Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures, as Intuitive Surgical and Snap in particular weighed in on several online giants. The stock market rallied Tesla ( TSLA ) and lower Treasuries will push the Nasdaq higher.
Optimism is growing that the market will crash in mid-June. However, the Nasdaq may be poised for a rebound, especially with more earnings coming next week.
In Thursday’s session, Tesla’s stock surged on earnings, sparking a rally. Shares have cleared a strong buy zone, but now appear to be overextended while at a good level.
Key earnings are delayed.
Snap (SNAP) and Intuitive surgery ( ISRG ) fell late Thursday on disappointing results.
SNAP stock fell 27% in afternoon trading not far from mid-June. Shares closed down 5.6% to 16.38. Snap reported a worse-than-expected Q2 loss, with revenue falling short. Snapchat’s parent isn’t giving Q3 guidance either. As it announces a $500 million buyback program, Snap will cut hiring and cut operating costs. All of this is a bad sign for social media companies and companies that rely on online advertising. Facebook parent Meta forums (META) lost nearly 5% and Google lost its parent. Alphabet ( GOOGL ) lost 3% of their earnings the following week. Business desk (TTD) retreated 7%.
Twitter earnings are Friday morning. TWTR stock was down just 2% late Thursday, with Elon Musk’s disputed takeover deal providing some support.
Notable surgical revenue fell for the second quarter, while revenue growth slowed for the fourth straight quarter, to just 4%. Both views have escaped scrutiny as the robotic surgery giant blames the ongoing impact of Covid on elective procedures. ISRG stock plunged 13%, poised to drop below its 50-day line. Predictable surgical revenue and feedback could be a bad sign for other makers of medical devices, products and systems.
Stocks near the purchase points
Alta beauty (ULTA), Oli bargain outlet (OLI), Fortinet (FTNT), Neurocrine Bioscience (NBIX) and Quanta Services (PWR) shares are in the process of being prepared.
Ollie’s Bargain Outlet and PWR stock are on the IBD Leaderboard Watch List. OLLI stock is 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.
A video embedded in the article discusses Thursday’s market session and analyzes Tesla stock; Carlisle (CSL) and Elf beauty (ELF)
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Dow Jones futures were up 0.1% in real terms. S&P 500 futures were down 0.35 percent. Nasdaq 100 futures fell 0.7%. ISRG stock is on the Nasdaq 100, along with MetaPlatforms and Google stock.
Remember that overnight action in Dow futures and elsewhere does not translate into actual trading during the next regular stock market session.
Join IBD’s experts as they analyze potential stocks in the stock market rally on IBD Live
Stock market rally
Tesla and Nasdaq are leading the stock market rally.
The Dow Jones Industrial Average rose 0.5% in Thursday’s stock market trading. The S&P 500 index rose 1%, with TSLA stock the biggest gainer. The Nasdaq composite emerged 1.4 percent. The small cap Russell 2000 gained 0.5%.
US crude oil prices fell 4.1 percent to $95.80 a barrel. Gasoline futures fell 4.9%, suggesting retail prices at the pump will continue to decline for at least the next two weeks.
The 10-year Treasury yield fell 13 basis points to 2.91 percent. The two-year Treasury yield fell 16 basis points to 3.09 percent. Jobless claims rose to an eight-month high as July’s Philly Fed manufacturing index showed activity slowing. Both raise recession fears but reinforce 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 ) rose 0.4%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.8 percent. The VanEck Vectors Semiconductor ETF ( SMH ) rose 1.7 percent.
Reflecting more speculative historical stocks, the ARK Innovation ETF ( ARKK ) made big gains this week, gaining 1.75% and the ARK Genomics ETF ( ARKG ) 1.8%. Tesla stock is a large holding in Arc Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) added 0.1% and the Global X US Infrastructure Development ETF (PAVE) added 1.5%. The US Global Jets ETF (JETS) fell 2.7 percent United Airlines (UAL) and American Airlines (AAL) hammers on Q2 results. The SPDR S&P Homebuilders ETF ( XHB ) popped 2.1 percent. The Energy Select SPDR ETF (XLE) rose 1.75% and the Financials Select SPDR ETF (XLF) rose 0.6%. The Healthcare Select Sector SPDR Fund ( XLV ) rose 1.6 percent.
