Dow Jones Futures: Jobs Report Will Test ‘Soft Landing’ Market Rally; Tesla stock split approved

Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures, and Friday’s July jobs report looms. Tesla (TSLA) shareholders approved a 3-for-1 stock split Thursday night.




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The stock market rally closed mixed on a relatively quiet Thursday for the major indices, but there were some big gain drivers.

Vertex Pharmaceuticals (VRTX), Amgen (AMGN) and Neurocrine Biosciences (NBIX) reported better-than-expected earnings on Thursday night as biotech remains a leading sector. All closed near buying points and key support levels.

Dow Jones Futures Today

Dow Jones futures rose against fair value. S&P 500 and Nasdaq 100 futures were broadly flat.

The Labor Department will release the jobs report for July at 8:30 am ET. The jobs data will certainly rock Dow futures and Treasury yields.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.


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Job report

Economists expect nonfarm payrolls to rise by 250,000 in the July jobs report, down from 372,000 in June. That would still indicate healthy hiring amid a slowing economy.

Keep an eye on the household survey, which showed a notable decline in employment in June. It’s more error-prone than payroll, but often shows labor market gyrations first.

Meanwhile, the unemployment rate is expected to hold steady at 3.6%, with annual hourly earnings growth slowing only slightly to 5%.

Jobless claims rose to 260,000 in the latest week, the highest in nine months. Job openings, while still high, have shrunk rapidly in the last two months.

The Federal Reserve, particularly Fed chief Jerome Powell, has argued that a soft landing is possible. Investors in recent weeks are beginning to accept the idea that the economy will weaken. just enough to cool inflation enough to prompt the Fed to slow and then stop Fed rate hikes, without triggering a big drop in demand and employment.


Tesla Vote on 3-for-1 Stock Split: Is Now the Time to Buy?


biotech earnings

Shares of VRTX slanted lower in overnight trading as Vertex earnings beat views and the biotech giant raised its full-year product revenue target. The shares fell 0.1% to 274.85, below the 50-day line and the buy points of 276.10 and 279.23.

AMGN shares lost 1% in the extended share after Amgen’s earnings outperformed and the company largely reaffirmed guidance for the full year. The shares fell 0.1% to 246.98 on Thursday, trading near the 50-day line. Amgen shares have a buy point of 253.87. The biotech giant announced a $3.7 billion purchase of Chemo Centryx (CCXI) before the open on Thursday.

NBIX shares fell slightly overnight after Neurocrine’s earnings and revenue peaked. The company raised the revenue forecast for its key drug, but also shelved a treatment that didn’t work well. The shares were up 2% on Thursday at 95.93, bouncing off the 50-day line. NBIX shares have a buy point of 100.10.

VRTX shares are listed on the IBD Leaderboard and the IBD Big Cap 20 Index. The iShares Biotechnology (IBB) ETF is listed on SwingTrader.

Tesla Stock Split, Annual Meeting

Tesla shareholders approve a 3-for-1 stock split Thursday night at the annual meeting, two years after a 5-for-1 stock split. Tesla proposed the TSLA split in June. It’s unclear whether the actual split will have much of an impact on Tesla’s stock. A TSLA stock split will make gaming options cheaper.

At the annual meeting, CEO Elon Musk said “this year, I swear,” Tesla will solve autonomous driving, laughing.

Musk hinted that Cybertruck pricing and specs will be different from what Tesla initially touted in 2019, citing inflation. The prices and specs pulled have always seemed highly unlikely, while material costs and 4680 battery delays have added to the program.

Musk also expects production to increase in the second half of the year. The Shanghai factory is receiving upgrades that increase capacity, while Tesla has two new factories in Berlin and Austin that have been expanded at a glacial pace. Musk said Tesla could ultimately have 10 to 12 factories and could make an announcement about the location of the next plant later this year.

Tesla shares rose a fraction overnight. The shares rose 0.4% to 925.90 in the regular session on Thursday, just above the 200-day line. TSLA shares had risen sharply on the news of the stock split, but that likely reflects the broad market rally and Tesla’s better-than-expected earnings on July 20. Tesla shares are a long way from the buy point of 1208.10. A consolidation near the 200 day line or higher could create a buying opportunity.

