Dow Jones futures rose slightly Thursday night, along with S&P 500 futures and Nasdaq futures, with AFRM stock signaling “buy now” on earnings. The stock market rally lost more ground on the major indexes Thursday, with the Dow Jones undercutting its 50-day line. But there was positive action beneath the surface.
American Airlines (AAL) and other carriers jumped Thursday as several issued warnings but also offered hints that the worst is over as Covid cases level off. AAL stock flashed a buy signal. Other travel-related stocks, from hotels to casinos to Airbnb (ABNB), have trended higher over the last several days.
Lululemon Athletica (LULU) gapped out of a long consolidation on earnings. RH (RH) flashed at least early buy signals on its results. TopBuild (BLD) and HCA Healthcare (HCA) also broke out past buy points, at least intraday.
Cybersecurity firm Zscaler (ZS), fintech Affirm (AFRM) and wood pellet grill IPO Traeger (COOK) reported earnings after the close. Zscaler and Traeger beat views and guided higher. But AFRM stock was the big overnight winner, flashing an aggressive entry
TopBuild stock is on IBD Leaderboard. BLD stock also was Thursday’s IBD Stock Of The Day. AAL stock is on SwingTrader.
The video embedded in the article analyzed LULU stock, RH and Macy’s (M).
Dow Jones Futures Today
Dow Jones futures climbed 0.3% vs. fair value. S&P 500 futures advanced 0.2% and Nasdaq 100 futures rose 0.1%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 224 million. Covid-19 deaths topped 4.61 million.
Coronavirus cases in the U.S. have hit 41.56 million, with deaths above 673,000. The seven-day moving average of new Covid cases is now falling.
Late Thursday, President Biden said he would impose a vaccination mandate on federal workers. Employees of most large businesses also face a vaccine mandate. The Los Angeles Unified School District will require all students 12 and up to be vaccinated.
Stock Market Rally
The stock market rally closed Thursday at session lows, though the declines were modest.
The Dow Jones Industrial Average fell 0.4% in Thursday’s stock market trading. The S&P 500 index lost 0.5%. The Nasdaq composite gave up 0.25%. The small-cap Russell 2000, up solidly intraday, closed flat.
Airline stocks were big winners. American Airlines, Delta Air Lines (DAL) and United Airlines (UAL) all cut third-quarter forecasts amid the recent rise in Covid cases. But they signaled the weakness would be short-lived or starting to fade. AAL stock jumped 5.6% to 20.20, reclaiming its 200-day line but finishing just under its falling 50-day average. DAL stock climbed 3.6% and UAL stock 2.3%.
LULU stock gapped up 10.5% on Lululemon’s beat-and-raise report, clearing a yearlong consolidation. But shares closed almost at session lows.
RH stock popped 7.8% to 725 on the furniture retailer’s beat-and-raise results, despite some supply chain issues. RH reclaimed the 50-day line and broke a trend line, offering an early entry. Investors also could use 730.63 as an other aggressive buy area or use 744.66, just above the old high.
TopBuild stock rose 1.7% to 223.73, briefly clearing a 229.99 cup-with-handle buy point, according to MarketSmith analysis, before backing off. It’s still actionable from an early entry of 223.07. But BLD stock did close in the lower half of its range.
HCA stock climbed 1.5% to 258.26, hitting a record high and clearing a seven-weeks-tight area. Investors could use 257.52 as the buy point.
Academy Sports & Outdoors (ASO) rose 1.5% to 44.07, moving higher in a buy zone, following strong earnings and guidance. But ASO stock initially tumbled to 39.05, just above its 50-day line, before rocketing higher.
On the downside, Biogen (BIIB) tumbled 6.7% after its CEO said its controversial Alzheimer’s drug has seen weaker initial demand than hoped. Eli Lilly (LLY), which is working on a similar Alzheimer’s treatment, sank 5.8%. BIIB stock and LLY were Thursday’s worst performers on the S&P 500 index.
President Joe Biden’s support for drug price controls also weighed on some drug and biotech stocks.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.9%. The FFTY ETF is still down slightly for the week, but that’s after rising more than 5% in each of the prior two weeks.
SPDR S&P Metals & Mining ETF (XME) gained 0.6% while Global X U.S. Infrastructure Development ETF (PAVE) fell 0.6%. U.S. Global Jets ETF (JETS) ascended 1.9%, with AAL stock and other carriers lifting the group. SPDR S&P Homebuilders ETF (XHB) closed up 0.6%, as RH stock, TopBuild and other housing-related retailers and building suppliers offset weakness in actual homebuilders. The Energy Select SPDR ETF (XLE) eked out a 0.2% increase while the Financial Select SPDR ETF (XLF) inched up 0.3%.
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Zscaler earnings and guidance topped Q4 views, with the cybersecurity firm guiding higher. ZS stock rose 2.5% overnight. Shares fell 0.2% to 280.22 on Thursday. But Zscaler stock is essentially at highs and extended from any entry.
Affirm reported a wider-than-expected loss but revenue growth easily topped. The “buy now, pay later” specialist forecast strong growth.
AFRM stock spiked 21% in extended trade, signaling a move above a possible 101.10 early entry. Shares rose 5.2% to 92.06 on Thursday.
Shares skyrocketed on Aug. 30, after Affirm reached a partnership agreement with Amazon.com. Affirm already offers buy now, pay later options for Walmart and Shopify. AFRM stock jumped in August after Square (SQ) agreed to pay $29 billion for AfterPay, an Australia-based BNPL fintech. PayPal (PYPL), which has its own BNPL offerings, this week agreed to buy Japan’s Paidy for $2.7 billion.
Traeger earnings beat and the wood pellet grill maker guided higher. But COOK stock tumbled 9% overnight. Shares rose 2.3% to 25.61 on Thursday. Traeger stock has been working on an IPO base with a 32.69 buy point.
Market Rally Analysis
The stock market rally had another mildly down session for the major indexes. The Dow Jones Industrial Average closed below its 50-day moving average. However, the Nasdaq is testing its 10-day line, while the S&P 500 is holding above its 21-day.
The Russell 2000 gave up intraday gains, but didn’t lose ground. Growth stocks overall did well, along with several other sectors. Airlines are trying to take off, as travel stocks get back to work.
Several new buying opportunities appeared, generally outside the tech growth space. Lululemon earnings and guidance not only lifted LULU stock, but also Nike (NKE), Under Armour (UAA) and some other apparel-related names. American Airlines, TopBuild, RH and Academy Sports also flashed buy signals.
There is some interesting divergence with broad sectors. Homebuilders are slumping while several related groups are doing well. Oceangoing shipping firms continue to be strong, but trucking, rail and many other shipping stocks are struggling.
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What To Do Now?
The stock market rally is still acting well, with growth and leading names outperforming the major indexes. There are plenty of reasons to be broadly bullish. But is this a great time to be significantly increasing exposure? After three weeks of growth stocks taking the lead, a pause or pullback would not be a surprise. One option is to take advantage of new buying opportunities to diversify your portfolio beyond growth. New buys also could be balanced by cutting losers or locking in partial profits.
Building your watchlist based on charts and fundamentals will let you spot intriguing setups from stocks and groups that you might otherwise miss. That can give an early start when those setups take off.
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.
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