Dow Jones futures were little changed after hours, along with S&P 500 and Nasdaq futures.
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The stock market rally was decidedly mixed on Thursday. The Dow Jones rose for a ninth consecutive session while the Nasdaq suffered its worst loss in more than four months. You’re here (TSLA) and netflix (NFLX) suffered steep declines. Taiwan semiconductor (TSM) was perhaps the biggest loser as its guidance weighed on the broader chip industry.
Still, the Nasdaq chart looks solid. A modest setback would probably be constructive. Tesla stock may enjoy a well-deserved break as TSM stock retests key support. NFLX stock saw an ugly drop of 8.4%, but was not down much for the week. Many top-tier stocks have fallen, particularly in the areas of chips and software, but generally appear to be pulling back well.
The biggest concern is for investors who have been buying stocks over the past few days and are now seeing their gains wiped out and turning into losses.
On the rise, Novo Nordisk (NVO) sent a buy signal as the drug giants performed well this week.
The TSLA stock is on the IBD ranking. Novo Nordisk was the IBD stock of the day on Thursday.
The video embedded in this article reviews Thursday’s shared market action and reviews NVO, Taiwan Semiconductor and CrowdStrike (CRWD).
Earnings
After closing, Intuitive surgery (ISRG), CSX (CSX) and Capital One Financial (COF) reported.
ISRG shares fell sharply after Intuitive Surgical reported strong earnings, but there were not enough da Vinci robotic surgery systems installed. ISRG stock fell 0.6% to 347.66 on Thursday. It is approaching the records set at the end of 2021.
CSX stock fell sharply after CSX’s earnings and revenue fell short. The rail operator fell 0.3% to 33.71 on Thursday, continuing a rebound from the 10-week line this week. Investors might view 34.38 as a handle buy point on a basis dating back almost 11 months.
COF stock edged higher in overnight trade after EPS topped views while earnings were lower. The shares fell 2.5% to 114.99, holding just above a buy point of 114.91 cup with handle.
Dow Jones Giant American Express (AXP) and oil services giant SLB (SLB) report early Friday.
AXP stock fell 1 cent to 177.11 on Thursday, struggling on the day to hold just above a handle buy point of 177.04 cup, according to MarketSmith analysis. SLB stock reversed slightly to plunge 0.2% to 57.26. Formerly known as Schlumberger, SLB has a buy point of 59.45 but is extended from the 200-day line. He offered early entry with a decisive break from the 200-day line on July 7.
Dow Jones Futures Today
Dow Jones futures rose slightly from fair value. S&P 500 futures rose a fraction and Nasdaq 100 futures were flat.
Remember that overnight action on futures contracts on Dow 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 was mixed on Thursday, with earnings creating a gap between major indexes.
The Dow Jones Industrial Average rose 0.5% in Thursday trading, buoyed by earnings-related gains from Johnson & Johnson (JNJ), Travelers (TRV) and IBM (IBM). The S&P 500 index fell 0.7%. The Nasdaq composite fell 2.05%. The small cap Russell 2000 was down 0.9%.
The Dow Jones is at its highest for 15 months. The S&P 500 and the Nasdaq have just plunged from their own 15-month highs. The Nasdaq suffered its worst loss since March 9, but it hasn’t quite reached its 10-day mark yet. The Russell 2000 has retreated from 2023 highs but is up sharply for the week.
The Invesco S&P 500 Equal Weight (RSP) ETF plunged just 0.1%.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) lost 1.15%. But the Nasdaq 100 fell 2.3%, dragged down by Tesla, Netflix and a number of very big chip and software names.
Many leading stocks struggled, with a number of them wiping out recent buying opportunities. But most found support.
US crude oil prices edged up 0.4% to $75.63 a barrel, closing intraday highs nicely.
The 10-year Treasury yield jumped 11 basis points to 3.85%, adding to headwinds for growth stocks.
But while earnings and Treasury yields may have been the catalyst for Thursday’s fall in growth stocks, the odds of a pullback had been high with the Nasdaq extended the 50-day line.
Thursday could be a one-time event or the start of some sort of pullback over days and weeks. Earnings season is expected to rock stocks, sectors and the broader market over the next two weeks.
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AND F
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 2.7%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 2.4%%, ending an eight-game winning streak. ETF VanEck Vectors Semiconductor (SMH) fell 3.5%, giving up very recent gains to close just below the 21-day line. TSM stock is a major component of SMH.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) fell 5.7% and ARK Genomics ETF (ARKG) fell 4.2%. Tesla stock is the No. 1 stock among Ark Invest ETFs.
The SPDR S&P Metals & Mining ETF (XME) fell 0.7%. The US Global Jets ETF (JETS) lost 1%. SPDR S&P Homebuilders ETF (XHB) resigned 2%. The Energy Select SPDR ETF (XLE) gained 1.2% and the Health Care Select Sector SPDR Fund (XLV) gained 1.7%.
The Industrial Select Sector SPDR (XLI) fund gained 0.45%, a new all-time high.
The Financial Select SPDR ETF (XLF) climbed 0.7%. The SPDR S&P Regional Banking (KRE) ETF fell 0.4%, but is still up sharply for the week.
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TSM action
Taiwan Semiconductor topped quarterly views, but margins contracted. Meanwhile, TSMC guided current-quarter sales low and signaled capital spending would be at the low end of its range.
TSM fell just over 5% to 97.86, undercutting the 50-day line, its shallow base trough and an earlier buy point. Maybe Taiwan Semi will now find support here and get back on track in a few days or weeks. But for investors who bought a trendline entry on July 13, modest gains turned into losses of 5% or more.
The chip foundry giant makes semiconductors for the likes of Apple (AAPL) and Nvidia (NVDA), so it is considered an industry indicator.
Meanwhile, many chip stocks have had a tough exit. Monolithic power systems (MPWR), Advanced micro-systems (AMD), Rambus (RMBS) and many others are among them. ASML (ASML), which fell more than 5% on Wednesday after its earnings, fell 5.5% on Thursday, dropping below its 50-day line and the low of its current base.
Tesla Stock
TSLA fell 0.7% to 262.90, below the 21-day line but only giving up its July gains. Late Wednesday, Tesla’s earnings and revenue topped views, but shares fell on lingering margin issues. Operating profit fell 2.6% from a year earlier despite a 47% jump in revenue.
From a technical standpoint, a slightly larger pullback and a break of a few weeks could create a much-needed grip on Tesla’s deep cup base.
Tesla stock fell slightly overnight.
What to do now
If you’ve bought stocks recently, you may have some decisions to make. If you purchased MPWR shares, Cloudy (NET), parent company of Google Alphabet (GOOGL), CRWD stocks or other similar names over the past few days you are almost certainly down, possibly triggering the 7%-8% sell rule. Along with future profits, investors may need to withdraw new positions or buy add-ons.
But for positions held longer with larger cushions, Thursday’s action wasn’t too troubling in most cases, even Netflix and Tesla stocks. But you should review your portfolio and think about the stocks you could want to take partial profits on.
What’s your game plan if the Nasdaq falls to the 21-day or even the 50-day line?
The strength of drugmakers such as NVO stocks, as well as travel, oil industries and services, highlights the benefit of having a diversity of leadership.
Should the market rally mark another modest pullback, a host of new buying opportunities should develop, including some of Thursday’s losers.
So keep working on your watchlists, spotting these emerging patterns.
As Thursday’s action showed, earnings season has arrived and it will be more intense next week.
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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