Dow Jones futures fell solidly Friday morning, along with S&P 500 futures and Nasdaq futures, after Russian troops seized Europe's largest nuclear power plant. Futures sold off Thursday night on reports that a fire broke out at the Ukrainian nuclear power plant complex. They recovered somewhat as later reports clarified that the fire did not threaten the plant itself.
The stock market rally hit resistance at a key level Thursday, reversing lower with the Nasdaq, small caps and especially aggressive growth leading the slide.
Meanwhile, investors will turn their attention to Friday's jobs report, due out before the stock market open.
Ukraine Nuclear Power Plant Facility
There was a fire in or adjacent to the Zaporizhzhia nuclear power plant complex on Thursday. Initial reports indicated that the nuclear plant in southern Ukraine, was, under assault by Russian troops, itself was on fire or in danger. Firefighters were eventually allowed into the facility, putting out the fire.
Russian troops now control Zaporizhzhia, the largest nuclear power plant in Europe and one of the world's 10 largest.
In 1986, while Ukraine was still part of the Soviet Union, the Chernobyl nuclear plant had a major accident, widely seen as the worst in human history in terms of cost and casualties.
Ukraine Invasion: 'Worst Is Yet To Come'
Earlier, Ukraine said an "understanding" has been reached with Russia on humanitarian corridors, letting Ukrainian civilians evacuate from besieged cities and letting in humanitarian aid. That would involve local cease-fires around those corridors.
But Russian President Vladimir Putin said on TV that his Ukraine invasion was "going according to plan." The Russia military is gaining territory, especially in the south by the Black Sea. But it's suffering notable losses in troops and equipment, with nearly all of the Russian forces that had been massed on Ukraine's border now committed to the fight.
The economic pain continues to build, with growing calls to sanction Russian energy. Russia's stock market, closed all this week, will remain closed until at least next Wednesday. But that appears to be forestalling the inevitable crash.
French President Emmanuel Macron said he fears "the worst is yet to come" following a lengthy phone call with Russian dictator Putin. He said Putin seems determined to continue his Ukraine invasion until he controls all of the country. Russia has been using artillery and bombs to hit major cities, striking many residential areas.
Jobs Report
At 8:30 a.m. ET, the Labor Department will release the February jobs report. Economists expect nonfarm payrolls to rise by 390,000 with the jobless rate dipping to 3.9%. The labor force participation rate will be key, as the Federal Reserve looks for signs of an increased workforce to ease supply-chain bottlenecks and wage pressure.
The Fed is expected to raise rates by a quarter point at its March 15-16 meeting. But the jobs report, the upcoming February consumer price index and Russia's Ukraine invasion could still alter that decision.
Dow Jones Futures Today
Dow Jones futures sank 0.9% vs. fair value. Futures turned sharply lower on the initial reports that the Zaporizhzhia nuclear power plant was on fire, then pared losses significantly that the now-extinguished fire didn't threaten the plant itself.
S&P 500 futures retreated 0.85%. Nasdaq 100 futures slumped 0.7%.
Crude oil prices rose 3%. The 10-year Treasury yield sank 7 basis points to 1.78%. As with stock futures, crude and Treasury yields swung overnight on the Ukraine nuclear plant news.
Dow futures are sure to move on the February jobs report before the market open.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Key Earnings
Costco Wholesale and Broadcom headlined earnings Thursday night.
Costco earnings and revenue topped views. But same-store sales growth, though above official fiscal Q2 views, slowly slightly vs. Q1. COST stock fell 2% early Friday. Shares edged up 1% to 533.05 on Thursday. Costco stock has a 571.59 cup-base buy point. Investors could use 534.34, just above short-term resistance at the 50-day line, as an aggressive entry.
Broadcom earnings and guidance were better than expected. AVGO stock rose 3% early Friday. Shares dipped 1.2% to 578.60 on Thursday. Broadcom stock has been consolidating, but needs to get above its 50-day line and a short-term high for an aggressive entry of 614.74. The official buy point is 677.86.
Stocks Breaking Out Thursday
Union Pacific broke out of a flat base intraday, though it pared gains into the close. Fellow rail operator CSX flashed an aggressive entry.
Warren Buffett's Berkshire Hathaway broke out as well. Berkshire, best known as an insurance giant, another pocket of market strength, also owns the BNSF railroad. Having a huge investment in Apple doesn't hurt Berkshire either.
Kroger gapped out of a base on earnings, while Sprouts Farmers Market also triggered buy signals. Fertilizer and lithium play SQM surged out of a base on blowout earnings and bullish comments about pricing.
But growth stocks were laggards, especially highly valued names. The Snowflake sell-off on earnings and guidance triggered heavy selling in many names.
That includes Datadog and Tesla, two of the relative standouts among the triple-digit P-E stocks.
Tesla stock and Union Pacific are on IBD Leaderboard, while CSX stock was added to the Leaderboard watchlist. Union Pacific also was Thursday's IBD Stock Of The Day.
