Dow Jones futures were little changed Friday morning, along with S&P 500 futures and Nasdaq futures, with the July jobs report looming large. Tesla (TSLA) shareholders approved a 3-for-1 stock split Thursday evening.
The stock market rally closed mixed in a relatively quiet Thursday for the major indexes, but there were some big earnings movers.
Vertex Pharmaceuticals (VRTX), Amgen (AMGN) and Neurocrine Biosciences (NBIX) reported better-than-expected earnings Thursday night as biotechs remain a leading sector. All closed near buy points and key support levels.
Dow Jones Futures Today
Dow Jones futures climbed less than 0.1% vs. fair value. S&P 500 futures lost 0.1% and Nasdaq 100 futures fell 0.25%.
The 10-year Treasury yield rose 2 basis points to 2.7%.
Crude oil futures edged lower.
Sen. Kyrsten Sinema, D-Ariz., threw her support behind the tax-spending-and-climate bill Thursday night. The legislation will add a 1% excise tax on stock buybacks and remove a provision to end the carried interest loophole.
The Labor Department will release the July jobs report at 8:30 a.m. ET. The employment data will certainly swing Dow futures and Treasury yields.
Economists expect to see nonfarm payrolls rise by 250,000 in the July jobs report, down from 372,000 in June. That would still indicate healthy hiring amid a slowing economy.
Keep an eye on the household survey, which showed a notable employment decrease in June. It’s more error prone than payrolls, but often shows labor market turns first.
Meanwhile, the unemployment rate is expected to hold steady at 3.6%, with annual hourly earnings growth slowing just a tick to 5%.
Jobless claims rose to 260,000 in the latest week, the highest in nine months. Job openings, though still high, have come down rapidly in the past two months.
The Federal Reserve, notably Fed chief Jerome Powell, has argued that a soft landing is possible. Investors over the past couple of weeks are starting to buy into the idea that the economy will weaken just enough to cool inflation sufficiently to spur the Federal Reserve to slow and then halt Fed rate hikes, without triggering a big drop in demand and employment.
VRTX stock tilted lower in overnight trade as Vertex earnings topped views and the biotech giant raised its full-year product revenue target. Shares dipped 0.1% to 274.85, below the 50-day line and buy points of 276.10 and 279.23.
AMGN stock lost 1% in extended action after Amgen earnings topped and the company largely reaffirmed full-year guidance. Shares dipped 0.1% to 246.98 on Thursday, trading near the 50-day line. Amgen stock has a 253.87 handle buy point. The biotech giant announced a $3.7 billion buyout of ChemoCentryx (CCXI) before Thursday’s open.
NBIX stock fell slightly overnight after Neurocrine’s earnings and revenue topped. The company raised revenue guidance on its key drug, but also shelved a treatment that didn’t perform well. Shares rose 2% on Thursday to 95.93, rebounding from the 50-day line. NBIX stock has a 100.10 handle buy point.
Tesla Stock Split, Annual Meeting
Tesla shareholders approve a 3-for-1 stock split Thursday evening at the annual meeting, two years after a 5-for-1 stock split. Tesla proposed the TSLA split in June. It’s unclear if the actual split will have much of an impact on Tesla shares. A TSLA stock split will make playing options cheaper.
At the annual meeting, CEO Elon Musk said “this year, I swear,” Tesla will solve self driving, laughing.
Musk hinted that Cybertruck prices and specs will be different than what Tesla initially touted in 2019, citing inflation. The pulled prices and specs always seemed highly unlikely, while materials costs and 4680 battery delays have added to the program.
Musk also expects production to surge in the second half of 2022, reaching a 2 million vehicle run rate by year-end. The Shanghai factory is getting capacity-boosting upgrades while Tesla has two new factories in Berlin and Austin that have ramped up at a glacial pace. Musk said Tesla could ultimately have 10-12 factories, and may make an announcement about the next plant’s location later this year.
