Dow Jones futures rose modestly Thursday morning, along with S&P 500 futures and Nasdaq futures, after the stock market rally closed near session lows for a second straight session. ServiceNow (NOW) and Ford Motor (F) were key earnings overnight. But investors will soon have key economic data with Apple (AAPL) earnings Thursday night.
XThe stock market rally finished poorly again on Wednesday with the Dow Jones and S&P 500 retreating. The Nasdaq composite closed essentially flat, even with Microsoft stock, Google parent Alphabet (GOOGL) and, to a lesser extent, Tesla (TSLA) providing a boost. Microsoft (MSFT) is closing in on Apple stock's market cap, while Google stock broke and approached a $2 trillion valuation. But many leaders showed wild action, while market breadth was weak.
The 10-year Treasury yield fell sharply Wednesday, extending recent declines, while crude and copper prices fell solidly.
Key Earnings
NOW stock, Ford, Upwork (UPWK), eBay (EBAY), Edwards Lifesciences (EW) and Twilio (TWLO) reported earnings after the close. ServiceNow, Ford and UPWK stock had all pulled back from buy points after briefly breaking out over the past week or so. EBay stock closed in buy range. EW stock and Twilio were near potential early entries.
Ford stock was the standout, jumping 8% before the open on strong earnings, raised guidance and a renewed dividend, despite missing on revenue. F stock is signaling it'll flash at least an early entry and likely an outright breakout on Thursday. That came after it retreated modestly Wednesday on mixed results and weak Q4 guidance from General Motors (GM).
ServiceNow earnings topped but NOW stock retreated modestly in premarket trading. UPWK stock tumbled despite a beat-and-raise report. EW stock declined modestly after Edwards narrowly beat Q3 EPS views on roughly in-line revenue, while guiding low on Q4 EPS. EBAY stock pulled back solidly overnight on weak revenue guidance. TWLO stock plunged despite the software maker reporting a surprise Q3 profit, as Q4 guidance was mixed and the COO will exit.
Apple Earnings Loom
On Thursday night, Apple will report fiscal Q4 earnings and sales. Apple stock dipped 0.3% to 148.85, modestly above its 50-day line. Shares are working toward a 157.36 buy point from a cup base, according to MarketSmith analysis. AAPL stock has the world's best market cap of $2.46 trillion.
But Microsoft stock is at $2.44 trillion. Shares jumped 4.2% on Wednesday to 323.17, a record high but extended from any buy point. Meanwhile, Google stock popped 5% to 2,924.35 on earnings, breaking out of a flat base with a 2,925.17 buy point. GOOGL stock has a $1.96 trillion market cap.
Tesla stock closed near session lows for a second straight day after hitting 1,070.87 intraday, but did advance nearly 2% to 1,038.31. TSLA stock now has a $1.04 trillion valuation. After the close, Piper Sandler raised its Street-high Tesla stock price target to 1,300 from 1,200. Shares rose 3% early Thursday.
Tesla, ServiceNow, Google and Microsoft stock are all on IBD Leaderboard. Google stock is on SwingTrader and was Wednesday's IBD Stock Of The Day. NOW stock, Google and Microsoft are all IBD Long-Term Leaders. Tesla stock and Google are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value, with Merck (MRK) and Caterpillar (CAT) rising on earnings. S&P 500 futures climbed 0.35%. Nasdaq 100 futures advanced 0.6%, with Tesla stock helping.
The 10-year Treasury yield picked up 1 basis point to 1.54%, while the two-year yield continues to narrow the gap. Crude oil futures fell more than 1%, while copper prices rose.
Dow futures and Treasury yields will likely move on economic data Thursday morning. At 8:30 a.m. ET, the Commerce Department will offer its initial estimate for third-quarter GDP growth. Economists slashed Q3 forecasts amid the delta Covid wave as well as supply-chain and labor issues. The Labor Department also will release weekly jobless claims.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally was mixed with the Dow Jones falling while the Nasdaq rallied on megacap stocks.
The Dow Jones Industrial Average lost 0.7% in Wednesday's stock market trading. The S&P 500 index retreated 0.5%. The Nasdaq composite closed up less than one point. The big-cap Nasdaq 100 eked out a 0.3% gain, thanks to Tesla, Microsoft and Google stock. The small-cap Russell 2000 sank 1.9%, nearing its 50-day and 200-day lines once again.
The 10-year Treasury yield tumbled 9 basis points to 1.53%, bringing the four-day decline to 14 basis points. Crude oil and copper fell more than 2%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.8%, while the Innovator IBD Breakout Opportunities ETF (BOUT) retreated 1.2%. The iShares Expanded Tech-Software Sector ETF (IGV) slid 0.9%, with Microsoft and NOW stock key holdings. The VanEck Vectors Semiconductor ETF (SMH) gave up 0.8%.
SPDR S&P Metals & Mining ETF (XME) tumbled 3.5% and Global X U.S. Infrastructure Development ETF (PAVE) sank 1.8%. U.S. Global Jets ETF (JETS) descended 1.7%. SPDR S&P Homebuilders ETF (XHB) dipped 0.4% after initially popping on falling rates. The Energy Select SPDR ETF (XLE) lost 2.9% and the Financial Select SPDR ETF (XLF) ceded 1.65%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both slumped 2.1%. Tesla stock is the No. 1 holding across ARK Invest's ETFs.
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Market Rally Analysis
Tesla, Microsoft and Google stock briefly pushed the Nasdaq 100 to a record high intraday. But closing at session lows is not a good look for a stock market rally. Losers trumped winners by more than 2-to-1 on the Nasdaq and NYSE.
Yes, Enphase Energy (ENPH) skyrocketed past a buy point on earnings, leading solar stocks. But many leaders showed wild action, including some nasty reversals like ZipRecruiter (ZIP).
A number of recent breakouts failing or flailing quickly suggests a lack of institutional support. Retail investors can trigger some breakouts, but if big money doesn't support the moves, they aren't going to last. If institutions aren't supporting growth stocks, beyond a handful of megacap names, it's a negative sign for the stock market rally.
As a practical matter, it's not a great environment for buying stocks when individual names whipsaw and the market closes poorly.
Treasury yields are narrowing, squeezing bank lending margins and sending a signal about the economy. The 10-year Treasury yield is pulling back rapidly, suggesting lowered expectations for economic growth and perhaps inflation. The two-year Treasury yield is rising ahead of next week's expected Federal Reserve decision to begin scaling back bond buys.
The narrowing yield spread isn't good news for financials. Meanwhile, commodity plays fell as crude oil prices and more slumped.
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What To Do Now
The stock market rally is trying to decide where to go next, with the Nasdaq just below record highs and leading stocks turning volatile.
Perhaps the Apple earnings report will provide clear direction, but next week investors will have the Fed meeting taper decision as well as big economic data, including the October jobs report.
Individual investors may want to limit new buys, especially in growth tech names, until the Nasdaq breaks into new high ground and big institutions commit. You also may need to cut some losses or consider taking partial profits on some winners.
Overall, the market rally isn't giving a reason to substantially reduce exposure. But if you trim some holdings without adding new positions, your exposure will come down incrementally.
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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