Dow Jones futures fell sharply Friday morning, along with S&P 500 futures and Nasdaq futures. The stock market rally rebounded Thursday after Wednesday’s sell-off, but gave up much of its strong intraday gains as Apple (AAPL) faded into the close.
Microsoft (MSFT), Google parent Alphabet (GOOGL) and ServiceNow (NOW) moved into buy areas, but Apple stock retreated below its buy point following strong earnings. All but Google stock — due next Tuesday — have quarterly results out of the way.
Meanwhile, Reddit-fueled GameStop (GME), AMC Entertainment (AMC), Express (EXPR) and Koss (KOSS) plunged Thursday amid massive intraday swings. Robinhood joined other brokerages in restricting trading in GME stock, AMC stock and some other short squeezes.
But GME stock, AMC stock and others roared back overnight as Robinhood said it would allow “limited buys” of the affected securities.
The Novavax coronavirus vaccine was just over 89% effective in a late-stage trial, the biotech said late Thursday. That’s slightly less than the roughly 95% mark set by the Pfizer (PFE) and Moderna (MRNA) vaccines, but the Novavax details were encouraging. NVAX stock jumped, signaling a breakout.
Visa (V), Atlassian (TEAM), Skyworks Solutions (SWKS) and Western Digital (WDC) all beat views after the close. WDC stock looks like it will clear a short consolidation. Skyworks surged on its results, also lifting fellow Apple iPhone chipmakers Qorvo (QCOM) and Qualcomm (QCOM), which report next week.
Caterpillar (CAT) is due early Friday.
Dow Jones Futures Today
Dow Jones futures fell 0.85% vs. fair value. S&P 500 futures lost 1.05%. Nasdaq 100 futures retreated 1.3%.
Novavax Coronavirus Vaccine
After the close, Novavax said that its coronavirus vaccine is 89.3% effective in a late-stage trial in the U.K. It was 95.6% effective vs. the original coronavirus strain and 85.6% effective against the U.K. strain, which is seen as highly contagious.
So the Novavax vaccine may stand up well next to the Pfizer and Moderna vaccines.
Further, Novavax said its Covid vaccine was 60% effective in a Phase 2b trial in South Africa, where a new variant appears to be slightly harder for current vaccines to block. The U.S. is running its own Novavax vaccine trial in the U.S. and Mexico that should be finished in mid-February. The FDA approval process likely would start after results are in from that trial.
Johnson & Johnson (JNJ) is expected to report efficacy data from its final-stage trial early next week. Its CFO said this week that he expects “robust” results. The JNJ vaccine requires only one shot vs. the two-shot Pfizer and Moderna vaccines.
Novavax stock jumped 35% to 180 early Friday. That signals a bullish gap-up from a base with a 150.60 buy point within a larger consolidation with an 189.40 high. NVAX stock had closed up 2.2% at 134.01.
Moderna stock rose slightly in the premarket after Thursday’s 2.45% gain to 159.55. MRNA stock is closing in on a 178.60 buy point from a cup base.
Pfizer stock rose slightly after closing down just over 1%. BioNTech (BNTX), Pfizer’s coronavirus vaccine partner, edged lower after rallying 3.8% on Thursday.
The U.S. vaccinated roughly 1.7 million people on Thursday, a fresh record and the ninth straight day of at least one million doses.
Coronavirus cases worldwide reached 102.12 million. Covid-19 deaths topped 2.20 million.
Coronavirus cases in the U.S. have hit 26.33 million, with deaths above 443,000.
Stock Market Rally
U.S. Stock Market Today Overview
Last Update: 4:02 PM ET 1/28/2021
The stock market rally rebounded on Thursday after the worst losses in weeks. But the major indexes lost much of their intraday gains, especially the Nasdaq.
The Dow Jones Industrial Average rose 1% in Thursday’s stock market trading. The S&P 500 index also climbed 1%. The Nasdaq composite advanced 0.5% after running up 1.8% intraday.
Growth stocks had a solid session. Among the best ETFs, the Innovator IBD 50 ETF (FFTY) climbed 0.9%, while the Innovator IBD Breakout Opportunities ETF (BOUT) popped 2%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.8%, with Microsoft and NOW being key components. The VanEck Vectors Semiconductor ETF (SMH) advanced 2.1%.
