Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures. The June jobs report looms.
The stock market rally backed off on Thursday as strong economic data pushed government bond yields higher, though indices offset some of the morning losses. The ADP Employment Report estimated that private payrolls skyrocketed to 497,000 in June, more than double the forecasts. The ISM index for the services sector rose more than expected. Initial jobless claims rose slightly, but the four-week average fell as ongoing claims fell. Announced layoff plans fell significantly last month.
Meta platforms (META) held up well as the Threads app racked up 30 million signups for its Twitter rival in less than a day, perhaps as many as 48 million in 24 hours. It is the highest number of downloads ever. Twitter threatened legal action against its new rival. Tesla (TSLA) CEO Elon Musk, owner of Twitter, said “cheating” is not okay.
Microsoft (MSFT) rallied during a price target increase.
Looking for stocks that hold up; Visa (V) and MasterCard (MA) hold together with in buying zones DexCom (DXCM). Nvidia (NVDA) continues to act tight. HubSpot (HUBS) slipped Thursday morning but rallied on key support.
Meanwhile, the FDA approved Biogen’s Alzheimer’s treatment Leqembi late Thursday. biogen (BIIB) and partner Eisai already have accelerated approval, but full FDA approval will increase their chances of Medicare reimbursement for Leqembi.
Biogen stock was discontinued after hours. Shares fell 0.3% during Thursday’s regular session. Eli Lilly (LLY), which has a similar treatment for Alzheimer’s disease under investigation. sharpened higher at night. LLY shares fell 0.5% on Thursday.
META Shares, Nvidia and HubSpot are on IBD Leaderboard. Microsoft stock is on IBD Long-Term Leaders. HUBS stock is on the IBD Big Cap 20.
The video embedded in this article discussed Thursday’s market action and analyzed MSFT stocks, Adobe (ADBE) and HubSpot.
Jobs report: what to expect
The Labor Department releases the June jobs report at 8:30 a.m. ET.
Economists expect an increase of 213,000 jobs, up from 339,000 in May. The unemployment rate should fall to 3.6%. Average hourly wage growth cools to 4.2% compared to 4.3% in May.
The ADP does not have a good track record of forecasting Labor’s non-farm payrolls. Still, the probability of a rate hike by the Fed on July 26 is now close to 93%. The probability of another quarter-point increase in November rose to about 56%, significantly higher than a few weeks ago.
Dow Jones Futures Today
Dow Jones futures lost a fraction of their fair value. S&P 500 futures and Nasdaq 100 futures fell 0.1%.
The jobs report is sure to swing interest rates on Treasuries and Dow 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 trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally Analysis
The stock market rally was sold off by rising yields after the ADP report, even though indexes closed lows. The yield on 10-year government bonds rose 10 basis points to 4.04%, a four-month high. The 2-year rate climbed 5 basis points to 5% after a 16-year peak of 5.12% intraday.
The Dow Jones Industrial Average fell 1.1% during Thursday trading. The S&P 500 index and the Nasdaq index lost 0.8%. The small-cap Russell 2000 fell 1.6% after Wednesday’s 1% drop.
The Nasdaq and S&P 500 found support around their 10-day moving averages. But the Dow Jones fell below the 10-day and 21-day lines, not far from its 50-day moving average.
Market breadth was abysmal on Thursday, with losers beating winners 6 to 1 on the NYSE and 3 to 1 on the Nasdaq. That followed negative latitude Wednesday.
The Invesco S&P 500 Equal Weight ETF (RSP) lost 0.8% and the First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) lost 1.3%. But both recovered from their 21-day lines.
The price of crude oil in the US rose 1 cent to $71.80 a barrel.
Leading stocks retreated further on Thursday. Many found support at key levels, but not all.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 2%. The iShares Expanded Tech-Software Sector ETF (IGV) lost just over 1%. MSFT stock is a major IGV component. The VanEck Vectors Semiconductor ETF (SMH) fell 1.2% after Wednesday’s loss of 1.9%. NVDA stock is the number 1 SMH holding company.
Due to more speculative story stocks, ARK Innovation ETF (ARKK) fell 3.8% and ARK Genomics ETF (ARKG) fell 3.6%.
