Dow Jones Futures: Jobs Report Will Test ‘Soft Landing’ Market Rally; Tesla Stock Split approved
Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, with Friday’s July jobs report looming large. Tesla ( TSLA ) shareholders approved a 3-for-1 stock split Thursday night.
X
Stocks closed mixed on a relatively quiet Thursday for the major indexes, but there were some big earnings moves.
Vertex Pharmaceuticals (VRTX), Amgen (AMGN) and Neurocrine Life Sciences (NBIX) reported better-than-expected earnings Thursday night, as biotech remains a leading sector. All closed near buy points and key support levels.
Dow Jones Futures today
Dow Jones futures rose 0.1% against real value. S&P 500 futures and Nasdaq 100 futures rose 0.1%.
The Labor Department will release the jobs report for July at 8:30 a.m. ET. The employment data will certainly swing Dow futures and Treasury yields.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
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Job report
Economists expect to see nonfarm payrolls rise by 250,000 in the July jobs report, down from 372,000 in June. That would still indicate healthy employment amid a slowing economy.
Follow the household survey, which showed a marked decline in employment in June. It is more error-prone than wages, but often shows the labor market first.
Meanwhile, the unemployment rate is expected to hold steady at 3.6%, with annual hourly wage growth slowing to just 5%.
Jobless claims rose to 260,000 last week, the highest in nine months. Job openings, while still high, have declined rapidly over the past two months.
The Federal Reserve, particularly Fed chief Jerome Powell, has argued that a soft landing is possible. Investors in the last couple of weeks have started to buy into the idea that the economy will weaken just enough to cool inflation sufficiently to spur the Federal Reserve to slow and then halt rate hikes at the Fed, without triggering a major drop in demand and employment.
Tesla vote on 3-for-1 stock split: Is now the time to buy?
Biotech earnings
VRTX stock edged lower in overnight trading as Vertex earnings topped views and the biotech giant raised its full-year product revenue target. Shares fell 0.1% to 274.85, below the 50-day line and buy points of 276.10 and 279.23.
AMGN stock lost 1% in extended action after Amgen earnings topped and the company largely affirmed its full-year guidance. Shares fell 0.1% to 246.98 on Thursday, trading near the 50-day line. The Amgen share has a buy point of 253.87. The biotech giant announced a $3.7 billion buyout ChemoCentryx (CCXI) before Thursday’s opening.
NBIX stock fell slightly overnight after Neurocrine’s earnings and revenue peaked. The company raised revenue guidance for the key drug, but also scrapped a treatment that wasn’t working well. Shares rose 2% on Thursday to 95.93, retreating from the 50-day line. The NBIX stock has a buy point of 100.10.
VRTX stock is on the IBD Leaderboard and the IBD Big Cap 20 Index. The iShares Biotechnology ETF (IBB) is on SwingTrader.
Tesla share split, annual meeting
Tesla shareholders approve a 3-to-1 stock split Thursday night at the annual meeting, two years after a 5-to-1 stock split. Tesla proposed the TSLA split in June. It is unclear whether the split itself will have a major impact on Tesla shares. A TSLA stock split will make play options cheaper.
At the annual meeting, CEO Elon Musk said “this year, I swear,” Tesla will solve self-driving, laughs.
Musk indicated that Cybertruck pricing and specifications will be different than what Tesla originally indicated in 2019, citing inflation. The drawn prices and specifications always seemed highly unlikely, while material costs and 4680 battery delays have added to the program.
Musk also expects production to increase in the second half of the year. The Shanghai factory is getting capacity-increasing upgrades, while Tesla has two new factories in Berlin and Austin that have increased in speed. Musk said Tesla could eventually have 10-12 factories, and could make an announcement about the next factory’s location later this year.
Tesla shares rose a fraction overnight. Shares rose 0.4% to 925.90 in Thursday’s regular session, just above the 200-day mark. TSLA stock had risen sharply on the stock split news, but that likely reflects the broad market rally and Tesla’s better-than-expected earnings on July 20. Tesla shares are a long way from the buy point of 1,208.10. A consolidation near the 200-day line or a handle higher up could create a buying opportunity.
