Dow Jones futures edged lower overnight, along with S&P 500 futures and Nasdaq futures. The market rally showed strength Thursday, with China stimulus hopes giving a big lift to stocks, commodities and Treasury yields. But the major indexes are running into a major key resistance area with the June jobs report on tap before Friday’s open.
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 power play Enphase Energy (ENPH) flashed buy signals on Thursday.
BABA stock cleared key levels on reports of new China stimulus. CRSP stock has a similar chart to Alibaba’s. ARLP stock rebounded from its 50-day line and cleared short-term levels. PWR stock and Enphase Energy triggered early entries within messy handles.
GME stock retreated 6% overnight as the mall-based video game retailer fired CFO Mike Recupero and made substantial layoffs across the company. Late Wednesday, GameStop (GME) announced plans for a 4-for-1 stock split. GME stock surged 15% on Thursday.
TWTR stock sank 4% overnight to just above 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 apparently isn’t satisfied. He’s also reportedly struggling to line up financing for the $44 billion, $54.20-a-share deal. Musk may want to exit the deal or pay a much-lower price, but he has few legal options, according to experts.
Upstart (UPST) reported preliminary Q2 revenue at $228 million vs. its target for $295 million to $305 million. Shares plunged 17% in extended trade. UPST stock crashed 56% on May 10 on that prior forecast.
Tesla Sales, EV Stocks
Early Friday, investors will get Tesla China sales for June, though the EV giant has already reported global second-quarter deliveries. Earlier this week the China Passenger Car Association reported Tesla delivered 78,000 China-made vehicles in June, according to preliminary figures. Meanwhile, further signs that China will extend EV subsidies should benefit Tesla (TSLA) and Chinese EV makers.
Tesla stock jumped 5.5% to 733.63 Thursday, racing above the 21-day line. That’s despite yet another NHTSA probe of a fatal crash possibly involving Tesla Autopilot. It’s also after a report that Musk fathered twins last year with a high-level executive.
The Labor Department will release the June jobs report at 8:30 a.m. ET. Economists expect to see nonfarm payrolls rise by 270,000 vs. May’s gain of 390,000 jobs.
The unemployment rate is expected to hold at 3.6%. A lower jobless rate would worry the Federal Reserve, which wants to see labor markets easing.
The jobs report, along with next week’s June consumer price index next week, will be key for the Fed rate hike outlook. But the Fed seems locked in on another 75-basis-point move for late July. There will be two more CPI and jobs reports before the September meeting.
Dow Jones Futures Today
Dow Jones futures fell 0.1% vs. fair value. S&P 500 futures lost 0.2%. Nasdaq 100 futures retreated 0.2%.
The 10-year Treasury yield dipped 1 basis point to 3%. The 2-year yield sank 2 basis points to 3.02%.
Crude oil prices edged lower. Copper prices slid 1%.
The June jobs report will surely swing Dow Jones futures before the open.
Stock Market Rally
The stock market rally started higher and quickly ramped up, closing near session highs with broad-based gains.
China may let provincial governments issue bonds for up to $220 billion in infrastructure spending, Bloomberg reported, buoying global economic hopes.
The Dow Jones Industrial Average rose 1.1% in Thursday’s stock market trading. The S&P 500 index popped 1.5%. The Nasdaq composite jumped 2.3%. The small-cap Russell 2000 ran up 2.35%.
U.S. crude oil prices rose 4.3% to $102.73 a barrel, back above the $100 level. Gasoline futures jumped 5.6% and natural gas futures leapt 14%.
Copper futures rose more than 4%, fueled by China stimulus hopes.
The 10-year Treasury yield jumped 10 basis points to 3.01%. The two-year Treasury yield rose 8 basis points to 3.04%, still signaling slight inversion.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 1.9%. The VanEck Vectors Semiconductor ETF (SMH) popped 4.6%.
