Nasdaq futures slipped, while Dow and S&P 500 futures moved higher Thursday as markets responded to mixed weekly jobless claims and second-quarter GDP data. Earnings news, reaction to Wednesday’s Federal Reserve comments and Senate progress on an infrastructure deal all factored into early trade — along with rebounding markets in China. And Chevron led the Dow Jones today, as oil prices edged higher.
Dow Jones futures climbed 0.5%, not quite enough to boost the index back above 35,000. S&P 500 futures gained 0.2%, looking to snap a two-day dip. Meanwhile, Nasdaq 100 futures briefly climbed, then reverted to a 0.1% loss. PayPal Holdings (PYPL) and Facebook (FB) dragged at the bottom of the Nasdaq and S&P 500, down 5.8% and 3.1%, respectively, following late-Wednesday earnings reports.
China-based stocks took three of the top five gains among Nasdaq 100 issues. Cognizant Technologies (CTSH) led the Nasdaq 100 and S&P 500, up 5.4% after its second-quarter report late Wednesday.
New issue Robinhood (HOOD) is set to begin trading, after pricing its 55-million-share offering at 38, raising more than $2 billion.
Intel Boosts Dow Jones Today
Intel (INTC) gained 0.4% on the Dow Jones today, as chipmakers advanced on a welter of industry news and earnings. Chip giant Intel announced Wednesday ambitious plans to upgrade and redefine its manufacturing capabilities.
Earnings from Qualcomm and STMicroelectronics helped boosted chipmakers in early trade, as well as the week’s earlier reports from Advanced Micro Devices (AMD), Monolithic Power Systems (MPWR) and Silicon Labs (SLAB). STMicroelectronics and AMD were in or near buy zones.
Shares of Taiwan Semiconductor (TSM) rose 1% Thursday after the company said it had received approval for construction of a manufacturing facility to produce 2-nanometer chips. Nikkei Asia reported the company would begin construction in 2022, aiming to install equipment in 2023. TSMC is also building a 5-nanometer chip manufacturing facility in Arizona.
The VanEck Vectors Semiconductor ETF (SMH) scored a 1.8% gain on Wednesday. The ETF traded 0.2% higher early Thursday.
Earnings News: STMicro, LKQ Poised For Breakouts
Ford Motor (F) rallied 4.8% after reporting a surprise second-quarter profit. STMicroelectronics (STM) spiked 5.4% after its June-quarter report. STM’s move set shares up for a starting bell breakout past a handle buy point at 39.79. On the downside, iRobot (IRBT) dived more than 11% after a second-quarter earnings miss.
Auto salvage leader LKQ Corp. (LKQ) jetted more than 5% higher, after clearing second-quarter earnings and revenue targets by wide margins. The move pointed to a starting bell breakout past a 51.69 buy point in what IBD MarketSmith analysis plotted as an eight-week cup-with-handle base.
Steelmakers Lead Infrastructure Gains
An infrastructure spending deal moved forward Wednesday, revealing what appeared to be a fracture in the Senate’s partisan stand-off. The proposal, weighing in at roughly $1 trillion, earned approval among 10 bipartisan negotiators. The Senate then passed a 67-32 vote to begin debating infrastructure reform this week. The move is far from putting shovels in dirt, but is the first real motion on infrastructure spending since May.
Buoyed by the Senate’s progress, steelmakers advanced and got a little help from a big second-quarter beat by ArcelorMittal (MT). Arcelor shares rallied more than 2%, after ending Wednesday low in a buy range above a 34.06 cup base buy point. U.S. Steel (X) gained 2%. Nucor (NUE) and Steel Dynamics (STLD) climbed more than 1% each.
Among other infrastructure-related stocks, Caterpillar (CAT) climbed 0.9% on the Dow Jones today. Vulcan Materials (VMC) moved up 1.3%, after clocking a 3.6% advance on Wednesday. Martin Marietta Materials (MLM) added 0.7%, following its 4% jump on Wednesday. The iShares U.S. Infrastructure ETF (IRFA) showed a 1.5% gain so far for the week.
