Dow Jones futures fell modestly overnight, along with S&P 500 futures and Nasdaq futures, as Intuitive Surgical and especially Snap weighed on several online giants. The stock market rose, too Tesla (TSLA) and lower government interest rates are driving the Nasdaq higher.
There is growing optimism that the market bottomed out in mid-June. However, the Nasdaq may be poised for a pullback, especially with so much earnings coming next week.
In Thursday’s session, the Tesla share rose in earnings, and increased. Shares cleared an aggressive buy range, but now look extended while still well off highs.
Snap (SNAP) and Intuitive surgical (ISRG) plunged late on Thursday with disappointing results.
SNAP stock crashed 27% in after-hours trading, not far off its mid-June lows. The shares had closed up 5.6% at 16.38. Snap reported a slightly worse-than-expected Q2 loss, while revenue fell short. The Snapchat parent also wouldn’t offer Q3 guidance. As Snap announces a $500 million buyback program, Snap will reduce hiring and reduce operating expenses. All of this is a bad sign for social media firms and online ad-dependent firms. Facebook parent Meta platforms (META) lost nearly 5% and Google parent Alphabet ( GOOGL ) fell 3% ahead of earnings next week. Trade Desk (TTD) retreated 7%.
Twitter earnings are due Friday morning. TWTR stock was down just 2% late Thursday, with Elon Musk’s contentious takeover deal providing some support.
Intuitive Surgical revenue fell for the second quarter, while revenue growth slowed for the fourth consecutive quarter, to just 4%. Both missed views as the robotic surgery giant blamed Covid’s ongoing impact on elective procedures. ISRG shares plunged 13%, set to fall back below the 50-day line. Intuitive Surgical’s earnings and comments could be a bad sign for other manufacturers of medical devices, products and systems.
Shares close to buy points
Ulta beauty (ULTA), Ollie’s Bargain Outlet (OLLI), Fortinet (FTNT), Neurocrine Life Sciences (NBIX) and Quanta services (PWR) creates shares.
Ollie’s Bargain Outlet and PWR stock are on the IBD Leaderboard Watch List. The OLLI share is on SwingTrader. FTNT stock is on the IBD 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 analyzed Tesla stock, Carlisle (CSL) and elf beauty (ALV).
Dow Jones Futures today
Dow Jones futures fell 0.1% relative to fair value. S&P 500 futures fell 0.35 percent. Nasdaq 100 futures fell 0.7 percent. ISRG shares are on the Nasdaq 100, along with Meta Platforms and Google shares.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock rally continued to increase, with Tesla and Nasdaq leading the way.
The Dow Jones Industrial Average rose 0.5% in Thursday’s trading. The S&P 500 rose 1%, with TSLA stock the biggest gainer. The Nasdaq composite rose 1.4 percent. The small-cap Russell 2000 rose 0.5%.
US crude oil prices 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 couple of weeks.
The 10-year government yield fell 13 basis points to 2.91%. The two-year government yield plunged 16 basis points to 3.09%. Jobless claims rose to an eight-month high, while the Philly Fed’s manufacturing index for July showed activity falling at a faster pace. Both raise fears of a recession, but also bolster expectations that the Federal Reserve will raise interest rates by 75 basis points next Wednesday, not a full point.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) climbed 0.4%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) also gained 0.4%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.8%. The VanEck Vectors Semiconductor ETF ( SMH ) climbed 1.7%.
Reflecting more speculative storied stocks, the ARK Innovation ETF ( ARKK ) rose 1.75% and the ARK Genomics ETF ( ARKG ) 1.8%, contributing to big gains this week. Tesla stock is a large holding across Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) gained 0.1% and the Global X US Infrastructure Development ETF (PAVE) gained 1.5%. The US Global Jets ETF (JETS) fell 2.7%, with United Airlines (UAL) and American Airlines (AAL) hammered Q2 results. The 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 Health Care Select Sector SPDR Fund ( XLV ) rose 1.6%.
