Dow Jones futures edged higher, along with S&P 500 and Nasdaq futures, as Treasury yields fell ahead of February’s ISM services index. Broadcom (AVGO) and hot AI play C3.ai headlining overnight earnings.
The stock market rally returned Thursday from its opening low even as the 10-year Treasury yield decisively rose above 4%. A generally weak open turned into a solidly positive day as a Fed official backed a quarter-point move.
Salesforce.com (CRM) lifted the Dow Jones. You’re here (TSLA) fell, weighing on the S&P 500 and the Nasdaq.
A few stocks, including Salesforce, issued buy signals. But the uptrend of the market is still under pressure with key tests ahead.
Broadcom (AVGO) and artificial intelligence games C3.ai (IA) and Veritone (VERI) reported Thursday evening.
More details about Tesla’s Mexican plant emerged overnight.
The video embedded in this article reviewed Thursday’s market action and analyzed CRM stock, Aehr test systems (AEHR) and Dexcom (DXCM).
Dow Jones Futures Today
Dow Jones futures were up 0.2% from fair value. S&P 500 futures climbed 0.3% and Nasdaq 100 futures rose 0.2%.
Bitcoin fell overnight after holding up relatively well on Thursday as more crypto-related companies fell.
The 10-year Treasury yield fell 6 basis points to 4.02%, after briefly falling to 4%.
The ISM will release its February non-manufacturing index at 10 a.m. ET. The strong ISM January services index from Feb. 3, along with the jobs report, helped spark the market’s recovery from the highs.
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.
AVGO stock soared nearly 2% in extended trade after Broadcom’s earnings beat views, with second-quarter revenue expectations also slightly higher. Broadcom stock edged up 0.9% to 598.65 in Thursday’s regular session, rebounding from the 21-day line after bouncing off the 50-day/10-week lines recently. AVGO stock has a buy point of 617.11 on a long consolidation. But the chip and software maker is just at an early entry.
AI stock jumped 16% in premarket trading, signaling a possible buy signal as C3.ai’s earnings results topped views and the company trended higher. AI stock rose 2.8% to 21.31 on Thursday after skidding below its 21-day line on Wednesday. A powerful rebound on Friday could offer an aggressive entry for AI stocks after breaking a trendline from its peak in early February.
VERI stock rose 7% overnight. Veritone revenue and revenue were missed, but new bookings soared 141%. Shares fell 1.2% to 6.36 on Thursday. Veritone stock bottomed out in late January and rose for a few days before falling back. VERI’s stock is now below the 50 and 200 day lines.
Wholesale Costco (COST), Nordström (JWN) and Z-scale (ZS) also reported. COST stock fell 2% and Nordstrom was little changed on mixed results. ZS stock plunged as billings failed to impress. All three closed below their 200-day lines.
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Stock market rally
The Dow Jones Industrial Average rose 1.05% in trading Thursday. The S&P 500 Index rose 0.8%, with Salesforce and DXCM stocks the best performers and Tesla the worst on the day. The Nasdaq composite advanced 0.7%. The small-cap Russell 2000 rose 0.2%.
U.S. crude oil prices rose 0.6% to $78.16 a barrel, up for a third straight session. Gasoline futures are up nearly 1%, up 14.5% so far this week.
The 10-year Treasury yield jumped 8 basis points to 4.07%, closing above the 4% level for the first time since Nov. 9. Blame weaker-than-expected U.S. jobless claims and higher-than-expected eurozone inflation. The 10-year yield is not far off October’s 15-year high of 4.33%.
Atlanta Fed President Rafael Bostic said he was “strongly” in favor of a quarter-point hike at the March meeting, after several policymakers signaled support or openness to it. a half-point movement. Bostic is however a non-voting member in 2023.
