Dow Jones futures rose early on Friday, while S&P 500 futures rose modestly and Nasdaq futures rose steadily. Netflix (NFLX) jumped with strong subscriber growth, with an energy giant SLB (SLB) on the tap. Google Parent Alphabet (GOOGLE) will cut 12,000 jobs as major cuts in the tech sector continue.
The stock market rally eased again on Thursday for a second day in a row, with the major indices testing or breaking additional key levels. Dow Jones turned negative for 2023.
New economic reports pointed to weaker economic activity, with one big exception: Initial jobless claims hit their lowest level since last April. The big picture points to rising recession risks, but tight labor markets keep the Federal Reserve hawkish.
Leading stocks are retreating to varying degrees. Investors should wait to see if this pullback is temporary or something more serious.
Dow Jones futures today
Dow Jones futures rose slightly to fair value. S&P 500 futures rose 0.3%. Nasdaq 100 futures rose 0.7%. Shares of NFLX and Google provide a boost to Nasdaq futures.
The 10-year Treasury yield rose 3 basis points to 3.43%.
Strong growth in Netflix subscribers
Netflix’s profits have dropped quite a bit views in Q4, while revenue growth of 2% was in line. But Netflix subscribers swelled to 7.66 million, far more than the 4.57 million expected. The streaming giant launched a lower-priced, ad-supported subscription option on November 3. Netflix no longer provides guidelines for subscribers.
Meanwhile, co-founder Reid Hastings stepped down as co-CEO to become executive chairman. Ted Sarandos will remain co-CEO, joined by Greg Peters, currently COO.
Shares of NFLX jumped in premarket trading. Shares fell 3.2 percent to 315.78 in Thursday’s regular session.
Netflix’s subscriber growth is a positive sign for many other streaming games, including Walt Disney (DIS), Paramount Global (FOR), Warner Bros Discovery (WBD) and year (A YEAR). But shares of DIS, Roku and others had weak gains in extended action.
Google is cutting jobs
Google Parent Alphabet to cut 12,000 jobs, or 6% of the staff. This is stated in an official memo. This follows Microsoft’s plans to cut 10,000 jobs, or 4.5% of its workforce, earlier this week, with Amazon.com (AMZN), Salesforce.com (CRM) and many other tech giants are downsizing.
Late Thursday, Google said it would delay 20 percent of bonus payments until at least March.
Shares of GOOGL rose steadily in premarket trading.
Shares of Google rose 2.1% to 93.05 on Thursday, moving above the 50-day line for the first time since early December. The 50-day line has been an area of resistance for the Internet giant since late 2021. Still, GOOGL shares remain far from its 200-day line.
Eli Lilly is rejected by the FDA for Alzheimer’s
The FDA rejected Eli Lilly’s accelerated approval submission for its Alzheimer’s treatment donanemab, seeking more data. Eli Lilly (LLY) fell modestly overnight. Biogen (BIB), which recently posted positive results for a similar Alzheimer’s drug, rose slightly ahead of opeb.
SLB top earners
SLB’s earnings and revenue modestly beat quarterly views. SLB, formerly known as Schlumberger, said in the release that “we believe the macro fund and market fundamentals underlying a strong multi-year energy upcycle remain very compelling.” Oil&Gas-Field Services is rated #1 out of IBD’s 197 industry groups.
Shares of SLB were up 2% early Thursday. Shares rose 0.4% to 57.38 on Thursday after falling to the top of a recent base. But SLB is slightly extended from 53.97 handle buy point.
Stock market rallies
The stock market rally extended Wednesday’s losses into Thursday morning, recovering somewhat in the afternoon but fading again toward the end.
The Dow Jones Industrial Average fell 0.8%. in Thursday Exchange Trading, along with the S&P 500. The Nasdaq composite sank nearly 1%. The small-cap Russell 2000 was down 1%.
Solar stocks were big losers amid growing concerns about the residential solar market.
