Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, with the May jobs report on tap. The stock market rally had a strong session, shrugging off a Microsoft (MSFT) profit warning and the Fed’s No. 2 official signaling big rate hikes will continue through September.
FlexLNG (FLNG), Howmet Aerospace (HWM), AAR Corp. (AIR), Enphase Energy (ENPH) and ZIM Integrated Shipping (ZIM) are near buy points. FLNG stock, AAR and Howmet Aerospace cleared early buy points Thursday, while Enphase broke out. ZIM stock is setting up.
Meanwhile, it was a strong day for EV makers and highly valued growth stocks such as You’re here (TSLA), Xpeng (XPEV), MongoDB (MDB) and UiPath (PATH), with the latter two flying on earnings. All of these names still need a lot of repair work.
China EV and battery giant BYD (BYDDF) rose on record May sales, on track to sixteen Tesla’s EV crown in the second quarter. BYD stock rose solidly, moving toward all-time highs.
Despite declining NYSE and Nasdaq volume, Thursday’s market rebound was encouraging after two days of modest losses. Investors can slowly add to exposure, but take small steps.
After the close, upscale retailers Lululemon Athletica (LULU) and HR (RH) topped quarterly views, but RH gave weak guidance. Cybersecurity plays CrowdStrike (CRWD) and Okta (OKTA) topped and beat guidance. LULU stock rose modestly overnight, while RH and CRWD stock retreated slightly. OKTA stock jumped. All four stocks are off recent lows, but a long way from being actionable.
ENPH stock is on IBD Leaderboard. Enphase and HWM stock are on SwingTrader. MSFT stock is on IBD Long-Term Leaders. ZIM stock is on the IBD 50. Howmet Aerospace was Thursday’s IBD Stock Of The Day.
The video embedded in this article highlights Thursday’s market action and analyzes FLNG stock, Enphase and Epam Systems (EPAM).
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures advanced 0.15% and Nasdaq 100 futures climbed 0.2%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
The Labor Department will release the May jobs report at 8:30 am ET. Economists expect nonfarm payrolls to rise by 325,000 after April’s 428,000. The jobless rate should dip to 3.5% with hourly earnings up 0.4% vs. April. The May jobs report follows Thursday’s ADP Employment Report estimating that private payrolls rose just 128,000, far below views, with small firms cutting 91,000 jobs.
The Federal Reserve wants to see substantial cooling in the labor market to curb inflation and inflation expectations. But a half-point rate hike at the mid-June Fed meeting is baked in. Policymakers will get several months of economic data before changing course or speed.
Stock Market Rally
The stock market rally got off to a rocky start Thursday as Microsoft warned on June-quarter earnings and revenue just before the opening bell, blaming currency swings. Not long after the open, Fed Vice Chair Lael Brainard said it’s “very hard to see the cause for a pause” in September, becoming the latest policymaker to indicate that half-point rate hikes are likely for at least the next three meetings.
But the market rally soon rebounded for strong gains, led by techs and small caps. Even MSFT stock, down 4% at one point, closed up 0.8%.
The Dow Jones Industrial Average rose 1.3% in Thursday’s stock market trading. The S&P 500 index advanced 1.8%. The Nasdaq composite jumped 2.7%. The small-cap Russell 2000 popped 2.4%.
US crude oil prices rose 1.4% to $116.87 a barrel, after falling 3% before the open. OPEC+ will increase production quotas by 648,000 barrels per day in July and August, but less than some reports had suggested. US crude oil inventories tumbled in the latest week.
The 10-year Treasury yield dipped 2 basis points to 2.91%, after surging 19 basis points in the prior two sessions.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.9%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) shot up 4.6%. MSFT stock is a major component. The VanEck Vectors Semiconductor ETF (SMH) advanced 3.5%.
SPDR S&P Metals & Mining ETF (XME) was up 3.75% and the Global X US Infrastructure Development ETF (PAVE) rose 2.1%. US Global Jets ETF (JETS) was up 1.6%. SPDR S&P Homebuilders ETF (XHB) ascended 2.3%. The Energy Select SPDR ETF (XLE) dipped 0.3% and the Financial Select SPDR ETF (XLF) was up 1.4%. The Health Care Select Sector SPDR Fund (XLV) pink 0.8%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) flew 7.4% higher and ARK Genomics ETF (ARKG) was up 6.1%. Tesla stock remains the No. 1 holding across Ark Invest’s ETFs, with BYD stock and XPEV stock also small holdings. Cathie Wood’s ARKK also owns a lot of PATH stock.
