Dow Jones futures rose on Friday morning, while S&P 500 futures and Nasdaq futures were modestly lower in anticipation of the key June jobs report. The market’s rally showed strength on Thursday, with hopes of China’s stimulus giving a big boost to stocks, commodities and government bond yields. But the major indices are falling into a major resistance zone.
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Chinese e-commerce giant Alibaba ( BABA ), gene-editing leader Crispr Therapeutics ( CRSP ), coal miner Alliance Resource Partners ( ARLP ), utility infrastructure firm Quanta Services ( PWR ), and solar Enphase Energy ( ENPH ) issued buy signals on Thursday.
BABA shares cleared key levels after reports of fresh stimulus in China. CRSP stock has a similar chart to that of Alibaba. Shares of ARLP recovered from its 50-day line and cleared near-term levels. Shares of PWR and Enphase Energy triggered early entries into messy handles.
Shares of GME fell 5% in premarket trading after the mall-based video game retailer fired CFO Mike Recupero and made significant layoffs across the company. Late Wednesday, GameStop ( GME ) announced plans for a 4-for-1 stock split. GME shares jumped 15% on Thursday.
Shares of TWTR sank 4% overnight to just over 37 on reports that Tesla CEO Elon Musk’s Twitter deal is in “serious jeopardy.” Twitter ( TWTR ) reiterated Thursday that it stands by its estimate that 5% of accounts are bots, but Musk is clearly not happy. It is also reported to be struggling to secure financing for the $44 billion, $54.20 per share deal. Musk may want to back out of the deal or pay a much lower price, but he has few legal options, experts say.
Upstart ( UPST ) reported preliminary second-quarter revenue of $228 million, versus its target of $295 million to $305 million. Shares fell 17% in extended trading. UPST shares tumbled 56% on May 10 from that previous forecast.
Tesla sales, EV shares
Early on Friday, the China Passenger Automobile Association reported that Tesla ( TSLA ) sold 78,906 Chinese-made vehicles in June, a new record, up 138% from a year earlier and 145% from May. The EV giant has already reported global deliveries in the second quarter. Earlier this week, CPCA gave Tesla China a preliminary figure of 78,000.
Shares of TSLA fell a fraction early Friday.
Tesla shares jumped 5.5% to 733.63 on Thursday, racing above a 21-day line. This comes amid further signs that China will expand EV subsidies. This is despite another NHTSA investigation into a fatal crash possibly involving Tesla’s Autopilot. Also following an announcement that Musk fathered twins last year with a high-ranking executive.
Electric vehicle and battery giant BYD ( BYDDF ) jumped 4.6% to 42.40, a new high at the close, breaking out of a buy range. Li Auto ( LI ) gained 1.8% to 39.26%, near the top of a buy zone.
PWR shares are listed on IBD. Enphase Energy is in the IBD 50. Quanta Services and ENPH are in the IBD Big Cap 20. Quanta Services was Thursday’s IBD Stock of the Day.
The video embedded in this article discusses Thursday’s market action and analyzes shares of AMD ( AMD ), Baidu ( BIDU ), and ARLP.
Jobs report
The Labor Department will release the June jobs report at 8:30 a.m. ET. Economists expected to see nonfarm payrolls rise by 270,000, compared with an increase of 390,000 jobs in May.
The unemployment rate is expected to remain at 3.6%. A lower unemployment rate would worry the Federal Reserve, which wants to see the labor market ease.
The jobs report, along with June’s consumer price index next week, will be key to the outlook for a Fed rate hike. But the Fed appears set for another move of 75 basis points for the end of July. There will be two more CPI and jobs reports before the September meeting.
Dow Jones futures today
Dow Jones futures were up 0.15% at fair value. S&P 500 futures were down about 0.1%. Nasdaq 100 futures were down 0.3%.
The yield on 10-year government bonds fell 3 basis points to 2.98%. The 2-year bond yield sank 4 basis points to 3%.
Copper prices fell 2%, giving back much of Thursday’s rally.
The June jobs report is sure to change Dow Jones futures ahead of the open.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD’s experts as they analyze active stocks on IBD Live’s stock market rally
Stock market rallies
The stock market rally started higher and quickly picked up, closing near session highs with broad gains.
China may allow provincial governments to issue up to $220 billion in bonds for infrastructure spending, Bloomberg reported, supporting global economic hopes.
The Dow Jones Industrial Average rose 1.1% in after-hours trading Thursday. The S&P 500 index jumped 1.5%. The Nasdaq composite jumped 2.3%. The small-cap Russell 2000 rose 2.35%.
U.S. crude oil prices rose 4.3% to $102.73 a barrel, again above the $100 level. Gasoline futures jumped 5.6% and natural gas futures jumped 14%.