U.S. crude oil prices rose 1.1% to $80.33 a barrel, continuing to trade just around the $80 level. Gasoline futures rose 2.9% to a two-month high at the close.
The 10-year Treasury yield rose 3 basis points to 3.4%.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) tumbled nearly 2%, while the Innovator IBD Breakout Opportunities ETF (BOOTH) sank by 1.2%. iShares Expanded Tech-Software Sector ETF (IGV) gave up 0.8%. VanEck Vectors Semiconductor ETF (SMH) lost 2.45%.
SPDR S&P Metals & Mining ETF (XME) fell 0.2%, along with the US Global Jets ETF (STREAMS). SPDR S&P Homebuilders ETF (XHB) sold out by 3%. Energy Select SPDR ETF (XLE) advanced 1.2%, with XOM shares number 1 and SLB also a major component. The Financial Select SPDR ETF (45) fell by 1.2%. Select Healthcare Sector SPDR Fund (XLV) rose by 0.2%.
Stocks to watch
MELI shares rose 0.4% to 1,072.74, ending this week after a big run in early 2023. The Latin American e-commerce and payments giant is just below 1,095.44 point of purchase, but really needs help to allow the underlying averages to catch up. The MercadoLibre stock holds up very well, but use a little depth on each handle to shake out the weak holders.
MEDP shares fell 1.5% to 228.84, near an official buy point of 235, according to MarketSmith analysis. Shares jumped above the 50-day line on January 10, suggesting an early entry. Medpace stock can now use a handle.
Shares of XOM tested its 50-day line but closed up 0.6% at 111.32. Shares are not far from a buy point of 114.76 from a flat base.
Shares of VRTX fell 0.6% to 307.94, still holding above its 50-day line. Shares jumped above the 50-day line on Tuesday, suggesting an early entry at the time. Investors should wait to see if the biotech can surpass Tuesday’s high of 312.35. The official flat base buy point is 324.85.
AXON shares rose 1% to 184.06, continuing to work on the handle of cup base this would lower the buy point slightly from the current 193.95. Axon, which makes Tasers, body cameras and digital storage for law enforcement, granted an early entry on Jan. 9 after moving above the 50-day line.
Market Rally Analysis
After Wednesday’s sharp reversal down, the stock market rally showed further weakness. While the major indexes recovered from their late-morning lows, they faded toward the close.
The S&P 500 index, after falling back below its 200-day line in the previous session, broke below its 50-day mark on Thursday. The Nasdaq also broke below its 50-day line but rebounded from its 21-day line. The Russell 2000, which nearly hit its late 2022 highs on Wednesday morning, tested its 200 days on Thursday but closed above that line.
The Dow Jones posted its third consecutive significant decline, testing its lows since January 6 following day. A close below the FTD low would be a bearish sign for a market rally, although the S&P 500 and Nasdaq are so far well above their January 6 lows.
Indexes closing bottoms offer hope that the current pullback is just a healthy pause that allows leading stocks to forge handles and other new buying opportunities. But this could be more serious. A break below Thursday’s lows would be worrisome.
Some leading stocks, such as those of Axon, MercadoLibre, and MEDP, are holding up quite well. But others suffer greater losses. Deere (ON), which emerged early on Tuesday morning, bottomed out of its flat base on Thursday.
What should we do now
As the market’s rally fades, many leading stocks pare recent gains or even fall below records.
Investors should refrain from new purchases for now. If anything, they want to reduce modest exposure, if only because of the action on individual farms.
Despite some recent losses, a large number of stocks are being created. A good day or two could significantly improve the technical picture of the market rally and offer many new buying opportunities. So get your watch lists ready.
But just because a stock is moving doesn’t mean it’s going to break out or give a buy signal, or that any such move will work.
Earnings season looks like it will come to an end with individual stocks and the overall uptrend in no time. Tread carefully.
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