Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. Applied Materials and DoorDash were key earnings after the close.
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The stock market rally pulled back Thursday amid a hot wholesale inflation report. The Dow Jones and other major indexes slashed early losses, but then fell back to session lows on a hawkish statements by St. Louis Fed President James Bullard and a sell-off in red-hot Tesla stock. Tesla (TSLA) is recalling over 362,000 vehicles for Full Self-Driving flaws that could cause crashes.
But leading stocks continued to act well overall.
Applied Materials (AMAT), HubSpot (HUBS), DoorDash (DASH), Dropbox (DBX), Shockwave Medical (SWAV), Texas Roadhouse (TXRH) and Vale (VALE) were notable earnings reports after Thursday’s closing bell.
Deere (DE) reports early Friday.
Dow Jones Futures Today
Dow Jones futures sank 0.15% vs. fair value. S&P 500 futures declined 0.3%. Nasdaq 100 futures fell 0.5%, with TSLA stock continuing to slide.
The 10-year Treasury yield rose 5 basis points to 3.89%, quickly approaching the 4% level again.
Crude oil futures fell slightly.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Key Earnings
AMAT stock rose 1.5% in overnight trade as Applied Materials earnings beat fiscal Q1 views, while the chip-gear maker’s Q2 guidance topped at the midpoint. Applied Materials stock fell 3.4% to 115.41 on Thursday. That’s back below a 116.19 cup-base buy point, though AMAT could retake it Friday.
HUBS stock soared 11% after hours, signaling a breakout as HubSpot earnings comfortably beat. The marketing software maker slipped 1.5% to 361.93 on Thursday. HubSpot stock has a cup-with-handle base with a 399.65 buy point, according to MarketSmith analysis.
DASH stock popped 5% overnight after DoorDash reported a wider-than-expected loss. But revenue beat while the food delivery app giant also gave a rosy outlook and announced a $750 million buyback. DoorDash stock rose sank 1.9% to 66.89 on Thursday. DASH stock recently cleared a bottoming base as it retook the 200-day line.
DBX stock was little changed in extended action as Dropbox earnings just beat. Dropbox stock dipped 0.9% on Thursday to 23.96, just below a 24.19 cup-with-handle buy point.
SWAV stock gained 5% in late action as Shockwave earnings crushed views while revenue was in line. Shockwave stock nudged down 4 cents on Thursday to 191.24, not far from its 50-day line but still some distance from the 200-day moving average.
TXRH stock fell 5% in overnight trade, signaling a move below a recent buy point, as Texas Roadhouse earnings and revenue missed. TXRH stock climbed 0.8% on Thursday to 105.15, still in range from a 101.85 flat-base entry.
Brazilian mining giant Vale edged lower in extended action after reporting Q4 results. Vale stock closed up 0.2% to 17.09. Shares recently round-tripped a 12% gain from a 17.19 cup-with-handle buy point. Investors could use a move above the 50-day line, which roughly coincides with the prior buy point, as an entry.
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Stock Market Rally
The stock market rally opened lower on a hot producer price index and lower-than-expected jobless claims. That continues a trend of generally strong economic data, including Tuesday’s CPI inflation report. The major indexes came off lows, but faded again in the final hour of trading. Bullard’s Fed rate hike comment and TSLA stock were possible catalysts for the late afternoon slide.
The Dow Jones Industrial Average slumped 1.3% in Thursday’s stock market trading. The S&P 500 index fell 1.4%. The Nasdaq composite tumbled 1.8%. The small-cap Russell 2000 fell nearly 1%.
U.S. crude oil prices dipped 0.1% to $78.49 a barrel.
Copper prices bounced 2.8%.
The 10-year Treasury yield climbed 3 basis points to 3.84%, after hitting 3.87% intraday. The 10-year Treasury yield is at 2023 highs, surging from a Feb. 2 low of 3.33%.