China EV shares
Meanwhile, Chinese EV manufacturers are showing some strength. BID ( BYD ), which reported booming July sales on Wednesday, rose 2.6% to 38.10 on Thursday, back above its 50-day mark. BYD stock is likely to make a new base after another week, but a move above the August 1 high of 38.35 could offer an early entry.
Li Auto ( LI ) climbed 1% to 34.32, continuing to trade between the 21-day and 50-day lines. LI stock should make a new base on a weekly chart after Friday. Li Auto stock is on the IBD 50.
Nine (NIO) rose 3% to 20.90, bouncing off the 50-day line. The NIO share is still below the 200-day mark.
Tesla vs. BYD: Which EV giant is the best buy?
Stock market rally Thursday
The stock rally did not move much on the major indexes heading into the jobs report in July.
The Dow Jones Industrial Average fell 0.3% in Thursday’s trading. The S&P 500 index fell 0.1 percent. The Nasdaq composite rose 0.4 percent. The small-cap Russell 2000 lost 0.2%.
U.S. crude oil prices fell 2.3% to $88.50 a barrel, hitting their lowest levels since before Russia’s invasion of Ukraine in late February. Gasoline futures fell 4.1%, signaling a continued decline in prices at the pump.
The 10-year government yield fell 7 basis points to 2.68%.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 0.35%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) ticked 1 cent higher. The iShares Expanded Tech-Software Sector ETF ( IGV ) gained 0.2%. The VanEck Vectors Semiconductor ETF (SMH) rose 1%.
The SPDR S&P Metals & Mining ETF ( XME ) rose 1% and the Global X US Infrastructure Development ETF ( PAVE ) gained 0.8%. The US Global Jets ETF (JETS) rose 0.5%. The SPDR S&P Homebuilders ETF (XHB) rose 1.7%. The Energy Select SPDR ETF (XLE) fell 3.7% and the Financial Select SPDR ETF (XLF) fell 0.3%. The Health Care Select Sector SPDR Fund ( XLV ) retreated 0.5%.
Reflecting more speculative storied stocks, the ARK Innovation ETF ( ARKK ) rose 0.8% and the ARK Genomics ETF ( ARKG ) rose 1.7%, both at three-month highs. Tesla stock is a large holding across Ark Invest’s ETFs. The Cathie Woods Ark fund also owns small stakes in BYD and Nio shares.
Top five Chinese stocks to watch now
Market Rally Analysis
The stock market rally had a mixed session on Thursday, trading in a narrow range. After strong recent gains, especially Wednesday’s technology-led advance, a pullback or pause would not be a surprise and could be healthy.
The Nasdaq composite is comfortably above its early June highs, with the Dow Jones, S&P 500 and Russell 2000 just below that resistance level.
While the major indexes were quiet on Thursday, there was plenty of action in sectors and individual stocks.
Oil and gas stocks are struggling again, with energy prices retreating, particularly crude oil. It is difficult to see the sector making meaningful progress without the underlying prices rising.
Biotechs had another strong session, with the IBB ETF up 2.2% after Wednesday’s 3.8% jump.
While there were more revenue winners on Thursday, revenue losers showed the dangers of having little cushion heading into results. Aris Water Solutions (ARIS) crashed 21% after earnings after Wednesday’s close in a buy zone. Fortinet (FTNT) plunged 16%, Eli Lilly (LLY) and Quanta Power (PWR) fell modestly, but further from buy points.
Country house (LNTH) had a wild session, hitting a record high of 81.43 just after the open, plunging to 66.26 a few minutes later, and briefly turned positive again before closing down 6.1% to 71.24.
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What to do now
The market rally is working, but investors have reasons to be cautious about increasing exposure quickly. A pullback could cause a temporary setback for the indices, but perhaps big losses for many individual names. There is still a significant risk that the market rally will soon run out of steam and pull back significantly, but perhaps not to the final lows.
Be careful with your earnings.
Continue working on watchlists. Stay engaged in the market, but you don’t have to stare at your computer screen all day.
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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