Dow Jones futures rose modestly early Friday morning, along with S&P 500 futures and Nasdaq futures. The stock market rally made strong gains Thursday, continuing rebounds from Wednesday’s lows. But volume was light.
Applied Materials (AMAT) headlined earnings reports late Thursday, with potentially big implications for fellow chip-equipment makers, the broader semiconductor sector and even the Nasdaq itself. Many chip stocks, including ASML (ASML), Lam Research (LRCX), Brooks Automation (BRKS), Nvidia (NVDA) as well as AMAT stock flashed some bullish signals during the regular session.
Tech titans Facebook (FB) and Google parent Alphabet (GOOGL) remain among the more-attractive tech stocks. Apple (AAPL) and Microsoft (MSFT) also had nice gains Thursday, bolstering the major indexes, but haven’t shown as much leadership. The same goes for Tesla (TSLA), which remains below moving averages.
While tech stocks thrived, mining, metals, financials largely sat out Thursday’s rally after tumbling Wednesday.
Applied Materials Earnings
Applied Materials earnings topped forecasts after the close, while also providing upside guidance. AMAT stock rose 1% before Friday’s open. Shares rallied 4.4% to 130.31 on Thursday, retaking its 50-day line after Wednesday’s upside reversal. AMAT stock closed essentially right on its downward-sloping trend line. A solid post-earnings gain Friday could offer a buying opportunity.
ASML stock climbed 2.85% to 648.77 after reversing from below its 50-day line on Wednesday. ASML stock broke a short trend line.
Lam Research stock popped 4.1% to 626.72 on Thursday rebounding from its 50-day line — and a prior buy point. LRCX stock also cleared a trend line.
BRKS stock gained 2.65% on Thursday to 96.19, breaking a very steep downtrend after Wednesday’s upside reversal to reclaim its 50-day line. Brooks Automation plans to split into two companies, spinning off its life sciences unit that’s nearly half of revenue.
Nvidia stock jumped 3.9% to 584.50 on Thursday, reclaiming its 50-day line and breaking a trend line. On Wednesday, NVDA stock rebounded from its 200-day line. Unlike AMAT stock or ASML, Nvidia has been moving sideways for several months, so its relative strength line is lackluster.
Chip stocks have flirted with market leadership over the past couple of months. But every time they seem poised to take off they fall back down.
Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures advanced 0.2% and Nasdaq 100 futures climbed 0.2%.
Coronavirus cases worldwide reached 165.91 million. Covid-19 deaths topped 3.44 million.
Coronavirus cases in the U.S. have hit 33.83 million, with deaths above 602,000.
Stock Market Rally Thursday
The stock market rally had a solid advance Thursday, finishing near session highs despite backing off intraday peaks slightly in the final minutes.
The Dow Jones Industrial Average climbed 0.55% in Thursday’s stock market trading. The S&P 500 index gained 1.1%. The Nasdaq composite jumped 1.8%. The Russell 2000 advanced 0.6%.
Facebook stock and Google stock both climbed 1.6%. Both are now extended from prior breakouts, but rebounded bullishly from their 10-week lines on Wednesday and are still within range. Both broke short downtrends as well Thursday. The relative strength line for Google stock is just below record highs. according to MarketSmith analysis. FB stock is off record levels but has been trending higher for months.
Meanwhile, Apple stock climbed 2.1% to 127.31 finishing just below its 50-day. Microsoft stock rose 1.4% to 246.48, back above the 50-day line and reclaiming a 246.23 buy point that’s technically still valid. Arguably both are breaking or at least touching trend lines. But both AAPL stock and Microsoft rose in volume that was well below average. Also, their RS lines are still near recent lows, unlike Google and Facebook stock.
Tesla stock climbed 4.1% to 586.78, though its still just below its 200-day moving average. In fact, TSLA stock is below its 10-day, 21-day and 50-day lines as well. The last time it closed above its 10-day line was on April 21. Meanwhile, the RS line for Tesla stock is at six-month lows.
However, Tesla stock rose more than 2% to 600 before Friday’s open. The EV maker raised Model 3 and Model Y prices yet again, with the base Model 3 going up $500 to $39,900. That’s up from about $37,000 in February. The base Model Y is now $51,990, up from $51,490 and vs. just under $50,000 a few months ago. That could reflect strong demand or production constraints.
Growth, Sector ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) was flat. The iShares Expanded Tech-Software Sector ETF (IGV) popped 2.4%. MSFT stock is the top IGV component. The VanEck Vectors Semiconductor ETF (SMH) ran up 2.5%. Nvidia stock and ASML are major SMH holdings, along with LRCX and AMAT stock.
SPDR S&P Metals & Mining ETF (XME) dipped 0.4%, paring intraday losses after skidding 3.1% on Wednesday. Global X U.S. Infrastructure Development ETF (PAVE) was flat. U.S. Global Jets ETF (JETS) slipped 0.9%. SPDR S&P Homebuilders ETF (XHB) climbed 0.6%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rallied 3.5% and ARK Genomics ETF (ARKG) 3%. Both are still below their 200-day moving averages. Tesla stock is the top holding across ARK Invest’s ETFs.
Market Rally Analysis
The Nasdaq composite led the stock market rally on Thursday, though it closed just short of its 50-day line. The big-cap Nasdaq 100, which includes Apple, Microsoft, Google, Facebook, Tesla and chip giants such as Nvidia, popped above its 50-day line.
The Dow Jones and S&P 500 reclaimed their 21-day lines after testing their 50-day lines on Thursday.
The Russell 2000, with its financial and energy components, was the laggard. Most of Thursday’s modest gains came in the final hour as the major indexes surged to the close.
The stock market rally is still “under pressure.”
Thursday’s price action was positive, but volume was down from Wednesday. Given that the S&P 500 and Nasdaq have suffered a number of distribution days — declines in higher volume than the prior session — some institutional support to the upside is lacking.
Is this the start of new run or yet another head fake? A choppy stock market rally is dangerous because it lures investors in just at the moment the indexes turn lower again. The ongoing sector rotations add to the difficulty. (On that note, is the run in commodity stocks and commodity prices over or is the recent pullback temporary?)
The Nasdaq reclaiming the 50-day line — and not just inching past — would be a big step toward returning to a healthy stock market rally. The Russell 2000 move back above its 50-day also would be a good sign. For the Dow Jones and S&P 500, all-time highs are their only hurdle.
What To Do Now
Eventually the stock market will break out of its choppy action, though not necessarily to the upside. So pay close attention. You can make some small buys, pilot positions to dip your toes into mini-uptrend in case the market rally does take off. But have your exit strategies in place.
This isn’t the time to rapidly ramp up exposure into the market or especially one sector. Let the market rally draw you in over time. There’s nothing wrong with standing pat with your current holdings. Just make sure to stay engaged and pay close attention to the market action via the major indexes and leading stocks.
Keep updating your watchlists, focusing on stocks with high relative strength. Make sure to follow promising stocks from a variety of sectors. This will help your spot potential buys but also stay in tune with sector rotations.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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