Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. Amazon.com[ticker symb=AMZN] earnings to the fore, but the internet giant reversed its downward trend Thursday night on concerns over cloud computing.
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The stock market rally advanced strongly on Thursday. Metaplatforms (META) exploded, with Microsoft (MSFT) action, Apple (AAPL), parent of Google Alphabet Also (GOOGL) and AMZN are all solid.
There have been strong gains outside of these tech megacaps. However, the size of the market remains a concern. In the meantime, Mobileye (MBLY) e crocodiles (CROX) collapsed on weak guidance.
amazon, Cloudflare (NET), Skechers (SKX), Prime Solar (FSLR), Dexcom (DXCM) and Hurried (SNAP) were notable earnings reports Thursday night.
Amazon shares traded sharply lower late after initially posting higher results. But NET shares plummeted on mixed results and indications. SNAP also dived on weak revenue and guidance. FSLR and Dexcom stock fell. SKX shares are up.
ExxonMobile (XOM) and the giant Dow Jones Chevrons (CVX) are due Friday morning.
META shares are in the IBD ranking, with DXCM shares and earning options. MSFT shares are on IBD long-term leaders.
Dow Jones Futures today
Dow Jones futures have lost a fraction of their fair value. S&P 500 futures were roughly flat. Nasdaq 100 futures fell 0.1%. AMZN stock is an S&P 500 and Nasdaq giant.
The Commerce Department will release the PCE Price Index for March at 8:30 AM ET. PCE and core PCE are the Fed’s preferred inflation indicators, but Thursday’s Q1 GDP report provided some strong signals about what’s to come.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session of the stock market.
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Amazon Earnings
Amazon’s earnings easily topped Q1 views with revenue on top. The e-commerce and cloud computing giant led in line for second-quarter revenue but slightly lower on operating profit. On Amazon’s earnings call, management said Amazon Web Services’ cloud unit is experiencing slower growth in April than it did in the first quarter.
AMZN stock, which initially rose more than 10% after hours, fell 2% on cloud commentary.
The shares shot up 4.6% to 109.82 in Thursday’s regular session, recovering the 200-day line and clearing last week’s high. Were it not for the earnings report, investors might have used it as an early entry for Amazon stock on a basis that dates back to February 2.
Other key gains
Cloudflare’s earnings went up, but revenue just went down. The cloud and security software company led second-quarter and full-year EPS higher but posted a decline in revenue. NET stock fell 25% in the extended action. Shares rose 0.1% to 59.58 on Thursday, closing near the session lows and below the 50-day line. Cloudflare stock had a base buy point of 66.30 cups with a handle.
Skechers earnings topped views, but the forecast for the second quarter was dim. SKX surged to the upside in overnight action. Shares fell 0.3% to 49.87 on Thursday but after plunging to 47 early on the open in sympathy with CROX shares. This briefly reduced a 47.80 handle buy point.
First Solar’s earnings and revenue fell well short of expectations, but the company gave optimistic guidance. FSLR stock fell 8% during the overnight action, signaling a decline below the 50-day line. Shares rose 0.7% to 208.83 on Thursday. Top Solar stock fell 5.2% Wednesday on weak guidance by Energy in phase (ENPH). Investors could use a strong bounce off the 50-day line as a buying opportunity or view the recent consolidation as a near-flat base with an entry around 219-221.
Dexcom’s earnings slightly outpaced views with its full-year revenue forecast online. DXCM shares are down 3% in recent trading. The maker of continuous glucose monitors fell 1.1% to 123.58 on Thursday. Intraday, Dexcom shares briefly edged past a 125.65 buy point.
SNAP stock plummeted overnight. Snapchat’s parent earned 1 cent a share in the first quarter versus an expected loss of 1 cent. But revenue, users, and revenue per user came to light. Snap also reduced its second quarter revenue. SNAP stock rallied 6.3% on Thursday in accordance with Meta Platforms, but closed just below its 50-day and 200-day lines.
In addition to these names, intel (INTC) popped up overnight on earnings while Sciences of Gilead (GILD) e Amgen (AMGN) were little changed. alterix (AYX) e Pinterest (PIN) sold.
XOM stock rose 1.2% to 116.87 on Thursday, slightly below a buy point of 117.28 cups with a handle, according to MarketSmith analysis.
CVX stock rose 0.6% to 166.95 on Thursday, finding support at the 200-day line. Chevron stock has a consolidation buy point of 189.78, but looks much weaker than Exxon right now.
