Dow Jones futures tilted lower early Friday, while S&P 500 futures fell and Nasdaq futures plunged, with Apple stock, Amazon.com and Google parent Alphabet falling on earnings. Meanwhile, the January jobs report is on tap Friday morning.
The stock market rally generally advanced yet again, but with some divergence. The Nasdaq surged as Meta Platforms spiked 23%. The S&P 500 and Russell 2000 also had strong gains, but the Dow Jones edged lower.
Other techs followed Meta, with GOOGL stock, Amazon, Microsoft and Apple all retaking their 200-day lines.
The Nasdaq and S&P 500 backed off midafternoon highs, as some of the hottest stocks such as Tesla pared gains. But the indexes shored up support heading into the close.
Still, the market rally could be due for a breather or pullback, after such strong gains in recent days. Along with Thursday night's megacap earnings, Friday's jobs report is on tap.
Key Earnings
Apple, Google, Amazon, Qualcomm and Ford Motor all reported after Thursday's close.
Apple earnings and revenue fell short. AAPL stock fell 1% in extended action, well off Thursday night's lows. Shares popped 3.7% to 150.82 on Thursday, closing above its 200-day line for the first time in nearly five months. But Apple stock could test or undercut that key level on Friday.
Amazon earnings slightly missed while revenue topped. The e-commerce and cloud-computing giant's Q1 revenue guidance midpoint was below consensus, with Amazon Web Services growth set to slow further. AMZN stock fell 3.5% in premarket trade, signaling a move back below the 200-day line. Shares jumped 7.4% to 112.91 on Thursday.
Google earnings and revenue slightly missed views. GOOGL stock declined more than 3% in extended action. Shares leapt 7.3% to 107.74, topping its 200-day line for the first time in 10 months.
Qualcomm earnings squeaked past views while revenue slightly missed. Guidance for the current quarter was generally lower than consensus. QCOM stock retreated 2% before the open. Shares fell 1.9% to 135.85 on Thursday, after fellow Apple-and-5G chipmaker Qorvo tumbled on weak guidance. Qualcomm stock climbed 3.9% Wednesday, extending its move above the 200-day line.
Ford earnings fell short, with the auto giant saying it left $2 billion "on the table." Ford stock tumbled 6% in extended trade. Shares had rallied 4% to 14.34 on Thursday, nearing a 14.77 buy point from a double-bottom base. On Thursday morning, Ford reported January U.S. sales, amid better-than-expected industrywide sales to start 2023. Ford had already cleared an early entry on Tuesday-Wednesday following General Motors earnings.
Jobs Report
The Labor Department will release the January jobs report at 8:30 a.m. ET. Economists expect to see nonfarm payrolls rising by just 185,000 after December's 223,000. That would be a two-year low. The jobless rate should tick higher to 3.6%. Average hourly earnings are expected to rise 4.4% vs. a year earlier, cooling further after December's 4.6%.
The Federal Reserve would like to see more-significant cooling in the jobs market. Despite continued big layoff announcements, especially in tech, job openings are high while jobless claims are trending lower. But Fed chief Jerome Powell said Wednesday that it was "gratifying" to see inflation start to cool even with labor markets tight.
Dow Jones Futures Today
Dow Jones futures fell 0.1% vs. fair value. S&P 500 futures declined 0.4%. Nasdaq 100 futures slumped 0.75%, well off overnight lows.
Apple stock is a Dow Jones, S&P 500 and Nasdaq component. Amazon stock, Google and Qualcomm are all S&P 500 and Nasdaq holdings. Several software makers were sliding on earnings reports as well as the AWS growth outlook.
Crude oil futures edged higher, while copper prices rose 1%.
The 10-year Treasury yield dipped 1 basis point to 3.39%.
The jobs report will no doubt swing Dow Jones futures and Treasury yields before the open.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally diverged Thursday, with the Dow Jones lagging and the Nasdaq running higher.
The Dow Jones Industrial Average edged down 0.1% in Thursday's stock market trading. The S&P 500 index jumped 1.5%. The Nasdaq composite soared 3.25%. The small-cap Russell 2000 popped 2%.
Microsoft stock popped 4.7% on Thursday, clearing its 200-day line and a long-term trendline, offering a quasi-breakout from a bottoming base.
