Dow Jones futures tilted higher Thursday morning, along with S&P 500 futures and Nasdaq futures, with Tesla rival Nio headlining overnight earnings reports. Growth once again lagged in Wednesday's stock market rally, while recovery plays led amid a tame inflation report and the White House seeing coronavirus cases "leveling off."
The Dow Jones and S&P 500 hit fresh all-time highs, with steel, materials, industrial, financial and some retail. The Nasdaq composite retreated modestly, paring losses even as Treasury yields dipped following a cooler-than-expected consumer price index. But many growth stocks suffered bigger losses, including chip and software names such as Applied Materials and CrowdStrike, with those charts starting to look more damaged.
Amid tentative signs of a peak in new Covid cases, coronavirus vaccine makers Moderna and BioNTech sold off hard. Supplier Maravai LifeSciences erased a big post-earnings gain. Other Covid plays, such as Zoom Video and DocuSign, also retreated, while better news on the virus may have weighed on highly valued software names generally.
On the plus side, a few recent IPOs surged Wednesday on earnings, including Upstart Holdings, Doximity and Unity Software.
But for the most part, growth took a back seat while recovery plays drove the advance.
Housing-related retailers RH and Home Depot cleared buy points, with builder Lennar arguably actionable. Shipping-related Textainer and industrial play Crane broke out, while trucking operator Old Dominion flirted with a buy point. Capital One and Five Below extended their recent breakouts.
Bottom line: Sector rotation is alive and well in the stock market rally. Investors need to adjust their portfolios and watchlists, but not upend their holdings either.
After the close, Nio stock, eBay, high-end music speaker maker Sonos and U.S. cannabis producer Green Thumb Industries reported better-than-expected earnings.
Energy drink maker Celsius Holdings reports early Thursday. Shares rose 1.2% to 77.81 on Wednesday, the eighth straight advance. CELH stock has been closing on an 83.10 buy point.
Tesla stock is on IBD Leaderboard and SwingTrader. MRNA stock, Celsius, CrowdStrike, Upstart, Doximity and Maravai are on the IBD 50. CR stock was Wednesday's IBD Stock Of The Day. COF stock was Tuesday's Stock Of The Day. RH stock and Lennar were recent Stock Of The Day selections.
The video embedded in this article analyzes Unity stock, Textainer and Crane, along with the overall market rally.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures were slightly higher. Nasdaq 100 futures gained a fraction.
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 205.70 million. Covid-19 deaths topped 4.34 million.
Coronavirus cases in the U.S. have hit 37.06 million, with deaths above 635,000.
There are some signs that new cases worldwide and in the U.S. may be peaking. The White House said Wednesday that some states with surging caseloads are seeing new infections level off. U.S. vaccinations have picked up substantially in the past few weeks, especially in states with low immunization rates. Social distancing also appears to be increasing.
Meanwhile, the European Medicines Agency is probing potential new side effects from the mRNA vaccines, including some skin reactions and kidney woes.
MRNA stock plunged 18% and BNTX stock 17%, accelerating losses from Tuesday after the coronavirus vaccine makers have had huge runs. Maravai, which provides supplies to help make the mRNA vaccines from Moderna and BioNTech, initially surged 13% to a record high on strong earnings. But MRVI stock closed down 0.4%.
After the close, CNN reported that the FDA is expected to authorize Covid vaccine booster shots in the next two days for immunocompromised Americans, who get less protection from the jabs than other people. Booster shots for the elderly and others could come in the next several weeks.
Moderna and BNTX stock rose slightly in premarket trade.
Stock Market Rally
The stock market rally continued to show sector rotation out of growth and into recovery stocks.
Before the open, the consumer price index continued to show big gains vs. a year earlier. But core prices cooled somewhat, below analyst views, as red-hot used-car prices were nearly flat vs. June after surging in the prior two months. The 10-year Treasury yield dipped 1 basis point to 1.33%, ending a six-session winning streak.
U.S. crude oil futures rose 1.4% on Wednesday after initially sinking on White House calls for more OPEC production.