Tesla stock edged lower early Friday. Shares rose 0.4% to 925.90 on Thursday, just above the 200-day line. TSLA stock had rallied strongly into the stock split news, but that likely reflects the broad market rally and Tesla’s better-than-expected earnings on July 20. Tesla stock is a long way from the 1,208.10 buy point. A consolidation near the 200-day line or a handle higher up could create a buying opportunity.
China EV Stocks
Meanwhile, China EV makers are showing some strength. BYD (BYD), which reported booming July sales on Wednesday, rose 2.6% to 38.10 on Thursday, back above the 50-day line. BYD stock will likely have a new base after another week, but a move above the Aug. 1 high of 38.35 could offer an early entry.
Nio (NIO) rose 3% to 20.90, bouncing from the 50-day line. NIO stock is still below the 200-day line.
Stock Market Rally Thursday
The stock market rally didn’t move much on the major indexes heading into the July jobs report.
The Dow Jones Industrial Average fell 0.3% in Thursday’s stock market trading. The S&P 500 index dipped 0.1%. The Nasdaq composite rose 0.4%. The small-cap Russell 2000 lost 0.2%.
U.S. crude oil prices fell 2.3% to $88.50 a barrel, hitting their lowest levels since before Russia’s Ukraine invasion in late February. Gasoline futures declined 4.1%, signaling a continued retreat in prices at the pump.
The 10-year Treasury yield slumped 7 basis points to 2.68%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) edged up 0.35%, while the Innovator IBD Breakout Opportunities ETF (BOUT) ticked 1 cent higher. The iShares Expanded Tech-Software Sector ETF (IGV) eked out a 0.2% gain. The VanEck Vectors Semiconductor ETF (SMH) rose 1%.
SPDR S&P Metals & Mining ETF (XME) climbed 1% and the Global X U.S. Infrastructure Development ETF (PAVE) added 0.8%. U.S. Global Jets ETF (JETS) ascended 0.5%. SPDR S&P Homebuilders ETF (XHB) gained 1.7%. The Energy Select SPDR ETF (XLE) slumped 3.7% and the Financial Select SPDR ETF (XLF) fell 0.3%. The Health Care Select Sector SPDR Fund (XLV) retreated 0.5%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) advanced 0.8% and ARK Genomics ETF (ARKG) climbed 1.7%, both at three-month highs. Tesla stock is a major holding across Ark Invest’s ETFs. Cathie Wood’s Ark funds also own small stakes in BYD and Nio stock.
Market Rally Analysis
The stock market rally had a mixed session Thursday, trading in a narrow range. After strong recent gains, notably Wednesday’s tech-led advance, a pullback or pause wouldn’t be a surprise and could be healthy.
The Nasdaq composite is holding comfortably above its early June highs, with the Dow Jones, S&P 500 and Russell 2000 just below that resistance level.
While the major indexes were quiet Thursday, there was plenty of action in sectors and individual stocks.
Oil and gas stocks are struggling once again, with energy prices retreating, especially crude oil. It’s hard to see the sector making a meaningful advance without underlying prices rising.
Biotechs had another strong session, with the IBB ETF up 2.2% after Wednesday’s 3.8% jump.
While there were several earnings winners Thursday, earnings losers showed the dangers of having little cushion heading into results. Aris Water Solutions (ARIS) crashed 21% following earnings after closing Wednesday in a buy zone. Fortinet (FTNT) plunged 16%, Eli Lilly (LLY) and Quanta Power (PWR) fell modestly, but further from buy points.
Lantheus (LNTH) had a wild session, hitting a record 81.43 just after the open, plunging to 66.26 a few minutes later, briefly turning positive again before closing down 6.1% to 71.24.
What To Do Now
The market rally is working, but investors have reasons to be cautious about ramping up exposure rapidly. A pullback could provide a temporary setback for the indexes, but perhaps big losses for many individual names. There’s still a sizable risk that the market rally soon runs out of steam and retreats significantly, though perhaps not to recent lows.
Be careful around earnings.
Keep working on watchlists. Stay engaged with the market, but you don’t have to stare at the computer screen all day.
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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