Etsy jumped 6.2% to 148.20, breaking out from a cup-with-handle base entry of 140.66, according to MarketSmith daily chart. On a weekly chart, ETSY stock had already cleared a handle with a 137.01 buy point. But Amazon earnings Thursday night loomed over ETSY's strong move. ETSY stock fell slightly early Friday.
U.S. crude oil prices fell 0.7% to $75.88 a barrel after sinking to $74.97 intraday.
The 10-year Treasury yield was flat at 3.4% after sinking to 3.34% intraday, the lowest since Sept. 13. The U.S. dollar rose modestly Thursday, but after tumbling Wednesday to its worst levels since last spring.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF climbed 1%. The iShares Expanded Tech-Software Sector ETF bumped up 2.5%, with Microsoft stock a key holding. The VanEck Vectors Semiconductor ETF climbed 2.1%. QCOM stock is a notable SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF soared 6.5% and ARK Genomics ETF 5.9%.
TSLA stock is a major holding across Ark Invest's ETFs. Tesla stock rose 3.8% to 188.27 on Thursday, after hitting 196.75 intraday. But shares are up 85% from the Jan. 6 bear market low of 101.81 amid massive volume.
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SPDR S&P Metals & Mining ETF edged up 0.5% and the Global X U.S. Infrastructure Development ETF rose 1.2%. U.S. Global Jets ETF ascended 3.1%. SPDR S&P Homebuilders ETF stepped up nearly 2%. The Energy Select SPDR ETF slumped 2.3% and the Financial Select SPDR ETF 0.3%. The Health Care Select Sector SPDR Fund retreated 0.7%.
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Market Rally Analysis
The stock market rally has been gaining momentum but also diverging.
The Nasdaq, S&P 500 and Russell 2000 have decisively cleared their late 2022 highs, with the small-cap index nearing its August peaks.
Since the Jan. 6 follow-through day, the Nasdaq has had a slew of subsequent FTDs, underscoring the strength in the current uptrend. The Nasdaq this week entered a power trend, yet another bullish mark.
The Dow Jones isn't far from its August and December highs, but has lagged in 2023 and declined on Thursday, even with Apple and Microsoft stocks up strongly. Health insurers, property & casualty insurers, oil and gas plays, drugmakers and heavy equipment makers are all struggling. Some of this reflects weak earnings, or declining commodity prices. But it also reflects a shift from more-defensive names and into fast-growing, riskier trades.
Meanwhile, the tech and growth sector is riding high, fueled by beaten-down names but with plenty of solid breakouts and buying opportunities in recent days, notably in the chip space.
Several other sectors are looking strong. The broad travel, housing and auto sectors are thriving, with trucking and other shippers showing strength. A number of industrial plays are working. Metals and mining stocks have done well, though miners had a rough outing Thursday.
The market rally has come on strong in 2023. It's possible that the major indexes, notably the Nasdaq, are due for some sort of pause. Many growth stocks like Tesla have doubled or nearly so in just a few weeks or months.
That comes amid often-lackluster earnings or guidance. Apple, Amazon, Google, Ford and other overnight losers may be falling in no small part because they had run up so much in the past several days and weeks.
Friday's jobs report is another test for the uptrend and investors' positive vibes from Fed chief Jerome Powell.
A market pullback could be healthy, removing some of the froth while winners digest gains and possibly offer new buying opportunities.
Earnings will still be heavy next week, but the megacap reports will be in the rearview mirror. Meanwhile, there is more clarity about the Fed endgame, with one or maybe two more small hikes left. The economy appears likely to at least avoid a hard landing.
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What To Do Now
The stock market rally has been running strong for several weeks, offering a large number of buying opportunities. Most of those have been working.
Investors hopefully have taken advantage and added exposure gradually, letting the market rally draw them in. Adding exposure by, say, 5-to-10 percentage points on a given day may seem inconsequential. But it doesn't take many of those days to become significantly or even fully invested.
Deliberately adding exposure minimizes the risk that'll you be caught out in a market or sector reversal or pullback. A 2% drop in the Nasdaq could send some white-hot growth leaders down well more than 10%.
Avoid the temptation to buy stocks that look extended, especially with the market perhaps ready for a breather. Don't get concentrated in a particular stock or sector.
Recognize sector shifts. Oil services firms, for instance, were market leaders to start 2023 but are now struggling.
There is no longer the imperative to take partial or full profits quickly in stocks, with the market rally showing consistent strength over several weeks. Still, investors should consider when they want to cash in some gains in various winners.
Have those watchlists up to date, and be ready to take action.
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.
