Dow Jones futures fell early Friday, along with S&P 500 and Nasdaq futures. The June jobs report looms large.
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The stock market rally retreated on Thursday as strong economic data pushed Treasury yields higher, although indexes pared morning losses somewhat. The ADP jobs report estimated private sector payrolls soared by 497,000 in June, more than double the forecast. The ISM services sector index rose more than expected. Initial jobless claims rose slightly, but the four-week average fell while continuing claims fell. Announced layoff plans have dropped significantly in the past month.
Metaplatforms (META) held up well as its Threads app saw 30 million sign-ups in less than a day for rival Twitter, perhaps 48 million in 24 hours. This is the fastest number of downloads ever recorded. Twitter has threatened legal action against its new rival. You’re here (TSLA) CEO Elon Musk, owner of Twitter, says “cheating” is not acceptable.
Microsoft (MSFT) rallied amid a rise in price target.
You are looking for stocks that are holding up; Visa (V) and MasterCard (MA) hold buy areas, as well as DexCom (DXCM). Nvidia (NVDA) continues to trade closely. HubSpot (HUBS) slipped Thursday morning but recovered key support.
Meanwhile, the FDA on Thursday night approved Biogen’s Leqembi treatment for Alzheimer’s disease. biogenic (BIIB) and its partner Eisai already have fast-track approval, but full FDA approval boosts their chances of getting Medicare reimbursement for Leqembi.
Biogen’s stock was roughly flat early Friday after being halted overnight. Shares edged down 0.3% on Thursday. Eli Lily (LLY), which has a similar treatment for Alzheimer’s in trials, rose slightly overnight. LLY stock fell 0.5% on Thursday.
META, Nvidia and HubSpot stocks are on the IBD ranking. Microsoft stock is on IBD Long-Term Leaders. The HUBS stock is on the IBD Big Cap 20.
The video embedded in this article discusses Thursday’s market action and analyzes MSFT stock, Adobe (ADBE) and HubSpot.
Jobs report: what to expect
The Department of Labor will release the June jobs report at 8:30 a.m. ET.
Economists expect to see an increase of 213,000 jobs, compared to 339,000 in May. The unemployment rate should come down to 3.6%. Average hourly wage growth is expected to slow to 4.2% from 4.3% in May.
The ADP does not have a great track record of forecasting Labour’s non-farm payrolls. Yet the odds of a Fed rate hike on July 26 are now close to 93%. The probability of another quarter-point rise in November rose to around 46% on Thursday, up significantly from a few weeks ago.
Dow Jones Futures Today
Dow Jones futures lost nearly 0.1% relative to fair value. S&P 500 futures fell 0.1% and Nasdaq 100 futures fell 0.15%.
The 10-year Treasury yield rose 3 basis points to 4.07%, just below 2023 highs.
Crude oil prices rose slightly. Copper futures rose slightly.
The jobs report is sure to rock Treasury yields and Dow futures ahead of the open.
Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally analysis
The stock market rally ended with a surge in yields following the ADP report, although indices closed lower. The 10-year Treasury yield rose 10 basis points to 4.04%, a four-month high. The 2-year yield climbed 5 basis points to 5% after hitting a 16-year high of 5.12% intraday.
The Dow Jones Industrial Average fell 1.1% in Thursday’s stock trading. The S&P 500 index and the Nasdaq composite lost 0.8%. The small-cap Russell 2000 fell 1.6% after Wednesday’s 1% drop.
The Nasdaq and S&P 500 found support around their 10-day moving averages. But the Dow Jones fell below its 10- and 21-day lines, not far from its 50-day average.
The breadth of the market was terrible on Thursday, with losers beating winners 6-to-1 on the NYSE and 3-to-1 on the Nasdaq. This followed a negative magnitude on Wednesday.
The Invesco S&P 500 Equal Weight ETF (RSP) lost 0.8% and the First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) lost 1.3%. But both rebounded from their 21-day lines.
U.S. crude oil prices rose 1 cent to $71.80 a barrel.
Major stocks fell further on Thursday. Many found support at key levels, but not all.
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Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 2%. The iShares Expanded Tech-Software Sector ETF (IGV) fell just over 1%. The MSFT stock is a major component of the IGV. ETF VanEck Vectors Semiconductor (SMH) fell 1.2% after Wednesday’s 1.9% loss. The NVDA share is the No. 1 share of the SMH holding company.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) fell 3.8% and ARK Genomics ETF (ARKG) fell 3.6%.
