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 boosting the Nasdaq.
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There is growing optimism that the market bottomed out in mid-June. However, the Nasdaq could be poised for a pullback, especially with so many gains next week.
In Thursday’s session, Tesla shares extended gains and rose. Shares cleared an aggressively overbought area, but now look stretched even though they remain well-placed highs.
Key gains late
Snap ( SNAP ) and Intuitive Surgical ( ISRG ) fell Thursday afternoon with disappointing results.
SNAP shares fell 27% in after-hours trading, not far from their mid-June trough. Shares had closed up 5.6% to 16.38. Snap posted a second-quarter loss that was slightly worse than expected, while revenue fell short. The Snapchat parent also wouldn’t offer third-quarter guidance. As it announces a $500 million buyback program, Snap will slow hiring and cut operating expenses. All of this is a bad sign for social media companies and businesses that depend on online ads. Facebook parent Meta ( META ) lost nearly 5% and Google parent Alphabet ( GOOGL ) sank 3% ahead of its gains next week. Trade Desk (TTD) retreated 7%.
Twitter earnings are due Friday morning. Shares of TWTR were down just 2% Thursday afternoon, with Elon Musk’s contested takeover deal providing support.
Intuitive Surgical’s earnings fell for a second quarter, while revenue growth slowed for a fourth straight quarter to 4%. Both lost sight as the robotic surgery giant blamed the continued impact of Covid on elective procedures. Shares of ISRG fell 13%, forecast for a drop below its 50-day line. Intuitive Surgical’s earnings and comments could be a bad sign for other manufacturers of medical devices, products and systems.
Actions near the points of purchase
Ulta Beauty ( ULTA ), Ollie’s Bargain Outlet ( OLLI ), Fortinet ( FTNT ), Neurocrine Biosciences ( NBIX ), and Quanta Services ( PWR ) are building stocks.
Ollie’s Bargain Outlet and PWR stock are on the IBD Leaderboard Watch List. OLLI shares are on SwingTrader. FTNT stock is on IBD’s Long-Term Leaders list. ULTA stock is on the IBD 50 list. Neurocrine Biosciences was Thursday’s IBD Stock of the Day.
The video embedded in the article discussed Thursday’s market rally and looked at shares of Tesla, Carlisle (CSL), and elf Beauty (ELF).
Dow Jones futures today
Dow Jones futures fell 0.1% to fair value. S&P 500 futures sank 0.4%. Nasdaq 100 futures fell 0.8%. ISRG shares are in the Nasdaq 100, along with shares of Meta Platforms and Google.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next normal stock market session.
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Stock Exchange meeting
The stock market rally continued to rise, with Tesla and the Nasdaq leading the way.
The Dow Jones Industrial Average rose 0.5% in Thursday’s trading. The S&P 500 rose 1%, and TSLA shares rose more. The Nasdaq composite rose 1.4%. The small-cap Russell 2000 gained 0.5%.
The price of US crude fell 4.1% to $95.80 a barrel. Gasoline futures fell 4.9%, suggesting retail prices at the pump will continue to fall for at least the next two weeks.
The 10-year Treasury yield fell 13 basis points to 2.91%. The two-year Treasury yield fell 16 basis points to 3.09%. Jobless claims rose to an eight-month high, while July’s Philly Fed manufacturing index showed activity slowed 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 top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 0.4%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) also rose 0.4%. The iShares Extended Technology Software Sector ETF ( IGV ) advanced 1.8%. The VanEck Vectors Semiconductor ETF (SMH) rose 1.7%.
Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) rose 1.75% and the ARK Genomics ETF (ARKG) rose 1.8%, adding big gains this week. Tesla stock is a major holding in Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) rose 0.1% and the Global X US Infrastructure Development ETF (PAVE) rose 1.5%. The US Global Jets ETF ( JETS ) fell 2.7%, with United Airlines ( UAL ) and American Airlines ( AAL ) hammered by second-quarter results. SPDR S&P Homebuilders ETF (XHB) rose 2.1%. The Energy Select SPDR ETF ( XLE ) slipped 1.75% and the Financial Select SPDR ETF ( XLF ) rose 0.6%. The Select Health Sector SPDR Fund (XLV) rallied 1.6%.