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Tesla earnings comfortably beat second-quarter views late Tuesday, with CEO Elon Musk saying the Cybertruck is on track for mid-2023. TSLA shares rose 9.8% to 815.12, clearing resistance back to early June and broke above a trend line that started in early April. An aggressive investor could have bought Tesla shares near the open, but even then it was extended from its 50-day line. At Thursday’s close, shares were 14% above the 50-day. Meanwhile, the EV giant remains significantly below its 200-day line, and some distance away from the official buy point of 1,208.10. At this point, investors may want to see TSLA stock decisively retake the 200-day line and then form a handle, while allowing the major averages to catch up.
After the closing, Bloomberg reported that Tesla is expected to remove Omead Afshar, a top Musk lieutenant who runs the Texas factory. Tesla’s internal auditors are reportedly investigating Afshar involving the purchase of suspicious building materials, including a special type of glass. Several Tesla employees have already been fired in the investigation.
TSLA stock was down overnight.
Stocks to watch
Ulta Beauty shares were up 0.7% at 411.27 on Thursday. The shares have a buy point of 429.58 from a flat base alongside a series of failed consolidations dating back to last August. But investors can use Wednesday’s high of 412.50 as a short-term entry. ULTA stock is 5.2% above its 50-day line, which isn’t too extended. Ulta is one of a few beauty stocks on the rise, despite not-quite-picture-perfect charts.
Ollie’s stock fell 1.2% to 66.50 on Thursday, but bounced slightly off its 21-day moving line. It provides an aggressive entry or follow-on buying opportunity for the end trader, who broke out last month from a bottom base.
FTNT shares climbed 3.7% to 61.86, moving back towards its 200-day line. It’s an area where Fortinet stock has hit resistance in recent months. A decisive move above the 200-day, perhaps clearing the July 12 high of 63.56, would offer an early entry or a place to start a position on the IBD Long-Term Leaders list. The official FTNT stock buy point is 74.45 from a consolidation going back to late last year, but shares have been capped for nearly a year.
PWR shares rose 0.6% to 133.07, working on a 138.56 buy point from a difficult cup-with-handle, according to MarketSmith analysis. Quanta Services is just below an early entry at 133.68 within the deep handle. PWR stock is 8.3% above its 50-day line, so a longer break could be constructive.
NBIX shares rose 0.1% to 97.60. Neurocrine Biosciences has a buy point of 100.10 cup with handle. Shares are arguably actionable from breaking a short trend line within that handle. NBIX stock is currently 5.3% above its 50-day.
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Market Rally Analysis
The share rise continued its strong last time. Once again the Nasdaq led the way, but on Thursday the Russell 2000 was something of a laggard.
The Nasdaq is back above the 12,000 level, with early June highs not too far away. The S&P 500 and Russell 2000, modestly above their late June highs, have some room before going up to early June highs. The Dow is still trading around late June highs, but rebounded from a 50-day line test intraday.
The Nasdaq has risen significantly over the past week and is near the high end of a regression line. It could signal a pause or pullback soon.
That’s something to keep in mind when the market faces an avalanche of earnings. In addition to Facebook parent META’s stock and Google stock, apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Exxon Mobil (XOM) and Chevron (CVX) is coming next week, along with hundreds of others. They will share the center with the Federal Reserve meeting.
While Tesla stock rose in earnings, Snap and Intuitive Surgical are just a taste of what investors may see in the coming days.
There are still not many good stocks to buy. While the gains have been broad-based, many of the big winners recently have been hard-hit growth stocks such as Data dog (DDOG), Nvidia (NVDA) and Tesla shares. Some of the leading areas, such as health insurers and discount carriers, have retreated this week, with sharp intraday falls in some cases.
ETFs that track the Nasdaq, software, biotech and chip sectors are ways to play the uptrend right now.
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What to do now
Investors who have built up positions over the past week are likely to appreciate that. At least the market rally appears to be a tradable one. With the Nasdaq rising so quickly and looking stretched by some measures, a pullback of some sort would not be a surprise. The big news in print means that the market and individual shares can see big fluctuations.
So don’t rush to add exposure. Continue to add to your holdings cautiously if the market and your positions continue to perform, but don’t be afraid to continue taking partial profits quickly.
Look for early buying opportunities, and stocks that are not too extended from moving averages. In 2022, stocks rising to or past traditional buy points have often struggled. Even names that continue to work can have major extinctions throughout the day.
Work on your watchlists and emphasize strong relative strength. Focus on stocks in or near buyable areas.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
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