China Electric Vehicle Stocks

Meanwhile, China’s electric vehicle makers are showing some strength. BYD (BYD), which reported a boom in July sales on Wednesday, rose 2.6% to 38.10 on Thursday, again above the 50-day line. BYD shares are likely to get a fresh base after another week, but a move above the 1st Aug high of 38.35 could offer an early entry.

li car (LI) was up 1% at 34.32, continuing to trade between the 21 and 50 day lines. LI shares should make a new base on a weekly chart after Friday. Li Auto shares are at the IBD 50.

child (NIO) was up 3% at 20.90, bouncing off the 50-day line. NIO shares are still below the 200 day line.


Tesla vs. BYD: Which giant EV is the best buy?


Stock market rally Thursday

The stock market rally didn’t move much in the major indices ahead of the July jobs report.

The Dow Jones industrial average fell 0.3% in trading on Thursday. The S&P 500 index fell 0.1%. The Nasdaq Composite rose 0.4%. The small-cap Russell 2000 lost 0.2%.

US crude prices fell 2.3% to $88.50 a barrel, hitting their lowest levels since before Russia’s invasion of Ukraine in late February. Gasoline futures fell 4.1%, indicating a continued pullback in prices at gas stations.

The 10-year Treasury yield fell 7 basis points to 2.68%.

ETFs

Among the best-performing ETFs, the Innovator IBD 50 ETF (FFTY) was up 0.35%, while the Innovator IBD Breakout Opportunities ETF (BOUT) was up 1 cent. The iShares Expanded Technology Software Sector (IGV) ETF gained 0.2%. The VanEck Vectors Semiconductor ETF (SMH) rose 1%.

SPDR S&P Metals & Mining ETF (XME) rose 1% and the Global X US Infrastructure Development ETF (PAVE) added 0.8%. The US Global Jets ETF (JETS) rose 0.5%. SPDR S&P Homebuilders ETF (XHB) gained 1.7%. The Energy Select SPDR ETF (XLE) fell 3.7% and the Financial Select SPDR ETF (XLF) fell 0.3%. The SPDR Fund of the Select Medical Care Sector (XLV) fell 0.5%.

Mirroring historically more speculative stocks, ARK Innovation ETF (ARKK) advanced 0.8% and ARK Genomics ETF (ARKG) rose 1.7%, both at three-month highs. Tesla shares are a major holding in Ark Invest ETFs. Cathie Wood’s Ark funds also own small stakes in BYD and Nio shares.


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Market recovery analysis

The stock market rally had a mixed session on Thursday, trading in a tight range. After strong recent gains, particularly Wednesday’s tech advance, a pullback or pause would not be a surprise and could be healthy.

The Nasdaq Composite remains comfortably above its early June highs, with the Dow Jones, S&P 500 and Russell 2000 just below that resistance level.

While the major indices were quiet on Thursday, there was plenty of action across sectors and individual stocks.

Oil and gas stocks are struggling once again, with energy prices pulling back, especially crude oil. It is difficult to see the sector making a significant advance without underlying prices rising.

Biotechs had another strong session, with the IBB ETF up 2.2% after Wednesday’s 3.8% jump.

While there were several earnings winners on Thursday, the earnings losers showed the dangers of having little cushion going into results. Aris water solutions (ARIS) tumbled 21% on gains after closing Wednesday in a buy zone. fortnite (FTNT) fell 16%, Eli Lilly (LLY) and quantum power (PWR) fell modestly, but further from buy points.

lanteus (LNTH) had a wild session, hitting a record high of 81.43 right after the open, falling to 66.26 a few minutes later, briefly turning positive again before closing down 6.1% at 71, 24.


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What to do now

The market rally is working, but investors have reason to be cautious about rapidly adding exposure. A pullback could provide a temporary setback for the indices, but perhaps big losses for many individual names. There is still a considerable risk that the market rally will soon run out of steam and retrace significantly, though perhaps not to recent lows.

Be careful with the profits.

Keep working on the watch lists. Stay engaged with the market, but you don’t have to stare at the computer screen all day.

Read The Big Picture every day to stay in sync with market direction and major stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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