Dow Jones futures edged lower overnight, along with S&P 500 futures and Nasdaq futures. Amazon.com[ticker symb=AMZN] headlined earnings, but the internet giant fell lower Thursday night on cloud-computing concerns.
The stock market rally advanced strongly on Thursday. Meta Platforms (META) boomed, with Microsoft (MSFT) stock, Apple (AAPL), parent of Google Alphabet (GOOGLE) and AMZN are all stable as well.
There are strong advantages outside of these tech megacaps. However, the extent of the market remains a concern. Meanwhile, Mobileye (MBLY) and Crocs (CROX) fall under poor guidance.
amazon, Cloudflare (NET), Skechers (SKX), First Solar (FSLR), Dexcom (DXCM) and Snap (SNAP) are prominent earnings reports Thursday evening.
Amazon’s stock fell sharply lower of late after an initial uptick in results. But NET stock fell on mixed results and guidance. SNAP also dives into poor income and guidance. FSLR and Dexcom stock fell. SKX stock is up.
ExxonMobil (XOM) and giant Dow Jones Chevron (CVX) is due on Friday morning.
META stock is on IBD Leaderboard, with DXCM stock playing profit options. MSFT stock is in the IBD Long-Term Leaders.
Dow Jones Futures Today
Dow Jones futures lost a fraction compared to fair value. S&P 500 futures were lower. Nasdaq 100 futures were down 0.1%. AMZN stock is an S&P 500 and Nasdaq giant.
The Commerce Department will release the PCE price index for March at 8:30 am ET. PCE and core PCE are the Fed’s favorite inflation gauges, but Thursday’s Q1 GDP report gave some strong signals about what that is.
Note that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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Amazon earnings easily beat the Q1 view with a revenue lead as well. The e-commerce and cloud computing giant guided in line for Q2 revenue, but slightly below operating profit. On Amazon’s earnings call, management said the Amazon Web Services cloud unit saw slower growth in April compared to Q1.
AMZN stock, which initially rose more than 10% after hours, fell 2% on the cloud comments.
Shares fell 4.6% to 109.82 in Thursday’s regular session, retrieving the 200-day line and topping last week’s highs. If not for the earnings report, investors could use that as an early entry for Amazon stock to a bottoming base back in Feb. 2.
Other Primary Income
Cloudflare’s revenues topped the charts, but profits fell just short. The cloud and security software firm guided for Q2 and full-year EPS but fell on revenue. NET stock dived 25% in extended action. Shares rose 0.1% to 59.58 on Thursday, closing near session lows and below the 50-day line. Cloudflare stock had a 66.30 cup-with-handle base buy point.
Skechers earnings beat views but Q2 guidance weak. SKX is higher in overnight action. Shares were down 0.3% at 49.87 on Thursday, but then plunged to 47 soon after tomorrow in sympathy with CROX stock. That briefly lowered a 47.80 handle buy point.
First Solar’s earnings and profits fell short of views but the company provided good guidance. FSLR stock fell 8% in overnight action, indicating a dip below the 50-day line. Shares rose 0.7% to 208.83 on Thursday. First Solar stock fell 5.2% on Wednesday on weak guidance from Enphase Energy (ENPH). Investors can use a strong bounce from the 50-day line as a buying opportunity, or view the recent consolidation as a quasi-flat base with an entry around 219-221.
Dexcom’s earnings modestly beat views on full-year earnings guidance. DXCM stock was down 3% in late trading. The maker of continuous glucose monitors fell 1.1% to 123.58 on Thursday. Intraday, Dexcom stock briefly topped the 125.65 handle buy point.
SNAP stock fell overnight. The Snapchat parent earned 1 cent a share in Q1 compared to an expected 1 cent loss. But income, users and income per user came to light. Snap also guided for lower Q2 earnings. SNAP stock rallied 6.3% Thursday in sympathy with Meta Platforms, but closed below its 50-day and 200-day lines.
In addition to these names, Intel (INTC) popped overnight in earnings, while Gilead Sciences (GILD) and Amgen (AMGN) is slightly modified. Alteryx (AYX) and Pinterest (PINs) sold.
XOM stock rose 1.2% to 116.87 on Thursday, slightly below the 117.28 cup-with-handle buy point, according to MarketSmith analysis.
CVX stock rose 0.6% to 166.95 on Thursday, finding support at the 200-day line. Chevron stock has a 189.78 consolidation buy point but looks weaker than Exxon today.
