Dow Jones futures rose slightly early Friday, along with S&P 500 and Nasdaq futures. Broadcom (AVGO) and Lululemon Athletica (LULU) headlined earnings Thursday night with the jobs report available ahead of the open. Tesla is looking to continue Thursday’s breakout attempt.
The Senate passed debt ceiling legislation Thursday night, sending it to President Biden for signature, averting the first-ever US default.
The stock market rally had a strong session on Thursday. After a mixed start, the major indices are expected to rebound and move higher, although they pared their gains towards the close. Market breadth was strong. Several stocks made bullish moves while some early earnings losers roared. Falling Treasury yields and a weaker dollar provided a boost.
You’re here (TSLA) stock tries to break out, while rival BYD (BYDDF) is just below a buy point. wing stop (WING), Fluency (FLNC) and UberTechnologies (UBER) are all near the entrances.
In addition to Broadcom and LULU shares, Z-scale (ZS), Asana (ASAN), samsara (IoT), SentinelOne (S), MongoDB (MDB) reported late.
Lululemon. Samsara and in particular MDB shares were the big winners in after-hours earnings. ASAN stock also rose. SentinelOne stock plummeted overnight, while Zscaler and AVGO stock fell slightly. ZS, Asana and Samara stocks all closed near buy points or early entries.
WING stock was added to the IBD ranking on Thursday. MDB, Fluence, Wingstop and Uber stocks are on the IBD 50. Wingstop was the IBD stock of the day on Thursday. FLNC action was Tuesday’s selection.
Report on the works
Economists expect the May jobs report to show nonfarm payrolls rose 180,000 from 253,000. The jobless rate is expected to rise from a long-term low to 3.5 %. The average hourly wage should climb by 4.4% compared to a year earlier, stable with April.
Other employment data this week was strong, including April job openings and the ADP May employment report. But there are other indications that labor markets have not been as tight as previously thought.
The jobs report will influence expectations for the Fed’s June meeting. Rate hike odds plunged on Wednesday as two Fed officials signaled they favored a pause this month. Markets now see a 77% chance of a break.
Dow Jones Futures Today
Dow Jones futures were up 0.5% from fair value. S&P 500 futures advanced 0.5% and Nasdaq 100 futures climbed 0.5%. AVGO stock is a notable holding in the S&P 500 and Nasdaq 100. Tesla too.
Crude oil climbed more than 1% and copper futures rose nearly 2%.
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
The stock market rally strengthened for most of the session, before retreating in the final 45 minutes.
The Dow Jones Industrial Average rose 0.4% in trading Thursday. The S&P 500 index climbed 1%. The Nasdaq composite jumped 1.3%. The small cap Russell 2000 rose 1.05%.
US crude oil prices rebounded nearly 3% to $70.10 a barrel. Copper prices jumped 2.1%. Commodity prices were helped by stronger Chinese economic data and a weaker US dollar.
The 10-year Treasury yield fell 3 basis points to 3.61%, down 21 basis points so far this week.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) gained 1.3%. The iShares Expanded Tech-Software Sector ETF (IGV) lost a fraction. Sentinel One, Asana and ZS shares are in IGV. ETF VanEck Vectors Semiconductor (SMH) gained 1.5%. AVGO stock is a large SMH component.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) climbed 1.5% and ARK Genomics ETF (ARKG) jumped 2.9%. Tesla stock is the top position among Ark Invest’s ETFs. Cathie Wood’s Ark also owns BYD stock.
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Tesla stock rose 1.8% to 207.52. Intraday, shares reached 209.80, briefly erasing a buy point of 207.89 from what is either a cup or a double-bottom base. Notably, TSLA stock has advanced on above-average volume for four straight sessions, after few such days in the previous three months.
Shares edged higher early Friday, signaling a continuation of the breakout attempt.
There had been speculation that Elon Musk would unveil a revamped Model 3 at the Shanghai factory on Thursday, but he didn’t. Meanwhile, Tesla is increasing discounts on US inventory, opting not to cut official prices at this time.
Meanwhile, BYD stock climbed 2% to 30.80 on Thursday, returning to a buy point of 31.17 cup with handle originally cleared on May 10. On Thursday, BYD reported record shipments in May, surpassing its late-2022 peak after a Tesla-led China electric vehicle price war took its toll in early 2023.
Other actions close to buy points
FLNC shares fell 2.4% to 24.20. Stocks are slightly below a buy point of 24.87, but have traded above an early entry this week after breaking the handle downtrend. Fluence Energy is in large-scale storage. Much like Tesla’s Megapack business, Fluence uses CATL batteries. Not yet profitable, but revenue growth is booming.
WING stock fell 0.3% to 198.44. Wingstop found support at its 10-week line this week, just above a previous buying point. Shares would be tradeable above Wednesday’s high of 202.43. This would also put WING stock above its 21-day line and break a downtrend in a short consolidation. Wingstop’s stock is on track to have a flat base by Friday’s close.
UBER stock rose 1.45% to 38.48, rebounding from the 21-day line. Technically, the ridesharing giant is in range of a cup base with a buy point of 37.68, according to MarketSmith analysis. Investors could buy Uber shares here or wait for a bit more strength to break a short downtrend. Uber is an example of a stock that rose straight from the bottom of its base. Last month’s break was constructive.
Market rally analysis
Large-cap tech led Thursday’s stock market rally, but it was a wide lead. The Nasdaq fell just below Tuesday’s nine-month high and closed at its best level since mid-August. The S&P 500 has set a new high in 2023.
The Dow Jones tested its 200-day line but bounced higher. It is still below its 50-day line. The Russell 2000 has recovered its 50 days but needs to return to its 200 day average.
Market breadth was strongly positive on Thursday, with winners outpacing losers by more than 2 to 1. However, new lows have largely exceeded new highs.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 0.7%, lagging the Nasdaq 100’s 1.2% gain but matching a 52-week closing high.
The equal-weight Invesco S&P 500 ETF (RSP) rose 0.75%, but is still below major moving averages. The RSP, along with the Russell 2000, reflects Thursday’s broad advance, but also weak longer-term momentum.
A few stocks broke, but aside from Tesla, they were extended from moving averages. There were a few add-on buys or swing trades such as Celsius (CELH), but you had to be quick.
Many of the AI, chip and software names dominating the market could use a rest. Some are significantly extended, while others ran straight from the bottom of the bases, but could use tight action around buy points.
Hopefully, other sectors can join and expand their market leadership, such as biotechnology, medical products, travel and home builders. For this to happen, the market rally must see a steady pattern of broad advances.
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What to do now
Thursday’s market action was positive, but it was only one day. Leadership remains narrow and weak.
There weren’t many buying opportunities on Thursday. Some stocks need to rest, while others need to push higher. Allow these configurations to develop. Don’t try to work your way up to higher exposure by buying extended stocks or others that aren’t in position yet.
Instead, you should follow these leaders and potential leaders. Keep your watchlists fresh, focusing on stocks that are close to being exploitable and have high potential.
Market exposure should remain modest. If a broad market rally sets in, there will be plenty of opportunities to gradually add to your portfolio. On the other hand, be prepared to move if individual holdings or the broader market weakens.
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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