Dow Jones futures will open on Sunday evening, along with S&P 500 futures and Nasdaq futures. The stock market rally suffered significant damage last week, with the major indexes below key support and starting to move toward their Jan. 24 lows.
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Fears that Russia will invade Ukraine are weighing heavily on the market rally, which is already dealing with inflation and other big headwinds. The uncertainty over what Russian President Vladimir Putin will do adds significantly to the volatility.
President Joe Biden said late Friday that he is confident that Putin has decided to invade Ukraine within the next few days. Other U.S. and NATO officials have echoed that concern, saying Russia has continued to build up troops near the Ukraine border. That’s despite Kremlin claims that some troops are pulling back.
Cease-fire violations between Ukraine and pro-Russian separatists have surged in the past couple of days, perhaps offering a pretext for Russia to launch a Ukraine invasion.
On Feb. 20, big Russia war games with Belarus are set to end. Moscow has said troops will then return home, but will they? Feb. 20 also is the end of the Winter Olympics in Beijing. Putin may be holding off on a Ukraine invasion to avoid offending China.
But setting aside the geopolitics, the stock market rally looks ever weaker. Investors should take a defensive posture with minimal exposure.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures. However, ETFs tracking the Dow Jones, S&P 500 and Nasdaq 100 retreated Friday evening after Biden made his latest comments on the Russia-Ukraine crisis.
The DIA ETF fell 0.4%. SPY sank 0.5% and QQQ 0.6%.
While Dow futures will open Sunday evening as usual, U.S. markets will be closed Monday in observance of the Presidents Day holiday. Other stock markets will be open around the world, however.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Five Stocks That Don’t Suck
Apple stock, O’Reilly Automotive (ORLY), Commercial Metals (CMC), Union Pacific (UNP) and Nutrien (NTR) are five stocks holding up near buy points with relative strength lines at or near highs.
Apple (AAPL) dwarfs all of these names, but it’s the only one trading below its 50-day moving average.
The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index. It’s an easy way to spot leading stocks in any kind of market. In a weak or choppy market, stocks with RS lines at highs could be leaders in the next rally.
Nvidia, Tesla Just Hanging On
Meanwhile, Nvidia stock and Tesla (TSLA) rebounded from near their 200-day moving averages on Friday. This is an area where Tesla stock and Nvidia (NVDA) found support before in late January. Can these big former winners continue to do so? It’ll likely depend on the market rally’s next moves. But as megacap stocks, Tesla and NVDA stock will have something to say about the overall market direction.
Home Depot (HD) headlines earnings before Tuesday’s open, while Mosaic (MOS) and Palo Alto Networks (PANW) are among those due after the close.
The video embedded in this article discussed the week’s market action in detail, while also analyzing CMC stock, Union Pacific and new SwingTrader stock Dollar Tree (DLTR).
Coronavirus cases in the U.S. have hit 80.02 million, with deaths above 958,000.
Stock Market Rally
The stock market rally tried to bounce last week but faded badly late in the week.
The Dow Jones Industrial Average fell 1.9% in last week’s stock market trading. The S&P 500 index gave up 1.6%. The Nasdaq composite sank 1.8%. The small-cap Russell 2000 retreated nearly 1%
The 10-year Treasury yield fell 2 basis points to 1.93%, but that’s after hitting a 30-month high of 2.065% intraday Wednesday. Russia war fears sent investors into safe havens, while Fed minutes from the January policy meeting didn’t offer any new hawkish surprises.
Crude oil prices fell more than 2% to $91.07 a barrel, but held above the $90 mark.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) slumped 3%. The iShares Expanded Tech-Software Sector ETF (IGV) tumbled 5.4%. The VanEck Vectors Semiconductor ETF (SMH) closed flat, but fell sharply on Thursday-Friday. Nvidia stock is a major SMH component.
SPDR S&P Metals & Mining ETF (XME) rose 2.1% last week. The Global X U.S. Infrastructure Development ETF (PAVE) gained 1.3%. U.S. Global Jets ETF (JETS) ascended 1.8%. SPDR S&P Homebuilders ETF (XHB) dipped 0.5%. The Energy Select SPDR ETF (XLE) gave up 3.35% and the Financial Select SPDR ETF (XLF) sank 2.3%. The Health Care Select Sector SPDR Fund (XLV) pulled back 2.1%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) plunged 9.9% last week, hitting a fresh 20-month low on Friday. ARK Genomics ETF (ARKG) tumbled 6.6%. Tesla stock remains the No. 1 holding across ARK Invest’s ETFs.
