Dow Jones futures were up early Friday, while S&P 500 futures were up slightly and Nasdaq futures were up solidly. Netflix (NFLX) jumped with the energy giant on strong subscriber growth SLB (SLB) on tap. Google parent alphabet (GOOGL) to cut 12,000 jobs as major tech layoffs continue.
The stock market rally declined for the second straight day on Thursday, with major indices testing or undercutting additional key levels. The Dow Jones turned negative for 2023.
New economic reports pointed to weaker economic activity, with one major exception: initial jobless claims hit their lowest level since last April. The overall picture points to rising recession risks, but tight labor markets are keeping the Federal Reserve hawkish.
Leading stocks are retreating to varying degrees. Investors should wait and see whether this pullback is temporary or something more serious.
MELI warehouse, Medpace Holdings (MEDP), AxonEnterprise (axon), Apex Pharma (VRTX) and Exxon Mobile (XOM) are names that are holding up relatively well so far.
MEDP shares and Axon Enterprise are on the IBD leaderboard. MercadoLibre and XOM stocks are on the IBD 50. VRTX and SLB stocks are on the IBD Big Cap 20. GOOGL stocks are on the IBD Long-Term Leaders list.
MercadoLibre (MELI) was Thursday’s IBD stock of the day. VRTX shares were on Wednesday.
Dow Jones futures today
Dow Jones futures gained only a fraction of fair value. S&P 500 futures were up 0.3%. Nasdaq 100 futures were up 0.75%. NFLX stock and Google give boost to Nasdaq futures.
The 10-year government bond yield rose 3 basis points to 3.43%.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.
Netflix subscriber growth strong
Netflix earnings came in well behind Q4 views, while revenue growth of 2% was in line. But Netflix subscribers grew by 7.66 million, well above 4.57 million expected. The streaming giant launched a cheaper, ad-supported subscription option on November 3. Netflix no longer offers subscription management.
Meanwhile, co-founder Reed Hastings stepped down as co-CEO to become executive chairman. Ted Sarandos remains Co-CEO, along with Greg Peters, currently Chief Operating Officer.
NFLX stock surged in premarket trading. Shares fell 3.2% to 315.78 in Thursday’s regular session.
Netflix subscriber growth is a positive sign for many other streaming games, including Walt Disney (DIS), Paramount Global (PARA), Warner Bros. Discovery (WBD) and roku (ROKU). But DIS stock, Roku, and the others had slight gains on extended actions.
Job cuts at Google
Google parent Alphabet will lay off 12,000 employees, or 6% of the workforce. This is according to a company announcement. It follows that Microsoft plans to cut 10,000 jobs, or 4.5% of the workforce, earlier this week Amazon.com (AMZN), salesforce.com (CRM) and many other tech giants are downsizing.
Late Thursday, Google announced it would be deferring 20% of bonus payments until at least March.
GOOGL stock rose solidly in premarket trading.
Google shares rose 2.1% to 93.05 on Thursday, breaking above the 50-day moving average for the first time since early December. The 50-day moving average has been a resistance area for the internet giant since late 2021. Still, GOOGL stock is still far from its 200-day moving average.
Eli Lilly falls for FDA Alzheimer’s rejection
The FDA rejected Eli Lilly’s accelerated regulatory submission for its Alzheimer’s treatment donanemab and asked for more data. Eli Lilli (LLY) fell slightly overnight. biogenic (BIIB), which recently published positive results on a similar Alzheimer’s drug, rose slightly ahead of opeb.
SLB Yield Peak
SLB earnings and revenue slightly beat quarterly views. SLB, formerly known as Schlumberger, said in the press release that “we believe the macro backdrop and market fundamentals, which underpin a strong multi-year upcycle for energy, remain very compelling.” Oil&Gas-Field Services is #1 of IBD’s 197 industry groups.
SLB stock was up more than 1% early Thursday. Shares rose 0.4% to 57.38 on Thursday after falling to the top of a recent base. But SLB is slightly lengthened from a 53.97 handle buy point.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
stock market rally
The stock market rally extended Wednesday’s losses into Thursday morning, recovering somewhat in the afternoon but fading again towards the end.
The Dow Jones Industrial Average fell 0.8%. in trading on Thursday, along with the S&P 500 Index. The Nasdaq Composite is down almost 1%. Small-cap Russell 2000 is down 1%.
