Dow Jones futures were little changed early Friday, while S&P 500 futures rose modestly and Nasdaq futures climbed solidly. Netflix (NFLX) jumped on strong subscriber growth, with energy giant SLB (SLB) on tap. Google parent Alphabet (GOOGL) will cut 12,000 jobs, as big tech layoffs continue.
The stock market rally retreated again Thursday for a second straight day, with the major indexes testing or undercutting further key levels. The Dow Jones turned negative for 2023.
Fresh economic reports pointed to weaker economic activity, with one big exception: Initial jobless claims matched their lowest level since last April. The overall picture points to rising recession risks, but tight labor markets keeping the Federal Reserve hawkish.
Leading stocks are retreating to various degrees. Investors should wait to see if this pullback is temporary or something more serious.
MELI stock, Medpace Holdings (MEDP), Axon Enterprise (AXON), Vertex Pharmaceuticals (VRTX) and Exxon Mobil (XOM) are names that are holding up relatively well, so far.
MEDP stock and Axon Enterprise are on IBD Leaderboard. MercadoLibre and XOM stock are on the IBD 50. VRTX and SLB stock are on the IBD Big Cap 20. GOOGL stock is on the IBD Long-Term Leaders list.
MercadoLibre (MELI) was Thursday’s IBD Stock Of The Day. VRTX stock was Wednesday’s.
Dow Jones Futures Today
Dow Jones futures were little changed vs. fair value. S&P 500 futures rose 0.3%. Nasdaq 100 futures climbed 0.7%. NFLX stock and Google are providing a boost to Nasdaq futures.
The 10-year Treasury yield rose 4 basis points to 3.44%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Netflix Subscriber Growth Strong
Netflix earnings fell well short of Q4 views, while 2% revenue growth was in line. But Netflix subscribers swelled by 7.66 million, far more than 4.57 million expected. The streaming giant launched a lower-priced, ad-supported subscription option on Nov. 3. Netflix no longer provides subscriber guidance.
Meanwhile, Co-founder Reed Hastings stepped down as co-CEO to become executive chairman. Ted Sarandos will remain co-CEO, joined by Greg Peters, currently chief operating officer.
NFLX stock jumped in premarket trade. Shares fell 3.2% to 315.78 in Thursday’s regular session.
The Netflix subscriber growth is a positive sign for many other streaming plays, including Walt Disney (DIS), Paramount Global (PARA), Warner Bros Discovery (WBD) and Roku (ROKU). But DIS stock, Roku and the others had smart gains in extended action.
Google Job Cuts
Google parent Alphabet will lay off 12,000 workers, or 6% of staff. That’s according to a company memo. That follows Microsoft plans to cut 10,000 positions, or 4.5% of staff, earlier this week, with Amazon.com (AMZN), Salesforce.com (CRM) and many other tech giants reducing staff.
Late Thursday, Google said it would defer 20% of bonus payments until at least March.
GOOGL stock climbed solidly in premarket trade.
Google stock rose 2.1% to 93.05 on Thursday, moving above the 50-day line for the first time since early December. The 50-day line has been a resistance area for the internet giant since late 2021. Still, GOOGL stock remains a long way from its 200-day line.
Eli Lilly Falls On FDA Alzheimer’s Rejection
The FDA rejected Eli Lilly’s accelerated approval submission of its Alzheimer’s treatment donanemab, seeking more data. Eli Lilly (LLY) fell modestly overnight. Biogen (BIIB), which recently released positive results on a similar Alzheimer’s drug, rose slightly before the open.
SLB Earnings Top
SLB earnings and revenue modestly topped quarterly views and raised its dividend. SLB, formerly known as Schlumberger, said in the release that “we believe the macro backdrop and market fundamentals that underpin a strong multi-year upcycle for energy remain very compelling.” Oil&Gas-Field Services is rated No. 1 out of IBD’s 197 industry groups.
SLB stock climbed 1% early Thursday. Shares edged up 0.4% to 57.38 on Thursday, after coming down to the top of a recent base. But SLB is slightly extended from a 53.97 handle buy point.
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Stock Market Rally
The stock market rally extended Wednesday’s losses on Thursday morning, rebounding somewhat in the afternoon but fading again into the close.
