Dow Jones futures were little changed late Thursday, along with S&P 500 futures and Nasdaq futures, after the major indexes rose Thursday while growth stocks continued to lag. Amid another rush of earnings from Cloudflare (NET), Roku stock and more, the Federal Reserve late Thursday that many asset prices are “elevated” and “vulnerable to significant declines.”
The stock market rally showed gains across the major indexes Thursday, closing near session highs. The Dow Jones hit a record high while the Nasdaq rebounded for slim gains after tumbling below key levels intraday.
A big catalyst: German Chancellor Angela Merkel opposed President Biden’s call to waive intellectual property rights for coronavirus vaccines from the likes of Moderna (MRNA) and partners Pfizer (PFE) and BioNTech (BNTX)
Tech Titans Mask Growth Woes
Even so, the Nasdaq’s performance had a lot to do with megacaps Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Facebook (FB) and Google parent Alphabet (GOOGL).
Beneath the surface, many growth names were pummeled, especially software and other highly valued names, including Square stock, Cloudflare and Roku (ROKU).
Square (SQ), NET stock and Roku reported earnings late Thursday, along with Floor & Decor (FND), EOG Resources (EOG), Progyny (PGNY) and Expedia (EXPE). Cloudflare, Roku and Expedia stock popped overnight while FND stock fell. Square and EOG stock rose slightly while Progyny was little changed.
On the bright side, mining and metals stocks continued to do well, along with financials. Oil and gas stocks pulled back but their charts looked fine.
Farm-machinery giant Deere (DE) and fertilizer maker CF Industries (CF) flashed buy signals.
Federal Reserve Warns Asset Prices ‘Vulnerable’
In its semiannual Financial Stability Report, the Fed said the the financial system remain stable, but high asset prices are a concern.
“High asset prices in part reflect the continued low level of Treasury yields. However, valuations for some assets are elevated relative to historical norms even when using measures that account for Treasury yields,” the report stated. “In this setting, asset prices may be vulnerable to significant declines should risk appetite fall.”
The report significant noted the recent Archegos Capital Management margin calls that triggered big losses in several major banks.
Fed Gov. Lael Brainard, in an accompanying statement, said equity valuations reflect an “elevated risk appetite.” Brainard cite the term “meme stock,” in which stocks or other assets soar based on social media-fueled memes.
Microsoft, Google, Floor & Decor are on IBD Leaderboard. PGNY stock is an IBD Leaderboard earnings option. Deere stock is on SwingTrader. MSFT is on IBD Long-Term Leaders. Progyny and Square stock are on the IBD 50. CF stock was Thursday’s IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures were even with fair value. S&P 500 futures edged higher. Nasdaq 100 futures climbed 0.1%.
The Fed warning on asset prices didn’t seem to have an affect on Dow futures.
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 cases worldwide reached 156.59 million. Covid-19 deaths topped 3.26 million.
Coronavirus cases in the U.S. have hit 33.36 million, with deaths above 593,000.
German Chancellor Merkel said Thursday she opposes suspending patent protections for coronavirus vaccines, after President Biden backed waiving IP rights Wednesday afternoon. BioNTech, which has partnered with drug giant Pfizer on a leading vaccine, is a German biotech.
BioNTech stock sank 1.6% to 168, after plunging as low as 145. BNTX stock peaked at 213.15 intraday Tuesday.
Moderna, which reported a first-ever profit early Thursday but missed on revenue, fell 1.4% after slashing steep losses. Novavax (NVAX), which will soon request FDA emergency approval for its Covid vaccine, edged up 0.45%. BNTX, MRNA and NVAX all reversed lower Wednesday on the Biden patent move.
Stock Market Rally Thursday
The stock market rally had a positive session on the surface, with the major indexes rising and closing near session highs. But many growth stocks struggled.
The Dow Jones Industrial Average rose 0.9% in Thursday’s stock market trading. The S&P 500 index climbed 0.8%. The Nasdaq composite closed up 0.4%. The tech-heavy erased sharp intraday losses on the latest Covid vaccine patent news. The Nasdaq fell Wednesday on news that Biden backed waiving coronavirus protections.