Stock Market Rally
The stock market rally opened higher and gained steam during the day.
The Dow Jones Industrial Average bounced 1.6% in stock market trading on Thursday. The S&P 500 index jumped nearly 2%. The Nasdaq composite jumped 2.4%. The small-cap Russell 2000 advanced 1.3%.
US crude oil prices rose 0.6% to $74.76 a barrel.
The 10-year Treasury yield jumped 10 basis points to 3.53%. The 2-year yield rose 17 basis points to 4.1%. With Thursday’s economic data showing weaker growth, stronger inflation and a tighter labor market than expected, the possibility of another Fed rate hike next Wednesday is back on a virtual lock.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) slid 0.9%, hit by some big profit losers such as MBLY stock and Crocs. The Innovator IBD Breakout Opportunities ETF (BATTLE) increased by 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 1.6%, boosted by MSFT stock. The VanEck Vectors Semiconductor ETF (SMH) advanced 1%, led by chip equipment giants as some early 2023 chip winners collapsed.
Mirroring stocks with a more speculative story, ARK Innovation ETF (ARKK) bounced 1.4% and ARK Genomics ETF (ARKG) increased by 0.5%.
SPDR S&P Metals & Mining ETF (XME) rebounded 1.85% and the Global X US Infrastructure Development ETF (PAVE) advanced 2.4%. US Global Jets ETF (JETS) climbed 0.5%. SPDR S&P Homebuilders ETF (XHB) increased by 3.4%. The Energy Select SPDR ETF (XLE) climbed 0.4%. XOM stock and Chevron are huge holdings on the XLE. The Health Care Select Sector SPDR Fund (XLV) increased by 0.5%. DXCM stock is at XLV.
The Financial Select SPDR ETF (XLF) gained 1.6%. The SPDR S&P Regional Banking ETF (KRE) bounced 1.9%.
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Market Rally Analysis
The stock market rally continues to rely heavily on megacap tech.
The meta stock rose 14% to a 52-week high on earnings. Microsoft rose 3.2%, adding to Wednesday’s 7.2% gain. GOOGL stock is off 3.7%, back in a buy zone. Apple stock gained 2.8% and Amazon cleared key levels in earnings.
However, unlike Wednesday, all major indexes rose on Thursday.
The Nasdaq composite jumped back above the 12,000 level and reclaimed the 21-day moving average, a day after rebounding from the 50-day line. The S&P 500 and Dow Jones are also back above their 21-day lines.
More importantly, market returns are stable outside of megacaps.
The First Trust Nasdaq-100 Equal Weighted Index ETF (QQEW) started off slow but eventually rose 1.65%, back above its 50-day line. The Invesco S&P 500 Equal Weight ETF (RSP) gained 1.6%, running above its 200-day, with the 50-day line just above it. But both of these ETFs are still down 1% or more for the week.
Winners topped losers firmly on Thursday, but market breadth remains a concern. New lows can easily beat new highs, especially on the Nasdaq.
Some top stocks flashed buy signals on Thursday, but many extended or reversed positions. More broadly, market leadership is narrow and rapidly shifting.
The major indexes still need to get above their April highs and clearly the 2023 peak. Taking RSP above the 50-day line would also signal broader participation beyond Meta, Microsoft and other tech megacaps. More buying opportunities will be a positive sign.
For now, the stock market rally remains uptrend under pressure.
Beware of Earnings Season
Net stock and Snap appear to be the latest big losers on earnings.
Many top stocks suffered massive profit sell-offs on Thursday. Imp (PI) fell 39% while Mobileye and CROX stock fell 19% and 16%, respectively, after all closed around buy points. Even with a decent cushion, say a 10% gain towards earnings, investors suffered painful losses.
The volume of large profit moves in recent days should remind investors to be aware of upcoming report dates for their positions and setting rules for holding or selling ahead of the results.
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What should be done now?
The market rally had a solid session, though not as strong as the big-cap indexes suggest. There weren’t too many stocks flashing buy signals on Thursday, though many found key intraday support. Many stocks that are setting up still have earnings in the next two weeks.
If the market rally continues to recover, buying opportunities will increase. Investors should prepare their watchlists with potential leaders in various sectors. But also be prepared to exit if the broader market turns sour.
Read The Big Picture daily to stay in sync with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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