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Tesla’s earnings comfortably beat second-quarter views late Tuesday, with CEO Elon Musk saying the Cybertruck is on track by mid-2023. Shares of TSLA rose 9.8% to 815.12, clearing resistance to early June and breaking above an early April trend. An aggressive investor could have bought Tesla stock at the open, but then it was extending above the 50-day line. By Thursday’s close, shares were 14 percent above their 50-day high. Meanwhile, the EV giant is still well 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 hold the major moving averages as TSLA stock decisively retraces the 200-day line and then creates a hold.
After the event, Bloomberg reported that Tesla is expected to oust Omed Afshar, the top Muck lieutenant running the Texas factory. Tesla’s internal auditors are reportedly investigating the purchase of questionable building materials, including special glass. Several Tesla employees have already been fired in the investigation.
TSLA stock is down overnight.
Ulta Beauty stock rose 0.7% to 411.27 on Thursday. Shares have a 429.58 buy point near a series of failed consolidations since last August. But investors can use Wednesday’s high of 412.50 for a short-term entry. ULTA stock is 5.2% above its 50-day line, which isn’t too long. Although not the most picture-perfect charts, Ulta is one of the few beauty stocks to chart.
Oli’s stock fell 1.2% to 66.50 on Thursday, but was up some ground from its 21-day moving average. That provides a buying opportunity to enter or follow up on the close that occurred last month.
FTNT shares rose 3.7% to 61.86, returning to its 200-day line. That’s where Fortnite stock’s resistance has hit over the past few months. A critical move above the 200-day would likely clear the July 12 high of 63.56, allowing for an early entry or starting position on IBD’s long-term leaders list. The official buy point for FTNT shares is 74.45 from the time of the merger until the end of last year, but shares have been range-bound for about a year.
Shares of PWR rose 0.6% to 133.07, working off a difficult cup-to-handle basis from a 138.56 buy point, according to MarketSmith analysis. Quanta Services is below the initial entry of 133.68 in that deep handle. PWR stock is 8.3% above its 50-day line, so a longer stop might be constructive.
NBIX stock rose 0.1% to 97.60. Neurocrine Biosciences has a buy point of 100.10 cups on hand. Shares are almost actionable if they break the short trend line in that handle. NBIX stock is currently 5.3% above its 50-day.
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Market Rally Analysis
The stock market rally continues its strong recent run. Still, the Nasdaq led the way, although the Russell 2000 lagged somewhat on Thursday.
The Nasdaq is back above the 12,000 level, not far off the highs of early June. The S&P 500 and Russell 2000, slightly above their late-June highs, have some ground to spare before a run through early June. The Dow is still trading near late June highs, but rebounded from a test of the 50-day line during the day.
The Nasdaq rose sharply last week, and is near the top of its regression line. That could indicate a stop or a pullback soon.
It is worth noting that the market is experiencing significant revenue compression. In addition to Facebook’s parent META Stock and Google Stock, Apple (APL) Microsoft (MSFT), Amazon.com (AMZN), Exxon Mobil (XOM) and Chevron (CVX) will be available next week, along with hundreds of others. They will share center stage with the Federal Reserve meeting.
As Tesla stock soars on earnings, Snap and Intuitive Surgical are just a taste of what investors may see in the coming days.
There are still not many very good stocks to buy. While the gains have been broad, several recent winners have become the toughest growth stocks. Datadog (DDOG), Nivea (NVDA) and Tesla stock. Some leading areas, such as health insurers and discounters, retreated this week, in some cases down sharply on the day.
ETFs tracking the Nasdaq, software, biotech and chip sectors are the way to play startups these days.
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What to do now
Investors who built positions last week are probably thankful they did. The market rally at least looks like a marketable rally. With the Nasdaq running so fast and looking overextended by some measures, some sort of pullback wouldn’t be surprising. Big news on tap means the market and individual stocks could see major changes.
So don’t rush to increase exposure. If the market and your positions continue to perform, continue to add to your holdings cautiously, but don’t be afraid to continue taking some partial profits quickly.
Look for early buying opportunities and stocks that are not overextended from moving averages. In the year In 2022, stocks advancing to or past traditional buy points have often struggled. Even names that continue to work can have a big boost during the day.
Work on your watch lists by highlighting strong relative strengths. Focus on buyable areas or nearby stocks.
Read The Big Picture daily to stay in tune with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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