The Dow Jones Industrial Average rose 0.6% in Wednesday's stock market trading. The S&P 500 index climbed 0.25%. The Nasdaq composite dipped 0.2%. The small-cap Russell 2000 rose 0.5%.
Among the best ETFs, the Innovator IBD 50 ETF fell 0.5%, while the Innovator IBD Breakout Opportunities ETF gained 0.8%. The iShares Expanded Tech-Software Sector ETF dipped 0.25%. The VanEck Vectors Semiconductor ETF edged down 0.3%.
SPDR S&P Metals & Mining ETF climbed 2.3% and Global X U.S. Infrastructure Development ETF gained 1.8%. U.S. Global Jets ETF advanced 1.4%. SPDR S&P Homebuilders ETF rallied 2.3%. The Energy Select SPDR ETF added 0.8% and the Financial Select SPDR ETF rose 1.15%.
Reflecting more-speculative story stocks, ARK Innovation ETF dipped 0.1% and ARK Genomics ETF retreated 1.3%.
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Key Earnings
Nio earnings topped views with the EV maker offering upbeat revenue guidance. Nio stock was up 1.5% early Thursday. Shares dipped 0.6% to 43.97 on Wednesday, below their 50-day and 200-day lines. Nio stock is in a very deep consolidation after peaking at 66.99 in January. But after this week, Nio stock will have a cup base within the larger pattern, with 55.23 buy point.
Meanwhile, Tesla stock was quiet late. Shares edged down 0.3% on Wednesday to 707.82, holding above a 700.10 buy point. TSLA stock appears to be forming another shelf over the past several sessions.
EBay earnings topped and the e-commerce giant raised guidance. EBay stock fell 2% overnight. Shares rose just over 1% to 68.02 on Wednesday, just reclaiming the 50-day line. EBay stock hit a record 74.13 on July 29, but then sold off on weak Amazon sales and guidance that day and kept falling amid a disappointing Etsy outlook.
Sonos earnings comfortably beat views while the music speaker maker raised guidance. SONO stock popped 10% before the open, offering an early entry from a 50-day line rebound. Shares sank 1.2% to 34.80 on Wednesday, closing just above the 50-day. SONO stock has a 44.82 official buy point.
Green Thumb earnings topped Q2 views. GBTIF stock, which trades over the counter, was not active in overnight trade. Shares slumped 5% to 31.30 on Wednesday. Green Thumb stock has been consolidating for six months with a 39.21 buy point. Investors could use 35.25 as an early entry for GBTIF stock.
Trulieve, another U.S. pot producer, reported better-than-expected revenue early Thursday. GrowGeneration, a pot supplies retailer, slightly missed on profit but beat on sales.
Market Rally Analysis
Sector rotation is alive and well in the stock market rally, with recovery plays leading and growth struggling. For a second straight day, the Dow Jones and S&P 500 hit record highs. The Nasdaq dipped to its 21-day line but remains close to all-time levels. The small-cap Russell 2000 isn't moving toward its 50-day line.
But while the Nasdaq still looks fine, many growth stocks came under pressure.
AMAT stock fell 2.35% and CrowdStrike 5.1%. Both suffered noticeable losses on Tuesday as well. Those charts didn't look bad on Tuesday's close, though AMAT and CRWD stock did undercut their 21-day lines. But on Wednesday, however, AMAT stock and CRWD stock sliced through their 50-day lines, with the latter hitting its lowest level since June 21.
Yes, UPST stock, Doximity, Unity Software and FuboTV were big earnings winners Wednesday, but those were exceptions.
Steel, industrial, financial, housing and discount retailers looked strong, with a number of breakouts in recent days.
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What To Do Now
As always, investors should follow the stock market. Right now, the market rally is rotating in favor of recovery plays and away from growth. Investors likely are diversifying even if that's not their goal, as they cut some weaker software or other growth names in their portfolios and replace them with steel, housing or financials breaking out such as RH, Crane or Capital One.
There's no need to bail on growth stocks wholesale. Some are marching ahead — or holding their ground like Tesla stock. Sector rotation could easily swing back to growth in the next few days or weeks.
Keep working on those watchlists. If you're running screens and doing your homework, you'll spot possible new leaders before they flash buy signals.
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