Stock market rebound
The stock market rally opened higher and gained momentum during the day.
The Dow Jones Industrial Average rebounded 1.6% in the stock market on Thursday. The S&P 500 index jumped nearly 2%. The Nasdaq composite jumped 2.4%. The small-cap Russell 2000 advanced 1.3%.
U.S. crude prices rose 0.6% to $74.76 a barrel.
The yield on the 10-year Treasury rose 10 basis points to 3.53%. The 2-year yield rose 17 basis points to 4.1%. With Thursday’s economic data showing weaker growth, stronger inflation and tighter-than-expected job markets, the odds of another Fed rate hike next Wednesday are back virtually deadlocked.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) slipped 0.9%, hit by some big earnings losses like MBLY stock and Crocs. The Innovator IBD Breakout Opportunities (BOUT) ETF was up 0.4%. The iShares Expanded Tech-Software Sector (IGV) ETF gained 1.6%, supported by MSFT stock. The VanEck Vector Semiconductor (SMH) ETF advanced 1%, led by chip equipment giants, while some early 2023 chip winners tumbled.
Reflecting shares in more speculative stories, ARK Innovation ETF (ARKK) rebounded 1.4% and ARK Genomics ETF (ARKG) was up 0.5%.
SPDR S&P Metals & Mining ETF (XME) rebounded 1.85% and Global X US Infrastructure Development ETF (PAVE) advanced 2.4%. The US Global Jets ETF (JETS) was up 0.5%. SPDR S&P Homebuilders ETF (XHB) was up 3.4%. The Energy Select SPDR ETF (XLE) was up 0.4%. XOM and Chevron stock are massive holdings in XLE. The Health Care Select Sector SPDR Fund (XLV) was up 0.5%. DXCM stock is in XLV.
The SPDR Financial Select ETF (XLF) gained 1.6%. The SPDR S&P Regional Banking (KRE) ETF rebounded 1.9%.
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Analysis of market rallies
The equity market rally continues to depend heavily on megacap technologies.
Meta stock rose 14% to a 52-week high on earnings. Microsoft rose 3.2%, adding to Wednesday’s 7.2% gain. GOOGL stock soared 3.7%, returning to a buy zone. Apple shares gained 2.8% and Amazon turned key levels into gains.
However, unlike Wednesday, all major indexes were up on Thursday.
The Nasdaq Composite recovered above the 12,000 level and reclaimed the 21-day moving average, one day after rebounding from the 50-day line. The S&P 500 and Dow Jones also returned above their 21-day lines.
More importantly, market gains have been robust outside of megacaps.
The First Trust Nasdaq-100 Equal Weighted Index ETF (QQEW) started slow but eventually climbed 1.65%, trading back above its 50-day line. The Invesco S&P 500 Equal Weight (RSP) ETF gained 1.6% as it cleared its 200-day mark, with the 50-day line just above. But both of these ETFs are still down 1% or more for the week.
The winners clearly outnumbered the losers on Thursday, but market breadth remains a concern. New lows easily beat new highs, especially on the Nasdaq.
Some leading stocks showed buy signals on Thursday, but many extended or moved back into position. More broadly, market leadership is small and moves quickly.
Major indexes have yet to clear April highs and clear 2023 highs. Taking the RSP above the 50-day line would also signal broader participation beyond Meta, Microsoft and other tech megacaps. More buying opportunities would also be a positive sign.
For now, the equity market rally remains an uptrend under pressure.
Watch out for earnings season
Net stock and Snap look like the last big losers on earnings.
Several leading stocks suffered massive earnings sell-offs on Thursday. Impinj (PI) plunged 39% while Mobileye and CROX shares plunged 19% and 16%, respectively, after everyone closed around buy points. Even with a decent buffer, say a 10% gain going to earnings, investors have suffered painful losses.
The string of massive earnings moves in recent days should remind investors to be aware of upcoming report dates for their positions and to set rules to hold or sell ahead of results.
Time The Market with IBD’s ETF Market Strategy
what to do now
The market rally had a solid session, although not as strong as the big cap indices would suggest. There weren’t many stocks showing buy signals on Thursday, although many did find key intraday support. Many startup stocks still have gains in the next couple of weeks.
If the market rally continues to pick up, buying opportunities will increase. Investors should have their watchlists ready with potential leaders in various industries. But also be prepared to exit if the broader market deteriorates.
Read The Big Picture daily to stay abreast of market direction and major stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarsonfor stock market updates and more.
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