The Dow Jones Industrial Average fell 0.8%. in Thursday’s stock market trading, along with the S&P 500 index. The Nasdaq composite sank nearly 1%. The small-cap Russell 2000 declined 1%.
Solar stocks were big losers amid growing concerns about the residential solar market.
US crude oil prices rose 1.1% to $80.33 a barrel, continuing to trade right around the $80 level. Gasoline futures climbed 2.9% to a two-month closing high.
The 10-year Treasury yield edged up 3 basis points to 3.4%.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) tumbled nearly 2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) sank 1.2%. The iShares Expanded Tech-Software Sector ETF (IGV) gave up 0.8%. The VanEck Vectors Semiconductor ETF (SMH) shed 2.45%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) skidded 3.2% and ARK Genomics ETF (ARKG) lost 3.3%.
SPDR S&P Metals & Mining ETF (XME) dipped 0.2%, along with US Global Jets ETF (JETS). SPDR S&P Homebuilders ETF (XHB) sold off 3%. The Energy Select SPDR ETF (XLE) advanced 1.2%, with XOM stock the No. 1 holding and SLB also a major component. The Financial Select SPDR ETF (XLF) slid 1.2%. The Health Care Select Sector SPDR Fund (XLV) edged up 0.2%.
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Stocks To Watch
MELI stock edged up 0.4% to 1,072.74, pausing this week after a big run to start 2023. The Latin American e-commerce and payments giant is just below a 1,095.44 buy point, but really needs a handle to let the major averages catch up. MercadoLibre stock has held up very well but uses some depth on any handle to shake out weak holders.
MEDP stock fell 1.5% to 228.84, near an official 235 buy point, according to MarketSmith analysis. Shares blasted above the 50-day line on Jan. 10, which offered an early entry. Now, Medpace stock could use a handle.
XOM stock tested its 50-day line but closed up 0.6% to 111.32. Shares are not far from a 114.76 buy point from a flat base.
VRTX stock edged down 0.6% to 307.94, still holding above its 50-day line. Shares popped above the 50-day line on Tuesday, offering an early entry at the time. Investors should wait to see if the biotech can move past Tuesday’s high of 312.35. The official flat-base buy point is 324.85.
AXON stock climbed 1% to 184.06, continuing to work on a handle on a cup base that would slightly lower the buy point from the current 193.95. Axon, which makes Tasers, body cameras and digital storage for law enforcement, cleared an early entry Jan. 9 if it moved above the 50-day line.
Market Rally Analysis
After Wednesday’s sharp downside reversal, the stock market rally showed further weakness. While the major indexes rebounded from their late morning lows, they faded into the close.
The S&P 500 index, after falling back below its 200-day line in the previous session, broke below its 50-day on Thursday. The Nasdaq also undercut its 50-day line, but bounced from its 21-day line. The Russell 2000, which nearly hit its late 2022 highs Wednesday morning, tested its 200-day on Thursday, but closed above that line.
The Dow Jones had its third straight significant decline, testing the low of the Jan. 6 follow-through day. Closing below the low of the FTD would be a bearish sign for a market rally, although the S&P 500 and Nasdaq are well above their Jan. 6 lows for now.
The indexes closing off lows offers hope that the current pullback is just a healthy pause, letting leading stocks forge handles and other new buying opportunities. But this could be more serious. Breaking below Thursday’s lows would be worrisome.
Some leading stocks, such as Axon, MercadoLibre and MEDP stock are holding up quite well. But others are suffering bigger losses. Deere (DE), which flashed an early entry Tuesday morning, undercut the low of its flat base on Thursday.
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What To Do Now
With the market rally retreating, many leading stocks are paring recent gains or even skidding below entries.
Investors should hold off on new purchases for now. If anything, they want to cut modest exposure, if only because of the action in individual holdings.
Despite some recent losses, a large number of stocks have been setting up. One or two good days could significantly improve the market rally’s technical picture and offer many new buying opportunities. So have your watchlists ready.
But just because a stock is setting up doesn’t mean it will break out or flash a buy signal, or that any such move will work.
Earnings season looks like it’s going to hit the market with individual stocks and the overall uptrend at a tenuous time. Tread carefully.
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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