy Select SPDR ETF (XLE) skidded 1.75% and the Financial Select SPDR ETF (XLF) rose 0.6%. The Health Care Select Sector SPDR Fund (XLV) rebounded 1.6%.
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Tesla earnings comfortably beat second-quarter views late Tuesday, with CEO Elon Musk saying the Cybertruck is on track for mid-2023. TSLA stock shot up 9.8% to 815.12, clearing resistance going back to early June and breaking above a trendline starting in early April. An aggressive investor could have bought Tesla stock near the open, but even then it was getting extended from its 50-day line. By Thursday’s close, shares were 14% above the 50-day. Meanwhile, the EV giant is still significantly below its 200-day line, and a long way from its official buy point of 1,208.10. At this point, investors may want to see TSLA stock decisively retake the 200-day line and then form a handle, while letting the major averages catch up.
After the close, Bloomberg reported that Tesla is expected to oust Omead Afshar, a top Musk lieutenant who is running the Texas factory. Tesla’s internal auditors are reportedly probing Afshar involving purchases of suspicious construction materials, including a special kind of glass. Several Tesla employees have already been fired in the investigation.
TSLA stock edged lower overnight.
Stocks To Watch
Ulta Beauty stock edged up 0.7% to 411.27 on Thursday. Shares have a 429.58 buy point from a flat base next to a series of failed consolidations going back to last August. But investors could use Wednesday’s high of 412.50 as a short-term entry. ULTA stock is 5.2% above its 50-day line, which is not too extended. Ulta is one of a few beauty stocks shaping up, despite not-quite-picture-perfect charts.
Ollie’s stock dipped 1.2% to 66.50 on Thursday, but bounced somewhat from its 21-day moving line. That offers an aggressive entry or follow-on buying opportunity into the closeout retailer, which broke out last month from a bottoming base.
FTNT stock climbed 3.7% to 61.86, moving back toward its 200-day line. That’s an area where Fortinet stock has hit resistance over the past few months. A decisive move above the 200-day, perhaps clearing the July 12 high of 63.56, would offer an early entry or a place to start a position on the IBD Long-Term Leaders list. The official FTNT stock buy point is 74.45 from a consolidation going back to the end of last year, but shares have been range-bound for almost a year.
PWR stock rose 0.6% to 133.07, working on a 138.56 buy point from an awkward cup-with-handle base, according to MarketSmith analysis. Quanta Services is just below an early entry of 133.68 within that deep handle. PWR stock is 8.3% above its 50-day line, so a longer pause could be constructive.
NBIX stock edged up 0.1% to 97.60. Neurocrine Biosciences has a 100.10 cup-with-handle buy point. Shares arguably are actionable from breaking a short trendline within that handle. NBIX stock is currently 5.3% above its 50-day.
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Market Rally Analysis
The stock market rally continued its strong recent run. Once again, the Nasdaq led the way, though on Thursday the Russell 2000 was somewhat of a laggard.
The Nasdaq is back above the 12,000 level, with the early June highs not too far away. The S&P 500 and Russell 2000, modestly above their late June highs, have some room before running up to early June peaks. The Dow is still trading around its late June highs, but rebounded from a 50-day line test intraday.
The Nasdaq has risen significantly over the past week, and is near the high end of a regression line. That could signal a pause or a pullback soon.
That’s something to keep in mind as the market faces an avalanche of earnings. In addition to Facebook parent META’s stock and Google stock, Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Exxon Mobil (XOM) and Chevron (CVX) are due next week, along with hundreds of others. They’ll share center stage with the Federal Reserve meeting.
While Tesla stock soared on earnings, Snap and Intuitive Surgical are just a taste of what investors might see in the coming days.
There still aren’t a lot of great stocks to buy. While gains have been broad-based, a lot of the big winners recently have been hard-hit growth stocks such as Datadog (DDOG), Nvidia (NVDA) and Tesla stock. Some of the leading areas, such as health insurers and discounters, have retreated this week, with sharp intraday drops in some cases.
ETFs tracking the Nasdaq, software, biotech and chip sectors are ways to play the uptrend right now.
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What To Do Now
Investors who have built up positions in the past week are probably thankful for doing so. The market rally certainly seems to be a tradable rally, at least. With the Nasdaq running up so quickly and looking extended by some measures, a pullback of some sort would not be a surprise. The big news on tap means that the market and individual stocks could see major swings.
So don’t rush to add exposure. Continue to add to your holdings carefully if the market and your positions keep working, but don’t be afraid to keep taking some partial profits quickly.
Look for early buying opportunities, and stocks that aren’t too extended from moving averages. In 2022, stocks rising to or past traditional buy points have often struggled. Even names that continue to work can have big intraday shakeouts.
Work on your watchlists, emphasizing strong relative strength. Focus on stocks in or near buyable areas.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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