Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, with the May job report in print. The stock market rally had a strong session, and shrugged Microsoft (MSFT) profit warning and the Fed’s official No. 2 signaling large interest rate increases will continue through September.
Flex LNG (FLNG), Howmet Aerospace (HWM), AAR Corp. (AIR), Enphase Energy (ENPH) and ZIM integrated shipping (ZIM) is close to buying points. FLNG shares, AAR and Howmet Aerospace cleared early buy points on Thursday, while Enphase broke out. The ZIM stock is up and running.
Meanwhile, it was a strong day for electric car manufacturers and highly valued growth stocks such as Tesla (TSLA), Xpeng (XPEV), MongoDB (MDB) and UiPath (PATH), with the latter two flying on earnings. All of these names still need a lot of repair work.
China EV and battery giant BYD (BYDDF) rose to record sales in May, on its way to taking Tesla’s EV crown in the second quarter. The BYD stock rose solidly, moving towards all-time highs.
Despite falling NYSE and Nasdaq volumes, Thursday’s market upturn was encouraging after two days of modest losses. Investors can slowly increase their exposure, but take small steps.
After the close, exclusive dealers Lululemon Athletica (LULU) and RH (RH) topped quarterly views, but RH provided weak guidance. Cyber security plays CrowdStrike (CRWD) and Okta (OKTA) topped and beat guidance. LULU shares rose modestly overnight, while RH and CRWD shares retreated slightly. The OKTA stock jumped. All four stocks are outside the last lowest levels, but far from being able to act.
The ENPH stock is on the IBD Leaderboard. Enphase and HWM shares are on SwingTrader. The MSFT stock is on IBD Long-Term Leaders. The ZIM stock is at IBD 50. Howmet Aerospace was Thursday’s IBD Stock Of The Day.
The video embedded in this article highlights Thursday’s market action and analyzes FLNG shares, Enphase and Epam systems (EPAM).
Dow Jones Futures today
Dow Jones futures rose 0.15% relative to fair value. S&P 500 futures rose 0.15% and Nasdaq 100 futures rose 0.2%.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze powerful stocks in the stock market rally on IBD Live
The Ministry of Labor will release the job report in May at 8:30 ET. Economists expect wage lists outside agriculture to rise by 325,000 after April 428,000. Unemployment will fall to 3.5% with hourly wages up 0.4% compared to April. The job report in May follows Thursday’s ADP Employment Report, which estimates that private payrolls only rose 128,000, well below the views, with small companies cutting 91,000 jobs.
The Federal Reserve wants to see significant cooling in the labor market to curb inflation and inflation expectations. But a half-point rate hike at the Fed meeting in mid-June has baked in. Politicians will get several months of financial data before changing course or speed.
Stock market rally
The stock market got off to a bad start on Thursday when Microsoft warned about earnings and earnings in the June quarter just before the opening clock, blaming currency fluctuations. Not long after the opening, Fed Deputy Lael Brainard said it was “very difficult to see the reason for a break” in September, and became the last decision-maker to indicate that interest rate hikes by half a point are likely to be present for at least the next three the meetings.
But the market upswing soon took off for strong gains, led by technologies and small companies. Even the MSFT stock, down 4% at one point, closed up 0.8%.
The Dow Jones Industrial Average rose 1.3% in Thursday’s trading session. The S&P 500 index rose 1.8 percent. The Nasdaq index rose 2.7 percent. Small-cap Russell 2000 rose 2.4%.
The US crude oil price rose 1.4% to 116.87 dollars per barrel, after falling 3% before opening. OPEC + will increase production quotas by 648,000 barrels per day in July and August, but less than some reports had suggested. US crude oil stocks fell last week.
The 10-year government interest rate fell 2 basis points to 2.91%, after rising 19 basis points in the two previous sessions.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.9%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.2%. iShares Expanded Tech-Software Sector ETF (IGV) shot up 4.6%. The MSFT share is an important component. VanEck Vectors Semiconductor ETF (SMH) rose 3.5%.
The SPDR S&P Metals & Mining ETF (XME) rose 3.75% and the Global X US Infrastructure Development ETF (PAVE) rose 2.1%. The US Global Jets ETF (JETS) was up 1.6%. SPDR S&P Homebuilders ETF (XHB) rose 2.3%. Energy Select SPDR ETF (XLE) fell 0.3% and Financial Select SPDR ETF (XLF) was up 1.4%. Health Care Select Sector SPDR Fund (XLV) rose 0.8%.