SPDR S&P Metals & Mining ETF (XME) rebounded 5.2% and the Global X U.S. Infrastructure Development ETF (PAVE) rose 2.3%. U.S. Global Jets ETF (JETS) ascended 1.3%. SPDR S&P Homebuilders ETF (XHB) added 1.5%. The Energy Select SPDR ETF (XLE) bounced 3.6% and the Financial Select SPDR ETF (XLF) gained 1.45%. The Health Care Select Sector SPDR Fund (XLV) edged up 0.4%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) jumped 6.5% and ARK Genomics ETF (ARKG) 6.4%. Tesla stock is a major holding across Ark Invest’s ETFs. CRSP stock is a notable ARKG holding. Cathie Wood’s Ark also owns some BYD stock.
Stocks Flashing Buy Signals
BABA stock gained 2.75% to 122.39, moving above its 200-day moving average. It’s also arguably clearing a bottoming base, with resistance just above 121 over the past month. Alibaba stock bottomed in March, along with many other Chinese names, but almost all of the bottoming base 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 been trading above their 200-day lines recently.
CRSP stock jumped 7.6% to 78.20, above its 200-day line and clearing resistance from the past few weeks. But unlike Alibaba, Crispr stock does not have a bottoming base, though it didn’t undercut its May lows. Crispr and Vertex Pharmaceuticals (VRTX) are testing a gene-edited drug that could offer a functional cure for two blood diseases, sickle cell disease and beta thalassemia.
Alliance Resource Partners stock rallied 5.6% to 19.41 rebounding above its 50-day line, breaking a downward-sloping trendline and clearing short-term resistance at 19.35. All of those offer reasons to take an early entry in this coal stock. ARLP stock is consolidating, but needs more time to forge a new base after strong gains for much of 2022.
ENPH stock jumped 6.1% to 206.84. Enphase has a 217.33 handle buy point on a double-bottom base. On Thursday, ENPH stock broke a downtrend in the handle and, intraday, topped a short-term level of 210.10. Investors looking to enter Enphase stock may want to at least start a position at an early entry, given the solar play’s big daily swings.
Quanta stock gained 4.7% to 132.25, working toward a 138.56 buy point from a somewhat awkward cup-with-handle base. Within the deep handle, PWR stock broke a trendline and cleared last week’s high of 129.86. But volume was light on Thursday, while Quanta stock is 9.9% above its 50-day line.
Market Rally Analysis
The stock market rally continues to regain strength, with solid-to-strong gains for the major indexes. Volume fell vs. Wednesday’s session, however.
Unlike Wednesday, when losing stocks easily outpaced winners, market breadth was strong.
Medicals are still the leading sector, though there are some tentative signs of broader strength.
The market rally remains under pressure, though conditions are less dire 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 topped its 21-day line on Wednesday, ran up to just below its 50-day line and late June highs.
Notably, the composite just above its 10-week moving average. That’s where the Nasdaq hit resistance last week, triggering a sharp sell-off. The Nasdaq hit resistance at its 10-week line in early June and late April.
The 10-week line has a been a resistance area for many individual stocks, but megacaps such as Apple (AAPL) and Google parent Alphabet (GOOGL) are pushing well past it. TSLA stock is now slightly above its 10-week line after reversing lower from that key level last week.
Even if the major indexes convincingly clear their 10-week lines, they would almost immediately face resistance at the early June peaks.
Friday’s jobs report could be a big market catalyst, up or down. Given this week’s market gains, especially for the Nasdaq, to key resistance, a post-jobs pullback would not be a surprise.
Copper, crude and other commodities roared back Thursday, while Treasury yields rebounded. But therein lies a quandary. If Treasury yields keep rising, will that weigh on stocks, especially growth plays? if commodities rebound toward highs, that could revive inflation concerns and spur aggressive Fed rate hikes for longer.
What To Do Now
With the market rally steadying somewhat, investors could add a little more exposure, perhaps expanding out tentatively from the medical sector. But the uptrend remains under pressure, and the indexes are coming right to levels that have acted as fierce resistance for most of the year.
Stocks that are rallying now, especially high-octane names such as Crispr, could sell off quickly if the market reverses.
If the major indexes clear their 10-week and 50-day lines, investors might gradually reduce their cash position. But the market rally would still face multiple resistance levels in quick succession.
After the jobs report and next week’s CPI data, earnings season will begin to pick up steam. With the economy in flux, corporate guidance will be key and could have a big impact on individual stocks, sectors and overall market.
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