Dow Jones futures fell slightly after hours, along with S&P 500 futures and Nasdaq futures. Applied Materials and DoorDash were key gains after the shutdown.
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The stock market rally pulled back on Thursday amid a hot wholesale inflation report. The Dow Jones and other major indexes pared early losses but then fell back to session lows on aggressive remarks by St. Louis Fed President James Bullard and a sell-off in Tesla shares. tesla (TSLA) is recalling more than 362,000 vehicles for fully autonomous driving failures that could cause accidents.
But leading stocks continued to perform well overall.
applied materials (AMA), hubspot (BUSHINGS), door board (DASH), mailbox (DBX), medical shock wave (SWAV), Texas roadside house (TXRH) and Valley (VALE) were notable earnings reports after the closing bell on Thursday.
deere (DE) reports early Friday.
Dow Jones Futures Today
Dow Jones futures lost 0.1% against fair value. S&P 500 futures fell 0.2%. Nasdaq 100 futures fell 0.4%, and TSLA shares continued to fall.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading at the next regular stock market session.
key gains
AMAT shares rose slightly late in the day as Applied Materials earnings topped forecasts for the fiscal first quarter, while the chip equipment maker’s second-quarter forecast topped the midpoint. Shares of Applied Materials fell 3.4% to 115.41 on Thursday. That’s back below a cup base buy point of 116.19, though AMAT could pick it up on Friday.
HUBS shares soared after hours, signaling a breakout as HubSpot earnings top out comfortably. The marketing software maker fell 1.5% to 361.93 on Thursday. HubSpot’s stock is on a cup-handle basis with a buy point of 399.65, according to MarketSmith’s analysis.
DASH shares rose overnight after DoorDash reported a larger-than-expected loss. But revenue topped, while the food delivery app giant also gave an upbeat outlook, announcing a $750 million buyback. DoorDash shares rose 1.9% to 66.89 on Thursday. DASH stock recently cleared a bottom when it retook the 200-day line.
DBX shares rose and fell in extended action as Dropbox’s earnings had just topped. Dropbox shares fell 0.9% on Thursday to 23.96, just below a cup-handle buy point of 24.19.
SWAV shares rose in late action as Shockwave earnings crushed views while earnings were in line. Shockwave shares were down 4 cents on Thursday at 191.24, not far from its 50-day line but still some distance from the 200-day moving average.
Shares of TXRH fell solidly in overnight trading, indicating a move below a recent buy point, as Texas Roadhouse earnings and revenue faltered. Shares of TXRH rose 0.8% on Thursday to 105.15, still range-bound from a flat-bottomed entry of 101.85.
Brazilian mining giant Vale was little changed after reporting fourth-quarter results. Vale’s shares closed 0.2% higher at 17.09. The stock recently rode a 12% gain from a handle cup buy point of 17.19. Investors could use a move above the 50-day line, which roughly coincides with the previous buy point, as an entry.
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stock 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 main indices came out of lows, but faded again in the last hour of trading. Bullard’s Fed rate hike comment and TSLA actions were likely catalysts for the afternoon dip.
The Dow Jones industrial average plunged 1.3% in trading on Thursday. The S&P 500 index fell 1.4%. The Nasdaq Composite fell 1.8%. The small-cap Russell 2000 fell nearly 1%.
US crude prices fell 0.1% to $78.49 a barrel.
Copper prices rebounded 2.8%.
The 10-year Treasury yield rose 3 basis points to 3.84%, after hitting 3.87% intraday. The 10-year Treasury yield is at a 2023 high, rising from a February 2 low of 3.33%.
St. Louis Fed’s Bullard said Thursday afternoon that he is open to a 50 basis point rate hike. Bullard is one of the most aggressive policymakers at the Fed and the one most eager to make big moves. But markets are still pricing in quarter-point moves in February and March, while leaning toward one more in June or July.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 2.4%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 1%. The iShares Expanded Technology Software (IGV) Sector ETF fell 2.5%. The VanEck Vectors Semiconductor (SMH) ETF fell 2.7%. AMAT shares are a notable holding of SMH.
Reflecting more speculative historical stocks, the ARK Innovation ETF (ARKK) lost 2.8% and the ARK Genomics ETF (ARKG) lost 2.9%. Tesla stock is a major holding in Ark Invest ETFs.
SPDR S&P Metals & Mining ETF (XME) rallied 1% and Global X US Infrastructure Development ETF (PAVE) lost 1%. The US Global Jets ETF (JETS) fell 1.8%. SPDR S&P Homebuilders ETF (XHB) was down 1.2%. Energy Select SPDR ETF (XLE), Financial Select SPDR ETF (XLF) and Health Care Select Sector SPDR Fund (XLV) all fell 1%.
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Tesla FSD withdrawal
The National Highway Traffic Safety Administration reported Thursday that Tesla Full Self-Driving allows a vehicle to “exceed speed limits or travel through intersections in an unlawful or unpredictable manner (which) increases the risk of a crash.” .
Some 362,758 Tesla vehicles could be affected, the NHTSA said. Tesla, which has apparently disputed some of the findings, will carry out the recall via an over-the-air software patch.
Chief Executive Elon Musk denounced calling the measure a withdrawal, saying it is “anachronistic and just plain wrong.”
NHTSA is conducting a wide-ranging investigation into Tesla’s FSD and Autopilot driver assistance systems, including crashes against stationary vehicles and phantom braking. The Department of Justice is conducting a criminal investigation into Tesla’s autonomous driving claims. But there’s no timetable for when those investigations might end, or if regulators will end up taking any action against 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 assistance system.
Tesla shares fell 5.7% to 202.04 on Thursday. Shares were initially only down, but selling picked up at close. It’s unclear if TSLA’s shares were 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 January 6 bear market low of 101.81. TSLA shares had been rising towards their 200-day moving average, an area of obvious resistance.
Tesla shares fell 2% after the close in active trading.
Market recovery analysis
The stock market rally has alternated between resilient and strong in February despite mixed economic and earnings data.
The major indices fell on Thursday, but all continue to trade in a recent range since early February. The Dow fell below its 21-day line, but is still holding its 50-day line.
A longer pause for the market rally would be nice.
A few more stocks showed buy signals, such as albermarle (SUNRISE), iridium (IRDM) and cisco systems (CSCO). Many other recent engines are holding up well, including GlobalFoundries (GFS), Arista Networks (ANET) and monster drink (MNST).
There were some notable losers, including Shopify (SHOP) and Toast (TOST) on earnings. But the general trend has been favorable.
Many other leaders are being installed. If the market rally breaks out of its recent pause, many of these names are likely to break out or trigger early entries.
Keep in mind that the stock market rally could shift you from your “glass half full” mentality and start selling in the face of mixed or unsightly economic data and earnings reports. The rally in Treasury yields and the dollar may start to become a bigger problem.
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What to do now
Investors need to be prepared, building their watch lists, doing extra work on potential big winners who are on the cusp of buying points. Doing this prep work means you can focus on the best actions, with a level head. It will help you avoid buying extended.
Don’t focus too much, be ready to weed out losers and be careful heading for profit. These rules will help protect you from gaps to the downside, like the TOST stock on Thursday.
Read The Big Picture every day to stay in sync with market direction and major stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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