Apple stock rose 1.3% on Thursday. Microsoft, Amazon, Facebook and Google stock all rose at least 1%.
Beneath those titans, growth stocks struggled, though commodity-related plays fared well.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slumped 2.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) dipped 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 0.5%. The VanEck Vectors Semiconductor ETF (SMH) rose 0.8%, halting a recent sell-off.
SPDR S&P Metals & Mining ETF (XME) popped 1.7%, hitting a record high for a fourth straight day. The Global X U.S. Infrastructure Development ETF (PAVE) added 0.6%. U.S. Global Jets ETF (JETS) lost 0.4%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) sank 2.7% and ARK Genomics ETF (ARKG) 2.9%, both below their 200-day lines. Roku stock and Square stock are top-five holdings for ARK Investments across its ETFs.
Five Best Chinese Stocks To Buy And Watch Now
Square earnings boomed, easily beating views, but the digital payments leader said fading stimulus cash will slow CashApp growth. SQ stock climbed 3% in overnight action. Square stock fell 3.4% to 223.96 on Thursday, falling further below the 50-day line. SQ stock came close to breaking out on April 14 but has reversed sharply lower since then.
Cloudflare reported a small adjusted loss that was in line with views, while revenue and sales outlook were strong. NET stock rallied 7% in extended trade. Cloudflare stock plunged nearly 13% on Thursday to 69.07, diving below its 50-day line. NET stock has fallen for seven straight sessions, but the first several had been small, low-volume declines that looked constructive. Not anymore.
Roku earnings were a surprise, with a first-ever adjusted profit. User growth missed views. Still, Roku stock jumped 8% overnight. Shares tumbled 6.6% on Thursday, undercutting their 200-day line in their eighth straight decline. Roku stock has sold off hard since hitting resistance at its falling 50-day line.
Floor & Decor earnings cleared Wall Street estimates FND stock fell 2.8% in extended action, but still in buy range. Shares rose 0.6% to 113.20 on Thursday, holding above a 108.64 buy point.
EOG Resources earnings topped views with the shale oil producer also announcing a $1 special dividend. EOG stock rose 2% in overnight trade, moving above a 77.24 buy point. Shares edged up 0.35% on Thursday to 76.98.
Expedia earnings were better than expected. EXPE stock popped 6.5% in extended action, signaling a possible move back above the 50-day line. Expedia stock sank 3.6% to 164.82, falling further below its 50-day line and just undercutting the low of its flat base. EXPE stock has a 188.03 buy point.
Progyny earnings beat expectations. PGNY stock was little changed overnight. Shares of the fertility benefits specialist fell 2.45% to 52.10 on Thursday, their sixth straight loss. PGNY stock is now back below a 53.58 buy point or 55.10 alternate entry.
Market Rally Analysis
The stock market rally continued to show its split behavior, Yes, the Nasdaq rebounded from a key 50-day test while the Russell 2000 closed fractionally higher. But tech and growth names look terrible beneath Apple, Google and other titans.
Growth ETFs show major damage over the last several weeks. For every tech stock that rallies slightly on earnings, several sell off hard.
At some point, tech stocks will rally. But you don’t know when, or whether your holdings will rebound as well.
Focus on sectors that are working, including commodity plays and financials. But even here, investors should exercise caution. Commodity plays are highly sensitive to the underlying commodity price, such as oil, copper, iron or corn. The current market rally could resolve itself with the Nasdaq and small-cap Russell 2000 dragging down the rest of the market.
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.
YOU MAY ALSO LIKE:
Why This IBD Tool Simplifies The Search For Top Stocks
Catch The Next Big Winning Stock With MarketSmith
Want To Get Quick Profits And Avoid Big Losses? Try SwingTrader
Best Growth Stocks To Buy And Watch
IBD Digital: Unlock IBD’s Premium Stock Lists, Tools And Analysis Today