St. Louis Fed’s Bullard said Thursday afternoon that he’s open to a 50-basis point rate hike. Bullard is one of the more hawkish Fed policymakers, and the most eager to go for big moves. But markets are still pricing in quarter-point moves in February and March, while leaning toward one more in either June or July.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) slumped 2.4%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 1%. The iShares Expanded Tech-Software Sector ETF (IGV) skidded 2.5%. The VanEck Vectors Semiconductor ETF (SMH) gave up 2.7%. AMAT stock is a notable SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) lost 2.8% and ARK Genomics ETF (ARKG) 2.9%. Tesla stock is a major holding across Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) rebounded 1% and the Global X U.S. Infrastructure Development ETF (PAVE) shed 1%. U.S. Global Jets ETF (JETS) descended 1.8%. SPDR S&P Homebuilders ETF (XHB) stepped down 1.2%. The Energy Select SPDR ETF (XLE), Financial Select SPDR ETF (XLF) and Health Care Select Sector SPDR Fund (XLV) all retreated 1%.
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Tesla FSD Recall
The National Highway Traffic Safety Administration reported Thursday that Tesla Full Self-Driving lets a vehicle “exceed speed limits or travel through intersections in an unlawful or unpredictable manner (that) increases the risk of a crash.”
Some 362,758 Tesla vehicles could be affected, NHTSA said. Tesla, which apparently disputed some of the findings, plans to carry out the recall via an over-the-air software patch.
However, Tesla has been trying to solve some of these issues for years, so it’s possible that Tesla doesn’t have a fix.
CEO Elon Musk decried calling the move a recall, saying that is “anachronistic and just flat wrong!”
It’s also unclear if this recall is the start of several regulatory moves vs. FSD, or if it’s a limited one-off.
NHTSA is conducting a wide-ranging probe of Tesla’s FSD and Autopilot driver-assist systems, including crashes into stationary vehicles and phantom braking. The Justice Department is conducting a criminal probe into Tesla’s self-driving claims. But there’s no timeline for when those investigations might end, or if regulators will end up taking any action vs. Tesla.
Musk has claimed for years that Tesla would achieve fully autonomous driving “this year.” But even FSD Beta is only a Level 2 driver-assist system.
Tesla stock tumbled 5.7% to 202.04 on Thursday. Shares initially only edged lower, but selling picked up into the close. It’s unclear if TSLA stock was driving the overall market lower or the other way around.
But shares are still up 2.6% for the week and have nearly doubled from the Jan. 6 bear-market low of 101.81. TSLA stock had been coming up toward its sliding 200-day moving average, an obvious resistance area.
Tesla stock fell 2% after the close in active trade.
Overnight, Tesla raised the China price of higher-end Model Y crossovers by $290, after raising the entry-level price by the same amount a week earlier. Those following major cuts in late October and on Jan. 6, but could spur more potential buyers to act vs. waiting for more cuts.
Tesla will halt some production at its Shanghai plant starting Sunday, Bloomberg reported earlier this week, to prepare for an unconfirmed Model 3 upgrade later this year. This follows two extended shutdowns in late December and late January.
Market Rally Analysis
The stock market rally has alternated between resilience and strength in February despite mixed earnings and economic data.
The major indexes fell Thursday, but all are continuing to trade in a recent range since early February. The Dow Jones did fall below its 21-day line, but is still holding the 50-day.
A longer pause for the market rally would be fine.
A few more stocks flashed buy signals, such as Albemarle (ALB), Iridium (IRDM) and Cisco Systems (CSCO). Many other recent movers are holding up well, including GlobalFoundries (GFS), Arista Networks (ANET) and Monster Beverage (MNST).
There were some notable losers, including Shopify (SHOP) and Toast (TOST) on earnings. But the general trend has been favorable.
Plenty of other leaders are setting up. If the market rally moves out of its recent pause, many of these names will likely break out or trigger early entries.
Keep in mind that the stock market rally could shift from its “glass half-full” mentality and start selling off in the face of uneven or ugly economic data and earnings reports. The rebound in Treasury yields and the dollar may start to become a bigger issue, with the 10-year yield nearing 4%.
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What To Do Now
Investors need to be ready, building up their watchlists, doing some extra work on potential big winners that are on the cusp of buy points. Doing this prep work means you can focus on the best stocks, with a level head. It’ll help you avoid buying extended.
Don’t get too concentrated, be ready to cut losers and be cautious heading into earnings. These rules will help protect you from gap downs, such as TOST stock Thursday.
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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