Apple stock fell 3.5% to 137.99, dropping below a 138.89 cup-with-handle buy point. Late Wednesday, Apple earnings easily beat views, with strong gains across the board. But the Dow tech giant sees slowing growth in wearables and tougher comparisons for services revenue. Last week AAPL stock jumped 9.8%, rebounding from its 50-day line to break out.
Big Techs In Buy Zones
Microsoft stock popped 2.6% to 238.93, closing above a 232.96 buy point for the first time. Shares have risen for eight straight sessions. Microsoft earnings were much better than expected late Tuesday, with EPS and sales growth accelerating for a second straight quarter. Revenue guidance also was strong.
ServiceNow stock jumped 7.3% to 554.24, retaking the 50-day line but closing just below last week’s high of 554.34. Investors could buy NOW stock now, or wait for a slight uptick over that early entry. NOW stock is also close to the 566.84 flat-base buy point, according to MarketSmith analysis. ServiceNow earnings beat views late Wednesday, with revenue growth slowly accelerating for a second straight quarter.
The Microsoft and ServiceNow earnings reports are good news for business software makers. Many business software stocks have struggled to make headway or hold their ground over the past month.
Google stock rose 1.9% to 1,853.20, back above an 1,843.93 buy point from a flat base within a base-on-base formation. Shares broke out on Jan. 20, but then tumbled 4.7% on Wednesday. Alphabet earnings are on Feb. 2, however, making any GOOGL stock buy now risky.
GME Stock: Game Over?
On Thurssday GME shot up as high as 483 and plunged to 112 before closing down 44% at 193.60. AMC stock crashed 57% to 8.63. Koss stock, which spiked 480% on Wednesday, more than doubled Thursday morning before reversing for a 28% loss to 41.96. EXPR stock tumbled 51% to 4.70.
American Airlines (AAL), a new Reddit fave, did rally 9.3% to 18.10 following earnings, but that’s well off intraday highs of 21.77.
Robinhood and Interactive Brokers on Thursday restricted trading in GME stock and some other short-squeeze names. That followed some limits by TD Ameritrade on Wednesday.
But the game may not be over for GME stock and other short squeezes. Robinhood’s announcement that it would allow some trading spurred strong overnight rallies. GME stock and Koss stock nearly doubled. AMC and Express rallied almost50%.
AMC is mulling a stock sale to take advantage of the high share price.
Yet for growth investors, these stocks are extremely extended and volatile and generally lack sound fundamentals. Forget about the 7%-8% sell rule; with GME stock you might face a 70%-80% sell rule in minutes.
It’s best to avoid these names and stick to the stocks and strategies where you have an edge.
Stock Market Analysis
It’s nice to see the stock market rally show some strength. The Dow Jones rebounded from its 50-day line. The S&P 500 regained its 21-day line. The Nasdaq composite bounced from its 21-day line.
The Nasdaq has had several one-day pullbacks in the past couple of months — Dec. 9, Jan. 14, Jan. 15 and Jan 27 — with a quick return to new highs. The problem is that the Nasdaq quickly gets extended again.
Even with Thursday’s weak close, the Nasdaq is 5% above its 50-day line. While that’s off Monday’s peak of 8.2%, it’s not far from the 6% level that typically means it’s getting extended.
That may limit the potential upside for the market rally and leading stocks. On the downside, the risks of another pullback remain high. While the last several pullbacks have been short-lived, eventually there will be a more serious sell-off.
The risk-reward ratio on new buys isn’t as attractive as in the early stages of a confirmed stock market rally.
In any case, there aren’t many stocks that are offering good buying opportunities right now. A number of stocks are staging solid rebounds from their 50-day or 10-week lines, but often from steep sell-offs. (Target (TGT), which had a less-steep retreat to the 50-day line and the top of its recent consolidation, may be an exception.)
A longer pullback or sideways action by the stock market rally would let the 50-day line truly catch up to the Nasdaq. It would also allow more stocks to form new bullish bases or rebounds.
But the market is going to do what it’s going to do.
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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