Dow futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures as the market continued to rally. from Broadcom (AVGO) and AI hot play C3.ai earnings overnight. The ISM Services Index report will be important on Friday morning.
The stock market rebounded Thursday from its opening lows even as the 10-year Treasury yield strengthened decisively above 4%. An overall weak opening turned into a strong positive day as a Fed official supported a quarter point move.
A few stocks, including Salesforce, are flashing buy signals. But the market’s upside remains under pressure with major tests ahead.
More details about Tesla’s Mexico factory were announced overnight.
Dow jones futures today
Dow futures fell 0.1% against fair value. S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.3%.
The 10-year Treasury yield fell 2 basis points, to 4.05%.
ISM will release its non-manufacturing index for February at 10 AM ET. The hot ISM services index for January on February 3, along with the jobs report, helped trigger a pullback in the market rally from highs.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
AVGO stock rose in extended trading after Broadcom’s earnings topped views, with revenue guidance up slightly for the second quarter as well. Broadcom stock rose 0.9% to 598.65 in Thursday’s regular session, bouncing off the 21-day line after bouncing off the 50-day/10-week lines recently. AVGO stock has a buy handle point of 617.11 in a long consolidation period. But the chip and software maker is right in making an early entry.
AI stock rose 18% in late trading, indicating a potential buy signal as C3.ai’s earnings results topped the views and the company headed higher. AI stock rose 2.8% to 21.31 on Thursday after sliding below the 21-day line on Wednesday. Friday’s strong recovery could provide a strong entry for AI stocks after breaking the trend line from its peak in early February.
VERI stock is up about 8% overnight. Veritone’s earnings and revenue were lost, but new bookings rose 141%. Shares fell 1.2 percent to 6.36 on Thursday. Veriton stock scraped a bottom in late January and rallied for a few days before pulling back. VERI stock is now below the 50-day and 200-day lines.
Costco wholesale (it costs), Nordstrom (JWN) And Zscaler (ZS) also reported. COST fell 2.5% and Nordstrom fell on mixed results. ZS stock fell 11.5% as billings failed to impress. All three closed below the 200-day lines.
Stock market rise
The Dow Jones Industrial Average rose 1.05% in stock market trading Thursday. The S&P 500 rose 0.8%, with Salesforce and DXCM the best performers and Tesla the worst on the day. The Nasdaq Composite advanced 0.7%. Small cap Russell 2000 rose 0.2%.
US crude oil prices rose 0.6 percent to $78.16 a barrel, up for the third consecutive session. Gasoline futures rose about 1%, up 14.5% so far this week.
The 10-year Treasury yield jumped 8 basis points to 4.07%, closing above 4% for the first time since November 9. He blamed lower-than-expected US jobless claims and more-than-expected eurozone inflation. The 10-year yield is not far from October’s 15-year high of 4.33%.
Atlanta Fed Chairman Rafael Bostick said he would “strongly” favor a quarter-point increase at the March meeting, after several policymakers signaled their support or openness to a half-point move. Bostick is a non-voting cast member in 2023.
Markets are steadily anticipating at least three more quarter-point rate hikes by the Fed, but with a good chance of a 50bp move in March or May. Some now slightly favor a fourth quarter-point hike at the July meeting. That would bring the fed funds range up to 5.5%-5.75% from 4.5%-4.75% today.
Exchange Traded Funds
Among the ETFs, the Innovator IBD 50 ETF (fifty) increased by 0.1%. iShares Expanded Technology and Software ETF (IGV) appeared by 2.4%. CRM inventory is one of IGV’s most important assets. VanEck Vectors Semiconductor Corporation (SMH) closed up 0.9% after stumbling Thursday morning.
SPDR S&P Metals & Mining ETFs (XME(Increased 0.4% and US Global X Infrastructure Development Fund (ETF) )cradle) an advance of 1.2%. US Global Gates Foundation ETF (Planes) rose by 0.45%. SPDR S&P Homebuilders ETF (XHB) by 0.7%. Energy Defined Fund SPDR ETF (xle(by 0.9% and the Financial Select SPDR ETF)XLF) fell 0.5%. SPDR Health Care Sector Selection Fund (XLV) gained 0.6%. DXCM stock is part of the XLV ETF.
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Tesla stock fell 5.85% to 190.90, moving below the 21-day line for the first time since Jan. 19. From a technical perspective, TSLA stock may simply be offering a change. This could allow the 50-day line to catch up while the 200-day line drifts to the February 16 high of 217.65. A decisive move above those levels would provide a strong entry.
But Tesla doubled down from its Jan. 6 low of 101.81 based on three factors: Tesla investor day noise, a revival of demand for price cuts and an overall market rebound, led by high-value growth stocks.
But Tesla Investor Day on Wednesday was largely non-event, with no new EV design shown off, let alone any idea a lower-cost model might be produced.
(Tesla confirmed Wednesday night plans to build an electric vehicle plant in northeastern Mexico. Construction is due to begin within 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 due to January’s global price cuts, as well as US tax breaks. But demand appears to be waning again, at least outside of the Model Y in the US, as the backlog shrinks and more discounts emerge.
In fact, Tesla has just started offering massive new discounts in several European countries, including Germany, on many Model 3 and Y stock vehicles. This follows outright Model 3 price cuts in Denmark a few days ago.
Finally, the growth-driven market rally has slowed in recent weeks.
Market rally analysis
The stock market rally appeared to be in real trouble at Thursday’s open, with the S&P 500 trimming its 200-day streak. The Nasdaq Composite, which fell below the 200-day line on Wednesday, has been moving towards the 50-day line. Even Russell 2000 tested his line for 10 weeks.
But even as Treasury yields rose, major indicators quickly improved, then turned broadly positive in the afternoon. This is despite treasury yields rising and with massive TSLA stock having a bad day.
The S&P 500 has regained its 50-day line while the Nasdaq is back above the 200-day mark. The Dow Jones, buoyed by CRM stock’s 11.5% gain on earnings, led the advance, but it’s still near its 2023 lows. The Russell 2000 closed just below the 21-day moving average, hitting multi-day resistance.
Russell, Nasdaq, and S&P 500 need to decisively retrace the 21-day lines to provide reasonable evidence that the market rally is regaining momentum. The February 2 highs will be the next big test above that.
Blue-chip stocks, which looked better than indices over the past month, also showed strength on Thursday. In addition to the CRM inventory, Octa (OKTA) outside the earnings base. DXCM stock is flirting with buy signals. FirstSource builders (BLDR) Long monotheism cleanse. Many others have extended their moves from buying areas or moved into the site.
But, if the indicators collapse further, the leaders will collapse as well. It is hard to see the major indices resilient if Treasury yields continue to rise. Friday’s ISM Services Index and the market’s reaction to this report will be important.
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What are you doing now
The stock market rally got a much needed gain on Thursday. Several blue-chip stocks are flashing buy signals as the major indices are gaining momentum.
But the market’s upside is still under pressure. The S&P 500 and Nasdaq just had one bad day of breaking below key levels.
Investors should be careful about adding exposure. If the S&P 500 and the Nasdaq move above the 21-day lines, you can gradually build your portfolio back up.
Now, you want to quickly reevaluate your watchlists.
With the market in such a tight trading area, a decisive move up or down could come soon. So be flexible and stay alert.
Read the big picture every day to stay in sync with market trend, leading stocks and sectors.
Please follow Ed Carson on Twitter at @employee For stock market updates and more.
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