Dow Jones futures were mixed Thursday night, along with S&P 500 futures and Nasdaq futures. The stock market rally suffered heavy losses Thursday as the 10-year Treasury yields continued to soar. This time the Nasdaq did not rally off lows, closing below key support.
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Nvidia (NVDA) and Teladoc Health (TDOC) joined stocks round-tripping sizable gains, while Tesla (TSLA) plunged further below its 10-week line. Investors should be playing defense, especially with tech stocks. For those waiting to see how big winners held up at the end of the week, some key sell or hold decisions are coming.
Meanwhile, GameStop (GME) came well off its intraday high. GME stock rose 19% to 108.73 after doubling on Wednesday. But it came way off its intraday high of 184.68. AMC Entertainment (AMC) and Express (EXPR), two other squeeze plays that leapt Thursday morning, closed down. GME stock retreated overnight in active trade.
Key Earnings Reports
Zscaler (ZS), Etsy (ETSY), Salesforce.com (CRM), Autodesk (ADSK), Farfetch (FTCH), Airbnb (ABNB) and DoorDash (DASH) headlined a slew of earnings reports after the close.
Etsy, Zscaler, Salesforce, Autodesk and Farfetch topped earnings views. Airbnb and DoorDash reported huge quarterly losses in their first quarterly reports since their late 2020 IPOs, but beat on revenue.
Etsy stock jumped in late trade, just exceeding Thursday’s 5.5% drop. Zscaler stock climbed, recouping most of its 5.8% regular-session loss. Salesforce stock retreated overnight on weak guidance after CRM closed down 3.9%. Farfetch stock also fell in extended trade, extending a 4.15% Thursday’s slide. ADSK stock declined overnight after a 5% slump.
ABNB stock edged higher overnight after tumbling 9.1% Thursday. DASH stock sold off after closing with a 5.4% decline.
DraftKings (DKNG) reports early Friday.
Investors have been less forgiving of earnings results in the current market climate, even when profits and guidance appear strong. Nvidia stock tumbled 8.2% Thursday following earnings. Teladoc, Innovative Industrial Properties (IIPR), Progyny (PGNY), NetApp (NTAP) and Novocure (NVCR) all suffered double-digit losses.
Tesla stock and Nvidia are on IBD Leaderboard. CRM stock is on IBD Long-Term Leaders. Tesla and Etsy stock are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures dipped 0.1% vs. fair value. S&P 500 futures lost 0.1%. Nasdaq 100 futures retreated 0.6%. Futures were somewhat volatile overnight, which is not surprising given the big market moves this week.
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.
Coronavirus News
Coronavirus cases worldwide reached 113.53 million. Covid-19 deaths topped 2.51 million.
Coronavirus cases in the U.S. have hit 29.05 million, with deaths above 520,000.
Stock Market Rally
The stock market rally suffered broad-based losses Thursday, with growth continuing to lead the downside.
The Dow Jones Industrial Average sank 1.75% in Thursday’s stock market trading, a day after hitting a record high. The S&P 500 index skidded 2.45%, but found support at the 50-day line. The Nasdaq composite plunged 3.5%, closing below its 50-day line for the first time since Nov. 3. It is still above Tuesday’s intraday low.
The 10-year Treasury yield jumped 14 basis points to 1.52%. That surging yield has been putting pressure on growth stocks.
Nvidia reported strong earnings and guidance, but plunged 8.2% to 532.30. That’s more than round-tripped a 10% gain from the 560.07 buy point and is now below the 50-day line. Nvidia rose slightly overnight as CEO Jen-Hsun “Jensen” Huang told CNBC’s Jim Cramer that he’s confident that the Arm Holdings takeover will go through.
Teladoc stock plunged 14% to 219.55. That wiped out a 30% run from a 236.76 handle entry and is now 7.3% below the buy point. TDOC stock is also well below its 50-day line.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 4.4%, while the Innovator IBD Breakout Opportunities ETF (BOUT) sank 5.5%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 3.9%. The VanEck Vectors Semiconductor ETF (SMH) skidded 5.6%, with Nvidia stock a key holding.
Reflecting more-speculative story stocks, Ark Innovation ETF sank 6.4% and Ark Genomics ETF 5.8%. Their parent ARK Invest’s biggest holding is Tesla stock, and it was bulking up on the EV maker earlier in the week. TDOC stock is another top-five holding. and ARK bought a lot of Teladoc shares Thursday.
With ARK Invest starting to see withdrawals, its release of daily buys and sells may make it hard to exit positions, especially in less-liquid names.
ARKK and ARKG fell overnight as Tesla and tech futures retreated.
Market Rally Analysis
Whether we’re in a broad market retreat or a sharp sector rotation, growth stocks are reeling. The Nasdaq composite has hit resistance at the 21-day exponential moving average and is now below its 50-day. The tech-heavy index is down 5.4% this week after sliding 1.6% last week.
Perhaps this is the moment that the stock market rally regains its footing. But the current trend is not your friend. Also, even if the market does start to move higher, that doesn’t mean the speculative growth names of the past year will lead the way or even advance. Cyclicals and financials have held up well this week, and might continue to lead.
The Dow Jones is off just 0.3% for the week, and is only down because of tech titans Apple (AAPL) and Microsoft (MSFT).
Weekly Sell Signals
Investors should always sell a stock if it falls 7%-8% below the purchase price, and they shouldn’t let a double-digit gain turn into a loss, as with Nvidia and Teladoc.
But selling winning stocks is both an art and a science. One way to minimize panic selling is to wait to see how a stock finishes out the week before selling or completely closing out a position. If a stock is decisively below its 10-week line — 2% or more — that can be a sell signal. (Sometimes a stock will have support areas slightly below the 10-week line, so investors might wait for a break of those levels as well.)
But if a stock is decisively below such support, do you sell? A lot of that comes down to your cost basis. If you’re seeing a 30% gain whittled down to under 10%, you might want to get out while you still have a gain. If you’re still up 100%, then you have more leeway. Your conviction also is key. If you believe a stock has the potential for big gains from current levels, you may want to preserve the bulk of this position. If you don’t have that conviction you might cash in your chips.
Tesla stock is 13% below its 10-week line, falling sharply this week in heavy volume. That would be a sell signal, but not an automatic one.
If you bought at the 466 buy point in November, you’ve seen a 93% gain cut in half to a still-hefty 46%. You probably wouldn’t want to see much more of that gain evaporate. If you bought around 290 or 174, holding Tesla stock would be even easier to justify. But selling much or all of your Tesla stock would also be understandable.
Selling Early Pays Off
As the Nasdaq became extended in January and February, IBD suggested selling into strength and cutting exposure in various pullbacks. The goal was to lock in some profits and preserve capital when market conditions and individual stock action became a little dicey.
In the very short run, stocks may have continued running higher. But on Thursday, the Nasdaq closed about where it was on Jan. 13. The FFTY ETF is back to where it was on Jan. 14 while ARKK is at pre-Christmas levels. Broadly speaking, if you took profits from mid-January to early February, you’re in a better position today.
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