Apple stock dipped 0.8% to 167.30 last week. During the late January market sell-off, the iPhone giant never came close to its 200-day line. AAPL stock now has a cup-with-handle base with a 176.75 buy point, according to MarketSmith analysis.
Commercial Metals Stock
Commercial Metals stock rose 3.1% to 36.75 last week. It’s slightly above its 50-day moving average, working on a 38.82 buy point. CMC stock could be starting to form a handle, with a potential lower entry of 37.59. Investors already could use that as an early entry.
Union Pacific Stock
Union Pacific jumped 5.2% to 251.19 last week. UNP stock is trading just below a 256.11 buy point in a very shallow flat base. Investors arguably could buy it now or just shy of 255.
O’Reilly Stock
ORLY stock edged up 1.3 to 676.96 last week, its fourth straight modest weekly gain. O’Reilly stock has reclaimed the 50-day line, offering an early entry in a shallow cup base. The official buy point is 710.96.
Nutrien Stock
NTR stock had a wild week, tumbling to undercut the 50-day line briefly before quickly rebounding to record high before pulling back slightly. But, ultimately, Nutrien stock dipped 0.7% to 75.78. That’s just below a 77.45 buy point.
On Wednesday night, the fertilizer maker reported a 929% EPS surge with revenue up 79%. Other fertilizer stocks also are doing well, despite some big intraday and daily swings. That includes MOS stock, which reports late Tuesday.
Tesla Stock
Tesla stock edged down 0.35% to 856.98 last week, but closed low in its range and nearly tested its 200-day line again on Friday. TSLA stock has been hitting resistance at its falling 21-day line for the past few weeks, while the 50-day line is racing lower. Holding the 200-day line, and its Jan. 28 low of 792.01, is key for the EV giant. On the upside, Tesla stock has a 1,208.10 buy point, and doesn’t really have an early entry.
Nvidia Stock
Nvidia stock fell 1.3% to 236.42 for the week, but after hitting resistance at its 10-week line, the chip giant tested its 40-week again and nearly touched its 200-day line. As with Tesla, NVDA stock pared Friday’s losses slightly.
Nvidia earnings and guidance late Wednesday topped views, but investors focused on forecasts for unchanged profit margins.
If Nvidia stock can rally above its 50-day line and its Feb. 10 high of 269.25, also breaking a steep downtrend, that would offer a very aggressive entry. NVDA stock would still have a long way to reach its Nov. 22 peak of 346.47.
Market Rally Analysis
The stock market rally, already under pressure, sold off again late last week. The Dow Jones, S&P 500 index and Nasdaq composite broke below their recent ranges and are heading toward their Jan. 24 lows. The S&P 500 and Nasdaq composite are now below their Jan. 31 follow-through day lows, with the odds high that they break to new lows. Undercutting the Jan. 24 lows would mark the end of the market rally.
In late 2018, the stock market correction or bear market had two failed follow-through days, finally bottoming on Christmas Eve.
The ailing market rally has retreated sharply over the last several days, so arguably it’s due for a bounce. But it doesn’t have to happen right away, and one or two good days wouldn’t be that meaningful.
New losers are still far outstripping new winners, while market breadth also weakened once again after briefly improving in early February.
In the very short run, the stock market will continue to focus on fears that Russia invades Ukraine. The long Presidents Day weekend could have major developments related to Russia and Ukraine, raising the potential for a big move up or down on Tuesday. But all of those moves could quickly reverse with the next headline.
Beyond the Russia-Ukraine crisis, inflation and Fed rate hikes hang over the market. On a somewhat related note, supply-chain woes have been a constant refrain in recent weeks.
General Electric (GE), Applied Materials (AMAT) and Roku (ROKU) were among the many companies that cited supply-chain issues continuing to restrict production and more.
Getting supply chain issues resolved would not only bolster corporate profits and economic growth, but also likely curb inflation. With Covid cases plunging and restrictions quickly ebbing, there may be a light at the end of the tunnel, but it could be a long way off.
Rather than try to guess how Russia, the Federal Reserve and supply chains play out — and how financial markets will react — focus on what the market is doing now. Right now, the major indexes and leading stocks — outside of a few pockets of strength — are simply not healthy.
Don’t get lured in by one or two good market days. The major indexes have a lot of work to do. In any case, there are only a handful of stocks setting up right now. At some point, there will be a strong market rally with a slew of quality stocks flashing buy signals and moving higher from there.
When that happens, you want to be ready. Keep your watchlists fresh and stay engaged with 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.
Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.
The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.
Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.
The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.
The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.
The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.
The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.
Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.
In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.
“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.
As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.
Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.
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