The SPDR S&P Metals & Mining ETF (XME) lost 1.75%. The US Global Jets ETF (JETS) fell 2.2%. SPDR S&P Homebuilders ETF (XHB) resigned 2%. The Energy Select SPDR ETF (XLE) was down 2.25% and the Health Care Select Sector SPDR Fund (XLV) was down 0.8%.
The SPDR Industrial Select Sector (XLI) fund lost 0.75%.
The Financial Select SPDR (XLF) ETF slid 0.9%, with Visa and MA shares large parts of the XLF ETF. The SPDR S&P Regional Banking ETF (KRE) slipped 0.6%.
Five best Chinese stocks to watch now
Meta Stock
META stock fell 0.8% to 291.99, holding firm after climbing 2.9% to a 17-month high on Wednesday ahead of the Threads launch.
The text feeds, which are part of Instagram, launched Wednesday evening and saw more than 30 million sign-ups in the first 16 hours. In the first 24 hours, registrations topped 48 million, according to a media report, citing internal metadata. Even the lowest number is by far the best download on day one. For comparison, ChatGPT got 1 million downloads in its first five days.
With many celebrities, high-profile journalists, and other Twitter power users posting quickly, Threads appears to be the biggest threat to Twitter to date. This site has been struggling since Elon Musk bought Twitter for $44 billion last fall. Musk has alienated many users and especially advertisers with various restrictions.
The Instagram chief acknowledged that Threads lacked a number of basic features, with staff working hard to introduce them.
A Twitter lawyer has threatened legal action against Meta. In a letter to Meta CEO Mark Zuckerberg, Alex Spiro accused Meta of poaching former Twitter employees and engaging in “unlawful misappropriation of Twitter trade secrets and other intellectual property” .
Musk, in a response to a tweet about this legal threat on Twitter, wrote “Competition is fine, cheating is not.”
Meta, in response to Twitter’s legal threat, said, “No one on the Threads engineering team is a former Twitter employee.”
Microsoft share
Microsoft stock edged up 0.9% to 341.27, rebounding near its 21-day line. Morgan Stanley raised its MSFT share price target to 415 from 335. The shares have consolidated in recent weeks since hitting a record high of 351.47 on June 16. Investors might view the recent break as a high handful for consolidation dating back to late 2021. But investors should likely wait for a longer break before seeking a Microsoft IPO.
Stocks to Watch
Visa stock slipped 0.2% to 238.88, continuing to hold above a fixed base buy point of 235.57. Mastercard stock fell 0.3% to 393.14, just above a fixed base buy point of 392.20, according to MarketSmith analysis. The payment giants offered early entries last week, but both are still within range of the 50-day line.
Nvidia shares fell 0.5% to 421.03, above their 10-day line. Stocks are not far from their 21-day line, but they haven’t reached that near-term level in two months. NVDA stock has a tight three-week pattern that could turn into a tight four weeks after Friday. A test of the 21 day line, or maybe the 400 level, could be a nice shake and let the fast growing 50 day line fill the gap. The official buy point is 439.90, but Wednesday’s high at 431.77 would offer early entry.
DexCom stock fell 0.3% to 127.70, closing above its fixed base buy point of 126.44 after finding support at its 21-day line for a third straight session. DXCM stock has struggled to clear a range since early November. But stocks have been trending higher, in choppy form, since late January.
HubSpot gained 0.1% to 521.34, closing above the 21-day line. Shares skidded to an intraday low of 497.03 but rebounded from the 10-week line. Investors who bought HUBS shares as they tried to break through a four-week period at the end of June may have been shaken. But it could be restored.
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What to do now
The new or renewed pullback in the market could be constructive, allowing new buying opportunities to emerge from the pullbacks towards key levels and possibly forging bases.
But investors don’t know that the current decline will moderate again or that their positions will hold up relatively well.
Now is the time to consider cutting some profits and be quick to cut losses, especially on new purchases.
Meanwhile, investors should look for those constructive pullbacks and stocks holding key levels and showing relative strength, such as HUBS stocks, Visa and perhaps Nvidia. The watchlists could once again require a serious overhaul in the coming days. But that work can yield big payoffs when the market rally picks up again.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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