Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures. The stock market rebounded powerfully Thursday from steep losses, led by techs such as Palo Alto stock. The US and Europe announced tougher sanctions vs. Russia for its sweeping Ukraine invasion, but the penalties were not as severe as feared.
The Nasdaq and S&P 500 raced up from strong gains, with the Dow Jones recovering to close slightly higher. This marks the start of a stock market rally attempt. But it’s not a green light for investors.
Palo Alto Networks (PANW) and other cybersecurity stocks raced higher, including Fortinet (FTNT) Datadog (DDOG) and ZS stock. But Zscaler (ZS) plunged overnight after reporting earnings.
Meanwhile, Microsoft (MSFT) rebounded 5.1% after undercutting the low of its base. Apple (AAPL) and Expedia (EXPE) both rallied off key support, with Apple closing up 1.5% and Expedia stock paring its loss to 2.5%. Microsoft remains below its 200-day line while Apple stock is below its 50-day, so they are not actionable. But EXPE stock is in a buy zone.
Banks were among the biggest losers, with JPMorgan Chase (JPM) and Bank of America (BAC) among the decliners. Sanctions vs. Russian banks will have a ripple effect on financials around the world. Fears of slower economic growth and flattening yield curves – with the Federal Reserve about to begin rate hikes – weighed on everyone from Wall Street titans like JPMorgan to foreign banks and regional lenders. While JPM stock and other financials rallied off intraday lows, the charts have seriously weakened in recent weeks.
Gold, a safe haven during the recent sell-off, reversed lower Thursday after surging 3% overnight. Newmont Mining (NEM), which narrowly beat views early Thursday, jumped to 70.37 shortly after the open. But NEM stock reversed to close down 2.2% to 66.72, briefly undercutting the 65.59 buy point.
Microsoft stock and Expedia are on IBD Leaderboard. Microsoft and FTNT stock are IBD Long-Term Leaders.
The video embedded in this article discussed Thursday’s wild moves, while also analyzing JPMorgan stock, NEM stock and PANW stock.
Dow Jones Futures Today
Dow Jones futures fell 0.5% vs. fair value. The S&P 500 futures fell 0.7% and the Nasdaq 100 futures declined 1.1%.
Crude oil futures climbed more than 2%.
The 10-year Treasury yield fell 1 basis point to 1.96%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Thursday
The stock market opened sharply lower Thursday as Russia began its full-scale Ukraine invasion, but rebounded to close higher.
The Dow Jones Industrial Average edged up 0.3% in Thursday’s stock market trading, with MSFT stock helping to offset JPMorgan and other drags. The S&P 500 index popped 1.5%. The Nasdaq composite soared 3.3%. The small-cap Russell 2000 rallied 2.6% after just undercutting its January lows near the open.
US crude oil prices rose 0.8% to $ 92.81 a barrel after topping $ 100 overnight.
The 10-year Treasury yield dipped 1 basis point to 1.97%, well off early lows of 1.89%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 2.35%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) soared 6.1%. Microsoft stock is a huge IGV component, while Palo Alto, Fortinet, DDOG stock and ZS stock are also holdings. The VanEck Vectors Semiconductor ETF (SMH) gained 3.4%.
SPDR S&P Metals & Mining ETF (XME) fell 1.2%, with NEM stock a major component. The Global X US Infrastructure Development ETF (PAVE) rose 1.5%. US Global Jets ETF (JETS) edged up 0.3%. SPDR S&P Homebuilders ETF (XHB) picked up 2.6%. The Energy Select SPDR ETF (XLE) fell 0.8%. The Financial Select SPDR ETF (XLF) gave up 1.2%, with JPMorgan stock and BofA both major holdings. The Health Care Select Sector SPDR Fund (XLV) edged up 0.4%
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both rebounded 7.8% after hitting 20-month lows Wednesday.
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While tech and growth names generally rebounded Thursday, with software among the leaders, cybersecurity plays were especially hot. Russia employed massive cybersecurity attacks vs. Ukraine heading into the physical invasion. Investors are betting that cybersecurity will be front and center for governments and businesses.
Palo Alto stock shot up 13% to 539.94 in huge volume. It is rebounding back above the 50-day line, while also breaking above a trendline and short-term resistance. The relative strength line for PANW stock is at a new high. In a stronger market, PANW stock would be flashing clear buy signals as an early entry. Shares do have a traditional buy point of 572.77.
FTNT stock leaps 11% to 316.45, back above its 200-day line and just below its 50-day line. Reclaiming the 50-day line and a trend line just above that key level would, in better times, be an aggressive entry. Short-term resistance just above those levels also would be a bullish signal. The base buy point is 371.87.
Datadog stock rose 7% to 159.86, back above its 50-day line. Shares are working on a messy consolidation with a deep handle, offering a 184.80 buy point. The RS line for DDOG stock is not far from a high.
Zscaler stock vaulted 10% to 263.38 in Thursday’s session, a penny below its 200-day line. After the close, Zscaler earnings topped views. But ZS stock plunged overnight, back near 2022 lows.
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The stock market had a wild session Thursday. The major indexes gapped down at the open as Russia invaded Ukraine with overwhelming force. But they bounced back powerfully as the West responded with tougher sanctions, but not so far reaching that they are expected to have a devastating impact on the global economy.
Arguably, the stock market was due for a bounce after several days of selling. The major indexes had broken below their Jan. 24 lows on Wednesday, with the Nasdaq briefly entering a bear market on Thursday. So this bounce could quickly fade.
Still, it was an encouraging session in heavy volume after a slew of distribution days and despair.
For now, Thursday marked day one of a stock market rally attempt on the major indexes. Starting late next week, investors could look for a follow-through day to confirm the new market rally.
Even if the market rally attempt continues and stages a follow-through day, not all confirmed uptrends work. The S&P 500 and Nasdaq staged FTDs on Jan. 31, but the uptrend quickly ran into trouble, finally failing definitively on Wednesday. In late 2018, the market had two failed FTDs before finally bottoming out on Christmas Eve that year.
In the current environment, where headlines can send the market in radically different directions, it will be difficult to have confidence in any market rebound, even a confirmed rally.
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What To Do Now
Watching stocks and the major indexes rebound from steep intraday losses, it can be tempting to try to jump on board near the “bottom.” But the risks are high that the market will quickly roll over and plunge to new lows. Even the upside could be limited if the market advances for a few days and then stalls out.
The past few months have shown the danger of getting too aggressive and not scaling out. What investors need now is patience. Wait for a follow-through day to take action. Even then, you’ll want to add exposure slowly, especially if the buying opportunities are limited.
For now, continue to work on your watchlists. The volatile market correction is once again upending potential leaders. Cybersecurity names are rising again, while banks are on the back foot. So put PANW stock on your watchlist, along with other security software names – though perhaps not Zscaler. But who knows which groups and stocks will stand tall when a new market uptrend finally takes hold?
So cast a wide net and keep an open mind. Focus on stocks with strong relative strength lines. Stay engaged. When the market shows sustained strength, you want to be prepared.
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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