SPDR S&P Metals & Mining ETF (XME) lost 1.75%. US Global Jets ETF (JETS) fell 2.2%. SPDR S&P Homebuilders ETF (XHB) fell 2%. The Energy Select SPDR ETF (XLE) fell 2.25% and the Health Care Select Sector SPDR Fund (XLV) wavered 0.8%.
The Industrial Select Sector SPDR Fund (XLI) lost 0.75%.
The Financial Select SPDR ETF (XLF) fell 0.9%, with Visa stocks and MA holding large portions of the XLF ETF. The SPDR S&P Regional Banking ETF (KRE) fell 0.6%.
Five best Chinese stocks to watch right now
The META share fell 0.8% to 291.99 and held strong after rising 2.9% to a 17-month high on Wednesday ahead of the launch of Threads.
Text-based Threads, part of Instagram, launched on Wednesday night and racked up more than 30 million signups within its first 16 hours. In the first 24 hours, there were more than 48 million logins, according to a media report, citing internal metadata. Even the lower figure is by far the best day one download ever. In comparison, ChatGPT got 1 million downloads in the first five days.
With many celebrities, high-profile journalists, and other Twitter power users posting fast, Threads appears to be Twitter’s biggest threat yet. That site has been struggling since Elon Musk bought Twitter for $44 billion last fall. Musk has alienated many users and especially advertisers with various restrictions.
A Twitter attorney threatened legal action against Meta. In a letter to Meta CEO Mark Zuckerberg, Alex Spiro accused Meta of poaching former Twitter personnel and of “unlawful misappropriation of Twitter’s trade secrets and other intellectual property.”
Musk wrote in response to a tweet about that legal threat from Twitter: “Competition is fine, no cheating.”
Meta, in response to Twitter’s legal threat, said, “No one on the Threads technical team is a former Twitter employee.”
Microsoft shares rose 0.9% to 341.27, bouncing near the 21-day line. Morgan Stanley raised its MSFT stock price target from 335 to 415. The shares have been consolidating in recent weeks since hitting an all-time high of 351.47 on June 16. Investors could see the recent pause as a high handle for a consolidation stretching back into late 2021. But investors should probably wait for a longer pause before looking for a Microsoft stock entry.
Stocks to watch
Visa shares fell 0.2% to 238.88 and remained above a buy point of 235.57 with a flat base. Mastercard shares fell 0.3% to 393.14, just above a flat-base buy point of 392.20, according to MarketSmith’s analysis. The payments giants offered early entries last week, but both are still within the 50-day range.
Nvidia shares gave up 0.5% to 421.03, above the 10-day line. Stocks are not far from their 21-day line, but they haven’t reached that short-term level in two months. NVDA shares are on a tight three-week pattern that could turn into a tight four-week pattern after Friday. A test of the 21-day line, or possibly the 400 level, could be a nice shakeout and allow the rapidly rising 50-day line to close the gap. The official buy point is 439.90, but Wednesday’s high of 431.77 would offer an early entry.
DexCom shares fell 0.3% to 127.70 to close above the 126.44 flat-base buy point after finding support at the 21-day line for a third session in a row. DXCM shares have struggled to clear a range since early November. But stocks have moved higher in choppy form since late January.
HubSpot gained 0.1% to 521.34 and closed above the 21-day line. Shares fell to an intraday low of 497.03, but recovered from the 10-week line. Investors who bought shares of HUBS as it attempted to resolve a tight four-week period at the end of June may have been shaken. But it can set up again.
Time the market with IBD’s ETF market strategy
What to do now
The new or renewed pullback from the market could be constructive, creating new buying opportunities from pullbacks to key levels and possibly base forging.
But investors don’t know that the current decline will be mild again, or that their positions will hold up relatively well.
It’s a time to consider cutting some profits and cutting losses quickly, especially on newer purchases.
Meanwhile, investors should look for those constructive pullbacks and stocks that hold important levels and are relatively strong, such as HUBS stock, Visa, and perhaps Nvidia. Watchlists may again undergo serious revision in the coming days. But that work could pay big dividends when the market rally ramps up again.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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