ARK Innovation ETF (ARKK) reflects more speculative history stocks, flew 7.4% higher and ARK Genomics ETF (ARKG) rose 6.1%. The Tesla share is still number 1 across Ark Invest’s ETFs, with BYD shares and XPEV shares also small holdings. Cathie Woods ARKK also owns a lot of PATH shares.
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Shares in, close to buying zones
The Flex LNG stock jumped 7.75% to 30.04, rebounding sharply from the 50-day line and coming above the 30 level, an area of resistance. Investors can buy FLNG shares, even though they are almost 7% above the 50-day limit now. The stock is trading at a consolidation buying point of 32.87, according to MarketSmith analysis.
The relative strength of FLNG shares is at a record high. The RS line, the blue line in the accompanying charts, tracks the performance of a stock versus the S&P 500 index.
The Howmet share climbed 3.6% to 36.97, moving towards a buy point of 37.63 double bottoms. Thursday’s action pushed the HWM stock above an early entry of 36.13, still within range of the 50-day line. The RS line for the Howmet stock is already at a high level. Howmet Aerospace makes tithes for the aerospace industry.
AIR shares climbed 3.2% to 50.13, jumped from near the 50-day line and topped an early entry of 49.76. The shares are moving towards an official buy point of 52.10 in a 15% deep base. The RS line for AIR storage is at a new high.
The single-phase stock rose 9% to 198.93, removing a 193 buy point from a double-bottom base that formed in the lower part of a much larger consolidation. The RS line for the ENPH stock is well away from all-time levels, but reached a consolidation high on Thursday.
ZIM shares fell 3.2% to 66.37. The shares are in a cup base with a buy point of 75.81. But ZIM storage works with a possible handle, even if it needs a few more days. The container freight warehouse is already more than 9% above the 50-day line.
Tesla shares rose 4.7% to 775, rising above the 21-day moving average. But it is well below the 50-day and 200-day moving averages. The TSLA share must exceed these levels before investors pay close attention.
The XPEV stock jumped 9.7% to 25.15, topping the long-moving 50-day moving average. Xpeng will benefit from recurring EV deliveries in May, but also new EV subsidies and the end of the Shanghai blockade, which will also benefit Tesla and many other car manufacturers.
The BYD share climbed 4.5% to 37.37, and continued to rise sharply from the beginning of May. The shares have now been expanded from an early entry of 34.60 and are working towards an official buy point of 41.34. But after driving up the right side of a 48% deep cup base, the BYD stock could use a handle.
Early Thursday, BYD reported May sales of 114,943 electric cars and plug-in hybrids, a record and the third month in a row over 100,000.
Market Rally Analysis
The stock market had a solid upturn on Thursday, despite Microsoft’s warning and Fed rate hikes. The major indices again found support on their 21-day lines.
Thursday’s volume went down from Wednesday, so do not get too excited. Nevertheless, the market has in recent days weathered or accumulated on seemingly bad news.
Meanwhile, the Dow Jones and Russell 2000 are approaching their 50-day lines, with the S&P 500 and Nasdaq not far behind. It can serve as a temporary resistance area or encourage another reversal towards low targets. But even if the key indices move past their 50-day lines, they will still face several other tests.
The current break in the market rally this week allows some possible handles to begin to form, for example with ZIM stocks. Longer sideways action can be beneficial. It would let some stocks forge or complete bases and let the moving average catch up. Especially outside the oil and gas sector, there are not many shares to buy. A number of shares are established, but some – Atkore (ATKR) and ZIM come to mind – are already well over their 50-day lines.
Some chemicals, building materials and freight warehouses look interesting. Drug stocks come under pressure under renewed buzz of possible price controls.
There were some major movements among highly valued software stocks on Thursday. MongoDB and UiPath increased by 19% and 17% in revenues, respectively. But many other names drifted higher, for example Datahund (DDOG). But even after large percentage movements from the last bottoms, they have a long way to go. And if the market goes sour, high-value growth names will be hit hard.
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What to do now
The stock market rally had a solid session. Investors can continue to nibble on stocks, and gradually increase their exposure. But in the last week, many stocks have shown much more volatile action than the large indices, such as Albemarle (ALB). Real market sales can trigger large losses in potential leading shares. Maintaining individual positions and general exposure light is a good way to minimize losses and limit the amount of loss reduction you need to do.
If the market rally has real legs, your first positions should work, and you can gradually increase your exposure, and generate big wins during the race.
For now, keep working on your watchlists. Energy will remain heavy on that list, but tracks stocks with strong relative strength across a number of sectors.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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