Copper futures rose more than 4%, fueled by hopes of Chinese stimulus.
The yield on the 10-year Treasury note jumped 10 basis points to 3.01%. The two-year Treasury yield rose 8 basis points to 3.04%, still signaling a slight inversion.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 1.5%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 0.2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) advanced 1.9%. The VanEck Vectors Semiconductor ETF ( SMH ) jumped 4.6%.
The SPDR S&P Metals & Mining ETF ( XME ) jumped 5.2 percent and the Global X US Infrastructure Development ETF ( PAVE ) rose 2.3 percent. The US Global Jets ETF ( JETS ) rose 1.3%. The SPDR S&P Homebuilders ETF ( XHB ) added 1.5%. The Energy Select SPDR ETF (XLE) jumped 3.6% and the Financial Select SPDR ETF (XLF) gained 1.45%. The Select Healthcare Sector SPDR Fund ( XLV ) rose 0.4%.
Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) jumped 6.5% and the ARK Genomics ETF (ARKG) jumped 6.4%. Tesla stock is a major holding in Ark Invest’s ETF. CRSP stock is a notable ARKG holding. Cathie Wood’s Ark also owns some shares of BYD.
The five best Chinese stocks to watch now
Stocks Flashing buy signals
Shares of BABA rose 2.75% to 122.39, moving above its 200-day moving average. It is also likely clearing a bottom base, with resistance just above 121 over the past month. Alibaba shares bottomed in March, along with many other Chinese names, but almost all of the bottom base was formed below the 200-day. However, the relative strength line for BABA stock is at its highest level since November.
Pinduoduo (PDD) and Baidu have recently traded above their 200-day lines.
Shares of CRSP jumped 7.6% to 78.20, above its 200-day line and clearing resistance from the past few weeks. But unlike Alibaba, Crispr’s stock hasn’t bottomed out, even though it didn’t hit its bottom in May. Crispr and Vertex Pharmaceuticals ( VRTX ) are testing a gene-edited drug that could offer a functional cure for two blood disorders, sickle cell disease and beta thalassemia.
Shares of Alliance Resource Partners rose 5.6% to 19.41, bouncing above its 50-day line, breaking the downtrend line and clearing near-term resistance at 19.35. All of these offer reasons to take an early entry into this coal stock. ARLP shares are consolidating but need more time to build a new base after strong gains for most of 2022.
ENPH shares jumped 6.1% to 206.84. Enphase has a 217.33 buy point on a double bottom base. ENPH shares broke a downtrend in the handle on Thursday and hit a short-term intraday high of 210.10. Investors looking to get into Enphase stock may want to at least start an early entry position given the solar play’s big daily swings.
Quanta shares gained 4.7% to 132.25, working towards a 138.56 buy point from a slightly uncomfortable cup-with-handle base. Within the deep handle, PWR shares broke the trendline and cleared last week’s high of 129.86. But volume was thin on Thursday, while Quanta shares are 9.9% above their 50-day line.
Market Rally Analysis
The stock market rally continues to gain strength, with steady to strong gains for major indexes. However, volume fell from Wednesday’s session.
Unlike Wednesday, when losers easily outpaced gainers, market breadth was strong.
Medical is still the leading sector, although there are some early signs of broader strength.
The market rally remains under pressure, although conditions are less severe than at the end of last week.
The S&P 500, Dow Jones and Russell 2000 regained their 21-day moving averages. The Nasdaq, which just broke its 21-day line on Wednesday, touched just below its 50-day line and late June highs.
Notably, the composite is slightly above its 10-week moving average. That’s where the Nasdaq hit resistance last week, triggering a sharp selloff. The Nasdaq hit resistance at its 10-week line in early June and late April.
The 10-week line has been a resistance zone for many individual stocks, but megacaps like Apple ( AAPL ) and Google Alphabet ( GOOGL ) are breaking through it. Shares of TSLA are now slightly above their 10-week line after turning down from that key level last week.
Even if the major indices convincingly clear their 10-week lines, they will almost immediately face resistance at the early June highs.
Friday’s jobs report could be a big market catalyst, up or down. Given this week’s market gains, especially for the Nasdaq, against key resistance, a post-jobs pullback would not be a surprise.
Copper, crude oil and other commodities rose on Thursday as government bond yields recovered. But here lies a difficulty. If government bond yields continue to rise, will that weigh on equities, especially growth? if commodities return to highs, it could revive inflation concerns and spur aggressive Fed rate hikes for longer.
Time the Market with IBD’s ETF Market Strategy
What should we do now
As the market rally stabilizes somewhat, investors could add a bit more exposure, perhaps tentatively expanding from the medical sector. But the uptrend remains under pressure, with indices coming right back to levels that have acted as fierce resistance for most of the year.
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