Markets are firmly expecting at least three more quarter-point rate hikes from the Fed, but with a decent chance of a 50 basis point move in March or May. And some are now slightly in favor of a fourth quarter-point hike at the July meeting. That would bring the fed funds range to 5.5%-5.75% from 4.5%-4.75% today.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) edged up 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) jumped 2.4%. CRM stock is a major holding company of IGV. ETF VanEck Vectors Semiconductor (SMH) closed up 0.9% after falling Thursday morning.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) rose 1.2% and ARK Genomics ETF (ARKG) edged up 0.4%. Tesla stock is a major holding in Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) climbed 0.4% and the Global X US Infrastructure Development ETF (PAVE) rose 1.2%. The US Global Jets ETF (JETS) climbed 0.45%. The SPDR S&P Homebuilders ETF (XHB) rose 0.7%. The Energy Select SPDR ETF (XLE) rose 0.9% and the Financial Select SPDR ETF (XLF) fell 0.5%. The SPDR health care sector fund (XLV) gained 0.6%. The DXCM stock is part of the XLV ETF.
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Tesla stock fell 5.85% to 190.90, breaking below the 21-day line for the first time since Jan. 19. From a technical standpoint, TSLA stock might just offer a breakup. This could let the 50-day line catch up as the 200-day line drifts towards the February 16 high at 217.65. A decisive move above these levels would offer an aggressive entry.
But Tesla doubled from its Jan. 6 low at 101.81 on three factors: Tesla Investor Day buzz, renewed demand for price cuts and the general market rebound, led by stocks. popular growth.
But Wednesday’s Tesla Investor Day was largely a non-event, with no new electric vehicle designs on show, let alone any hint that a low-cost model might go into production.
(Tesla on Wednesday night confirmed plans to build an electric vehicle factory in northeastern Mexico. Construction is expected to begin in three months, a Mexican official said Thursday night, adding that the site will be twice the size of the Austin plant.)
Tesla orders initially jumped on January’s global price cuts, as well as U.S. tax credits. But demand seems to be falling again, at least outside of Model Y in the US, with backlogs shrinking and more discounts appearing.
In fact, Tesla has just started offering new discounts in many European countries, on many Model 3 and Y inventory vehicles. This follows the outright Model 3 price cuts in Denmark a few days ago. .
Finally, the growth-driven market recovery has cooled in recent weeks.
Market rally analysis
The stock market rally appeared to be in trouble at Thursday’s open, as the S&P 500 breached its 200-day line. The Nasdaq composite, which fell below its 200-day line on Wednesday, was heading towards its 50-day line. Even the Russell 2000 has tested its 10 week line.
But even with the surge in Treasury yields, major indexes quickly improved, then turned broadly positive in the afternoon. This is despite soaring Treasury yields and megacap TSLA stocks having a bad day.
The S&P 500 recovered its 50-day line while the Nasdaq returned above its 200-day line. The Dow, supported by the 11.5% gain in CRM stock earnings, led the advance, but is still near 2023 lows. The Russell 2000 closed slightly below its moving average on 21 days, where it reached resistance for several days.
The Russell, Nasdaq and S&P 500 need to decisively recover their 21-day lines to offer reasonable evidence that the market recovery is gaining momentum. The February 2 highs would be the next big test above that.
Major stocks, which looked better than indexes over the past month, also showed strength on Thursday. In addition to stock CRM, Okta (OKTA) discounted from a profit basis. DXCM stock flirted with buy signals. FirstSource Builders (BLDR) pulled off a long consolidation. Many others have extended their travels from buying areas or taken up positions.
But, if the indices collapse further, the leaders will also collapse. It’s hard to see the major indices holding up if Treasury yields continue to climb. Friday’s ISM Services Index and the market’s reaction to that report will be important.
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What to do now
The stock market rally got a well-deserved victory on Thursday. Several leading stocks issued buy signals as major indices gained momentum.
But the uptrend of the market is still under pressure. The S&P 500 and Nasdaq are just one bad day away from breaking below key levels.
Investors should be careful when adding exposure. If the S&P 500 and Nasdaq cross their 21-day lines, you could gradually rebuild your portfolio.
Right now, you want to quickly reassess your watchlists.
With the market in such a tight trading zone, a decisive move up or down could happen soon. So be flexible and stay alert.
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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