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Tesla stock
Tesla’s earnings comfortably beat second-quarter views late Tuesday, and CEO Elon Musk said the Cybertruck is on track for mid-2023. TSLA shares rose 9.8% to 815.12, clearing early June resistance and breaking an early April trend line. An aggressive investor could have bought Tesla shares near the open, but even then it was extending from its 50-day line. At Thursday’s close, shares were 14% above their 50-day high. Meanwhile, the electric vehicle 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 shares decisively recover the 200-day line and then form a handle, while allowing the major averages to catch up.
After the shutdown, Bloomberg reported that Tesla is expected to fire Omead Afshar, a senior Musk lieutenant who runs the Texas factory. Tesla’s internal auditors are investigating Afshar for buying suspicious construction materials, including a special type of glass. Several Tesla employees have already been fired in the investigation.
Shares of TSLA fell overnight.
Stocks to watch
Shares of Ulta Beauty rose 0.7% to 411.27 on Thursday. The stock has a buy point at 429.58 from a flat base alongside a string of failed consolidations dating back to last August. But investors could use Wednesday’s high of 412.50 as a short-term entry. Shares of ULTA are 5.2% above their 50-day line, which isn’t too far out. Ulta is one of the few beauty stocks that is trending, though the charts aren’t quite perfect.
Ollie’s shares fell 1.2% to 66.50 on Thursday, but rebounded slightly from their 21-day moving line. This provides an aggressive entry or follow-on buying opportunity to the liquidating retailer, which exited last month from a fund base.
Shares of FTNT rose 3.7% to 61.86, retreating towards its 200-day line. This is one area where Fortinet shares have hit resistance in recent months. A decisive move above the 200-day, perhaps clearing the July 12 high of 63.56, would provide an early entry or place to start a position on the IBD long-term leader list. FTNT’s official share buy point is 74.45 from a consolidation dating back to late last year, but shares have been capped for nearly a year.
Shares of PWR rose 0.6% to 133.07, working off a 138.56 buy point from an uneasy cup-with-handle base, according to MarketSmith analysis. Quanta Services is just below an early entry of 133.68 within this deep control. Shares of PWR are 8.3% above their 50-day line, so a longer break could be constructive.
Shares of NBIX rose 0.1% to 97.60. Neurocrine Biosciences has a buy point of 100.10 mugs with handle. The stock is certainly actionable to break a short trend line within this handle. Shares of NBIX are currently 5.3% above their 50-day.
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Analysis of market concentration
The stock market rally continued its recent strong run. Once again, the Nasdaq led the way, although the Russell 2000 was a bit of a laggard on Thursday.
The Nasdaq is back above the 12,000 level, with early June highs not far behind. The S&P 500 and Russell 2000, both modestly above late-June highs, have some room to go before reaching early June peaks. The Dow is still trading around late June highs, but recovered from a test of the 50-day intraday line.
The Nasdaq has rallied significantly over the past week and is near the high end of a retracement line. This could signal a pause or pullback soon.
This is something to keep in mind as the market faces an avalanche of gains. In addition to META shares of Facebook and shares of Google, Apple ( AAPL ), Microsoft ( MSFT ), Amazon.com ( AMZN ), Exxon Mobil ( XOM ) and Chevron ( CVX ) will sell off next week, along with hundreds of others. They will share the spotlight with the Federal Reserve meeting.
While Tesla shares soared on earnings, Snap and Intuitive Surgical are just a taste of what investors could see in the coming days.
There aren’t many great stocks to buy yet. While gains have been broad-based, many of the big winners recently have been hard-hit growth stocks like Datadog (DDOG), Nvidia (NVDA), and Tesla. Some of the leading areas, such as health insurance and discounts, have retreated this week, with sharp intraday declines in some cases.
ETFs that track the Nasdaq, software, biotech and chip sectors are ways to play the bullish trend right now.
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what to do now
Investors who have accumulated positions over the past week are probably thankful they did. The market rally certainly appears to be a tradable rally, at least. With the Nasdaq rising so quickly and looking stretched by some measures, a pullback of some sort wouldn’t be a surprise. Big neighborhood news means the market and individual stocks could see big swings.
So don’t rush to add exposure. Continue to add to your holdings carefully if the market and your positions continue to perform, but don’t be afraid to continue to take some partial profits quickly.
Look for early buying opportunities and stocks that are not too far out of the moving averages. In 2022, stocks that rose to or exceeded traditional buy points have often struggled. Even names that continue to work can have big…