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Stocks In, Near Buy Zones
Flex LNG stock jumped 7.75% to 30.04, rebounding powerfully from the 50-day line and getting above the 30 level, an area of resistance. Investors could buy FLNG stock, though it’s nearly 7% above the 50-day line now. Shares are working on a 32.87 consolidation buy point, according to MarketSmith analysis.
The relative strength line for FLNG stock is at a record high. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.
Howmet stock climbed 3.6% to 36.97, moving toward a 37.63 double-bottom buy point. Thursday’s action pushed HWM stock above an early entry at 36.13, still in range from the 50-day line. The RS line for Howmet stock is already at a high. Howmet Aerospace makes titanium parts for the aerospace industry.
AIR stock climbed 3.2% to 50.13, bouncing from near its 50-day line and topping an early entry of 49.76. Shares are moving toward a 52.10 official buy point in a 15%-deep base. The RS line for AIR stock is at a new high.
Enphase stock surged 9% to 198.93, clearing a 193 buy point from a double-bottom base that formed in the lower part of a much-larger consolidation. The RS line for ENPH stock is well off all-time levels, but did hit a consolidation high on Thursday.
ZIM stock popped 3.2% to 66.37. Shares are in a cup base with a 75.81 buy point. But ZIM stock is working on a possible handle, though that needs a few more days. The container shipping stock is already more than 9% above its 50-day line.
Tesla stock rose 4.7% to 775, rebounding above its 21-day moving average. But it’s well below its 50-day and 200-day moving averages. TSLA stock needs to get above those levels before investors pay close attention.
XPEV stock leapt 9.7% to 25.15, topping its long-sliding 50-day moving average. Xpeng is benefiting from rebounding EV deliveries in May but also new EV subsidies and the end of the Shanghai lockdown, which will also benefit Tesla and many other automakers.
BYD stock climbed 4.5% to 37.37, continuing a sharp rally from early May. Shares are now extended from a 34.60 early entry and are working toward a 41.34 official buy point. But after running up the right side of a 48%-deep cup base, BYD stock could use a handle.
Early Thursday, BYD reported May sales of 114,943 EVs and plug-in hybrids, a record and the third straight month above 100,000.
Market Rally Analysis
The stock market rally had a solid bounce on Thursday, despite the Microsoft warning and Fed rate-hike signals. The major indexes all found support at their 21-day lines once again.
Thursday’s volume declined from Wednesday, so don’t get too excited. Still, the market in the past several days has weathered or rallied on seemingly bad news.
Meanwhile, the Dow Jones and Russell 2000 are closing in on their 50-day lines, with the S&P 500 and Nasdaq not too far behind. That could serve as a temporary resistance area or spur yet another reversal toward lows. But even if the key indexes move past their 50-day lines, they still would face several other tests.
The current market rally pause this week is letting some possible handles start to form, such as with ZIM stock. Longer sideways action could be beneficial. It would let some stocks forge or finish bases and let moving averages catch up. Especially outside the oil and gas sector, there aren’t that many stocks to buy. A number of stocks are setting up, but some — Atkore (ATKR) and ZIM come to mind — already are some distance above their 50-day lines.
Some chemicals, building materials and shipping stocks look interesting. Drug stocks are coming under pressure amid renewed buzz of possible price controls.
There were some huge moves among highly valued software stocks Thursday. MongoDB and UiPath surged 19% and 17%, respectively, on earnings. But plenty of other names powered higher, such as Datadog (DDOG). But even after big percentage moves off recent bottoms, they have a long road ahead. And if the market sours, highly value growth names will be hard hit.
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What To Do Now
The stock market rally had a solid session. Investors can keep nibbling on stocks, gradually adding to exposure. But in the past week many stocks have shown much-more volatile action than the major indexes, such as Albemarle (ALB). A real market sell-off could trigger major losses in would-be leading stocks. Keeping individual positions and overall exposure light is a good way to minimize losses and limit have much loss-cutting you need to do.
If the market rally has real legs, your initial positions should work and you can gradually increase exposure, generating big gains over the run.
For now, keep working on your watchlists. Energy will still be heavy in that list, but track stocks with strong relative strength across a variety of sectors.
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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