The video embedded in this article discussed Thursday's market action and analyzed UNP stock, Anthem and DDOG stock.
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Stock Market Rally
The stock market rally opened strong but almost immediately fell back, with growth and small-cap stocks hardest hit.
The Dow Jones Industrial Average fell 0.35% in Thursday's stock market trading. The S&P 500 index dipped 0.6%. The Nasdaq composite slumped 1.6%. The small-cap Russell 2000 retreated 1.2%.
Crude oil prices fell 2.6% to $107.67 a barrel, after topping $114 in premarket trade. House Speaker Nancy Pelosi called for halting U.S. imports of Russian crude, which would have a relatively limited impact. However, a majority of Russian crude exports is failing to attract buyers. In addition to Russia-Ukraine headlines, Western nations and Russia are making progress toward a new Iran nuclear deal. That would free up big Iranian crude oil exports.
The 10-year Treasury yield also reversed lower, dipping about 2 basis points to 1.84%.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF edged down 0.1%, while the Innovator IBD Breakout Opportunities ETF lost 0.7%. The iShares Expanded Tech-Software Sector ETF retreated 2.5%. The VanEck Vectors Semiconductor ETF sank 2.2%.
SPDR S&P Metals & Mining ETF ran up 3.2% while the Global X U.S. Infrastructure Development ETF rose 0.5%. U.S. Global Jets ETF descended 3.4%. SPDR S&P Homebuilders ETF dropped 1.1%. The Energy Select SPDR ETF edged up 0.3% and the Financial Select SPDR ETF dipped 0.3.%. The Health Care Select Sector SPDR Fund advanced 0.5%.
Reflecting more-speculative story stocks, ARK Innovation ETF slumped 6.4% and ARK Genomics ETF 4.6%. Ark Invest has only minimal exposure to SNOW stock, but many of its highly valued holdings skidded Thursday in Snowflake's avalanche. Tesla stock remains the No. 1 holding across ARK Invest's ETFs.
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Rail Operators
Union Pacific stock rose 1.15% to 256.21, closing near session lows. That's after hitting 263.59 intraday, above a 256.21 buy point most of the day, according to MarketSmith. The flat base is just 8% deep. The relative strength line for UNP stock is at a record high. The RS line, the blue line in the charts provided, track a stock's performance vs. the S&P 500 index.
CSX stock popped 2% to 35.29, closing right at its 50-day line. Intraday, shares cleared their February peaks, offering an aggressive entry. The flat-base buy point is 38.11.
Berkshire Hathaway is best known for its insurance operations and Warren Buffett's investments. But the BNSF rail operations are a key part of the business. BRKB stock rose 1.2% to 327.63. That cleared a four-weeks-tight with an official buy point of 325.73. Investors could view the consolidation since mid-January as an untidy flat base.
The rail advance comes as shipping companies are generally acting well. Oceangoing carriers such as Star Bulk Carriers and Zim Integrated Shipping have led the way for a long time. Meanwhile, J.B. Hunt Transportation is actionable with other trucking companies starting to look interesting.
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Market Rally Analysis
The stock market rally attempt opened Thursday with the S&P 500 index and Nasdaq composite moving above their 21-day moving average, while the Dow Jones came right up to that level. But within a minute, the major indexes backed off and reversed lower,
The 21-day has acted as resistance for the major indexes for most of 2022. Above that, the Dow, S&P 500 and Nasdaq still face several other potential hurdles.
Thursday was an outside day for the Nasdaq, with means its intraday range exceeded Wednesday's highs and lows. Outside days are more meaningful. So the downside reversal was even more discouraging.
Aggressive growth was hammered Thursday. Snowflake beat views late Wednesday, doubling revenue and slightly guiding higher for the current fiscal year. But that wasn't enough, as SNOW stock plunged 15% to a nine-month low. A slew of other highly valued stocks, especially software, sold off as well.
DDOG stock plunged 9.7%, back below its 50-day line.
Tesla stock, though performing much better than most EV plays, slumped 4.6%, back below its 21-day line but just managed to hold above its 21-day.
Still, the market rally attempt remains intact. A follow-through day could happen at any time to confirm the new uptrend.
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What To Do Now
Just because a high school student is on a "college track" does not mean that she will graduate from MIT with honors, or even graduate high school.
Wednesday's strong gains, which came on lighter volume than in the prior session, was encouraging. But with no follow-through day and the major indexes still pinned below the 21-day line, there was no reason to significantly add exposure.
The market rally attempt may become a confirmed uptrend in the near future, and that uptrend may have legs. But the news-driven market could quickly head south. Also, some sectors that have done well, notably in energy and commodities, might take a back seat if the broader indexes steadily advance.
So, if and when the market rally shows strength, gradually build up your exposure. For now, investors may want to take at least partial profits on winners as they reach 10%.
There's still nothing wrong with being all or nearly all in cash.
Keep working on watchlists. Stay engaged so you're ready for when the market turns.
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.