Solar stocks were big losers amid growing concerns about the residential solar market.
US crude prices rose 1.1% to $80.33 a barrel and continues to trade around the $80 mark. Gasoline futures climbed 2.9% to a two-month closing high.
The 10-year government bond yield rose 3 basis points to 3.4%.
Among growth ETFs, Innovator IBD 50 ETF (FFTY) tumbled nearly 2%, while Innovator IBD Breakout Opportunities ETF (BOUT) fell 1.2%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 0.8%. The VanEck Vectors Semiconductor ETF (SMH) lost 2.45%.
Mirroring more speculative story stocks, ARK Innovation ETF (ARKK) slipped 3.2% and ARK Genomics ETF (ARKG) lost 3.3%.
SPDR S&P Metals & Mining ETF (XME) is down 0.2%, along with US Global Jets ETF (JETS). The SPDR S&P Homebuilders ETF (XHB) was sold down 3%. The Energy Select SPDR ETF (XLE) was up 1.2%, with XOM stock the No. 1 holding and SLB also a key component. The Financial Select SPDR ETF (XLF) is down 1.2%. The Health Care Select Sector SPDR Fund (XLV) edged up 0.2%.
The five best Chinese stocks to watch right now
stocks to look at
MELI stock rose 0.4% to 1,072.74 and paused this week after a big rush earlier in 2023. The Latin American e-commerce and payments giant is just below a buy point of 1,095.44 but really needs a grip for the major averages to catch up. MercadoLibre stock has held up very well, but use some depth on each hold to shake off weak holders.
According to MarketSmith analysis, MEDP stock fell 1.5% to 228.84, near an official buy point of 235. Shares burst above the 50-day moving average on Jan. 10, offering an early entry. Now the Medpace share could use a handle.
XOM stock tested its 50-day moving average but closed down 0.6% at 111.32. Stocks are not far from a buy point of 114.76 from a flat base.
VRTX shares fell 0.6% to 307.94, still holding above its 50-day moving average. Shares jumped above the 50-day moving average on Tuesday, offering an early entry at the time. Investors should wait and see if the biotech can break above Tuesday’s high of 312.35. The official flat base buy point is 324.85.
AXON stock climbed 1% to 184.06 and continued to work on a cup basis handle that would slightly lower the buy point from the current 193.95. Axon, which makes tasers, body cameras and digital storage for law enforcement, deleted an early entry on Jan. 9 as it broke the 50-day line.
Analysis of the market rally
After Wednesday’s sharp move lower, the stock market rally showed further weakness. As the major indices recovered from their late morning lows, they faded into the close.
After falling below its 200-day moving average in the previous session, the S&P 500 index broke below its 50-day moving average on Thursday. The Nasdaq also undercut its 50-day moving average but recovered from its 21-day moving average. The Russell 2000, which nearly touched its late 2022 highs on Wednesday morning, tested its 200-day mark on Thursday but closed above that line.
The Dow Jones had its third significant decline in a row, testing the following day’s low of January 6th. A close below the FTD’s low would be a bearish sign of a market recovery, although for now the S&P 500 and Nasdaq are well above their Jan. 6 lows.
Indices closing lows offer hope that the current pullback is just a healthy pause, allowing leading stocks to forge handles and other fresh buying opportunities. But this could be more serious. A break below Thursday’s lows would be concerning.
Some leading stocks like Axon, MercadoLibre, and MEDP stocks are holding up quite well. But others suffer greater losses. deer (DE), which showed early entry Tuesday morning, undercut the low of its flat base on Thursday.
Time the market with IBD’s ETF market strategy
As the market rally fades, many leading stocks pare recent gains or even slip below entries.
Investors should hold back on new purchases for the time being. If anything, they want to reduce the modest commitment, if only because of the campaign in individual companies.
Despite some recent losses, a large number of stocks were built up. A good day or two could significantly improve the technical picture of the market rally and provide many new buying opportunities. So have your watch lists ready.
But just because a stock is rallying doesn’t mean it’s breaking out or sending a buy signal, or that such a move will work.
The earnings season looks like it’s coming at a soft time with individual stocks and the overall uptrend. Tread cautiously.
Read The Big Picture every day to keep up to date with 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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