Most indexes in the stock market moved quietly Tuesday, with small caps falling a little more than large-cap blue chips. But Snowflake stock begged to differ as the large-cap database firm jumped 3.3% in the heaviest volume since mid-December and cleared a proper buy point in a new base.
Both the Nasdaq and S&P 500 etched new multiyear and all-time closing highs, respectively.
For the Nasdaq, which closed at 15,425, it marked the highest close since Jan. 4, 2022.
Snowflake, featured as Tuesday's IBD Stock Of The Day, rallied past a 202.83 correct entry in a five-week flat base. The 5% buy zone, or the best range of prices in which to establish a new position, goes up to 212.97.
Snowflake is showing stock market leadership as it holds a high IBD Composite Rating of 94 out of a best-possible 99. The rating combines fundamental, technical and fund sponsorship metrics designed as an easy-to-use tool to quickly build a watchlist of growth stocks.
The Bozeman, Mont.-based innovator in database search tools reports its next quarterly results on Feb. 29.
Meanwhile, Netflix jumped more than 7% after the close as it posted bullish fourth-quarter results. Earnings lifted to $4.49 a share, up from 12 cents a share a year earlier and ahead of the Capital IQ consensus view of $4.14. Revenue hit $8.83 billion as the streaming giant added 13.1 million net new subscribers globally.
Key Indexes Today
Tuesday's moves among software firms came as the Nasdaq 100 tracker Invesco QQQ Trust edged up 0.4% at the close. It posted all-time highs last week. At the session high of 423.70, the fund had rallied more than 23% from its late-October low.
The S&P 500 nearly matched QQQ's gain, up 0.3%, but the Dow Jones Industrial Average turned almost 0.3% lower as at least seven components fell 2 points or more. The Nasdaq composite added 0.4% to 15,425 while the Russell 2000 cooled 0.4%.
In the fixed income market, the yield on the benchmark U.S. 10-year government bond rose nearly 5 basis points to 4.14%. Crude oil futures eased 0.3% to $74.51 a barrel. Gold rose 0.4% to $2,029 an ounce.
Software Jamming In The Stock Market Today
Snowflake's earnings have grown sharply since the quarter ended in April 2023, when it posted a profit of 15 cents per share vs. a 1-cent loss in the year-ago quarter. July-quarter earnings soared to 22 cents vs. a penny in the year-ago quarter, then rose 127% to 25 cents a share in the October-ended fiscal Q3.
Sales jumped 48%, 36% and 32% vs. year-ago levels over that same time frame.
Wall Street sees the company posting a net profit of 79 cents a share in fiscal 2024, which ends this month, then growing earnings another 40% to $1.11 a share in fiscal 2025. Snowflake went public at 120 a share in September 2020 and sailed as high as 429 in December that year before plummeting.
Mutual funds have begun to pile into SNOW stock as well.
According to MarketSmith, mutual funds owning a piece of Snowflake grew to 1,706 funds at the end of the fourth quarter 2023 vs. 1,675 in Q3 the same year and 1,622 in the year-ago quarter.
Franklin Growth, a member of the IBD Mutual Fund Index, held 370,000 shares in Snowflake as of Q4 2023, down from 530,000 shares during the second quarter the same year.
Monday.com Rallies Hard On Tuesday
Other enterprise software stocks having a bullish week so far include Monday.com, highlighted on IBD Live last week. The midcap stock climbed back above a buy point of 189.15 amid a 6% gain Tuesday.
Shares are gaining momentum since rising out of a five-month consolidation pattern. The developer of work management software tools also bolted past resistance at 200.
During a December breakout attempt, Monday.com reversed and fell 7% below that entry point, justifying a sell rule to cut losses. Since then, Monday.com rebounded during a test of the 10-week moving average and hit new 52-week highs before completing a new bullish chart pattern. Yet the recent action from Dec. 19 through Jan. 19 resembled a flat base.
The Israeli company shows a top-flight 99 Composite Rating, according to IBD Stock Checkup. In the years 2019 through 2022, Monday.com lost a cumulative $6.33 a share. But the company has posted positive earnings five quarters in a row, including a net profit of 64 cents a share in the third quarter as sales roared 38% higher to $189.2 million, likely the highest amount for a single quarter.
Wall Street sees Monday.com earnings $1.46 a share in 2023 and $1.97 a share in 2024, up 35%.
Earnings Season: Homebuilders Punished
Elsewhere, a sharp drop by D.R. Horton on quarterly earnings sparked a slide in its industry group. The group fell 5.8%, the worst drop among 197 industries tracked by IBD.
For Horton, per-share earnings rose 2% from the year-ago quarter to $2.82 while sales gained 6% to $7.73 billion.
D.R. Horton joined Leaderboard as a new half-size position on Nov. 14 at a price of 129.28, then got raised to a three-quarters size position — a nearly 9% weighting within the model portfolio — on Dec. 1.
But on Tuesday, the stock exited the Leaders List on Leaderboard as it crashed below its rising 10-week line, drawn in red in the above weekly chart.
Building products retailer and Dow component Home Depot sank nearly 2% in dull volume. It's testing support at the 21-day exponential moving average near 350.
Stock Market Breadth Today
Volume fell 4% on both main stock exchanges vs. Monday. But the quieter volume might not last with dozens of companies reporting earnings in the next few days. See the IBD Earnings Calendar for details.
Breadth in the stock market has improved. The General Market Indicators chart page, found at the bottom of each Big Picture column, shows the New York Stock Exchange advance-decline line rose for seven weeks in a row before pausing. A rising advance-decline line indicates more companies are participating in the upward trend.
Dow Jones Laggard
However, some stocks are delivering sell signals.
Take 3M, the diversified manufacturer of adhesives, medical products and surveillance gear. 3M tanked nearly 11% Tuesday after reporting a 6% gain in earnings to $2.42 a share for the fourth quarter. That marked a slight acceleration after an 11% dip in earnings in the second quarter of last year and a 3% increase in the third quarter.
Volume in 3M's sell-off hit 27 million shares, eight times its usual level and the highest in more than a year.
The Minnesota-based company's sales fell nearly 1% to $8.01 billion. Strong sales growth, combined with hefty profit increases, are critical components to selecting leading growth stocks.
3M triggered a defense-type sell rule Tuesday by crossing sharply below its 10-week moving average in weekly volume that, so far, is running 379% above its 10-week average.
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