Bond Yields, Fed Meeting
Markets backtracked into mixed trade following the Federal Reserve’s rate policy announcement and news conference on Wednesday. No shift in rate policy, and no real update on timing for the tapering of bond purchases, left the change in language regarding the spread of Covid as the main takeaway from the meeting.
Bond yields edged above 1.27%, after settling on Wednesday just above 1.26%. Yields have fallen sharply for the past 10 weeks, after touching a high above 1.76% in April.
Jobless Claims, GDP Growth Miss Views
First-time applications for unemployment assistance dipped to 400,000 in the week ended July 24, the Labor Department reported. That was down from the prior week’s 424,000 tally, but more than the 390,000 claims projected by economists.
The more disappointing miss was in the Commerce Department’s second-quarter GDP growth estimate. That number came in at 6.5%. That is a massive jump by historic standards, as the economy recovers from pandemic-depressed levels in 2020. But it is barely above the first-quarter’s 6.4% bounce, and far below expectations for an 8% surge.
Yet personal spending was a positive, rebounding 11.8% during the quarter. That is up from an 11.4% gain in the first quarter, and comfortably above projections for another 11.4% rise.
Rising Vaccine Focus Lifts Biotechs
IBD 50 stock Moderna (MRNA) traded up 0.9%, running high among IBD 50 stocks. Vaccines continue to garner attention as an increasing number of state, federal and corporate leaders impose mandatory vaccination rules, or restrict activities of those who are unvaccinated. The Federal Reserve, in its official statement on the direction of policy, said Wednesday, “The path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy.”
IBD Leaderboard stock BioNTech (BNTX) rose 1.7% early Thursday. Vaccine partner Pfizer (PFE) said Wednesday it expected $33 billion in revenue from Covid-19 vaccine sales in 2021. The company also released data showing that a third shot of the Pfizer/BioNTech vaccine can “strongly” boost protection against the Delta virus variant, vs. protection afforded by the standard two-shot dosage.
Pfizer shares slipped 0.3% early Thursday. Moderna and BioNTech are both extended.
China Stocks: Rebound Sharpens
Hong Kong’s Hang Seng Index staged a powerful bounce, surging 3.3% on Wednesday. That second day of recovery left the index still on negative ground for the week, but grabbed back a large share of losses from the Monday-Tuesday selloff.
The Shanghai Composite rebounded 1.5%, snapping its four-day decline. For the week, the Shanghai index is down 3.9%. Hong Kong’s benchmark is off 3.7%.
China’s markets fell hard beginning on Friday, after authorities launched a series of reforms reshaping regulations that govern education companies, food delivery operations and companies listing on exchanges outside of China. Bloomberg reported the three days of selling had wiped $1.5 trillion in market value off the Shanghai and Hong Kong markets.
In the U.S., the iShares MSCI China ETF (MCHI) had, by the end of Wednesday’s session, narrowed its loss for the week to 3.8%. It moved up 0.7% early Wednesday. The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) pared to a 3.6% loss, and gained a fraction in premarket trade Wednesday.
Technology tracker KraneShares CSI China Internet ETF (KWEB) trimmed a 13.8% loss to 5% by the end of the day Wednesday. The ETF was up 1.6% in premarket trade on Thursday.
Markets in Europe traded higher near mid-session. The CAC-40 in Paris climbed 0.7%. Frankfurt’s DAX gained 0.5%, and the FTSE 100 in London rallied 0.9. The SPDR Portfolio Europe ETF (SPEU) gained 0.8% on Wednesday.
Stocks To Watch: Pool, Icici, Discover, CarMax
Keeping tabs on the four names pinpointed as stocks to watch this week by IBD’s Investing Action Plan, all remained near their buy points early Wednesday.
Pool held near the top of its buy range from its 449.54 buy point. The swimming pool services and supplies leader retook the entry Friday, after pulling back to test support at its 50-day moving average. The buy zone runs to 472.02.
India-based Icici Bank retook its 18.27 cup-with-handle buy point with a powerful 2.3% advance on Wednesday. The move rode trading volume that was 40% above average, qualifying the breakout. The stock remained in its buy range, which runs through 19.18. Shares traded up 0.1% early Thursday.
Discover Financial held steady Wednesday, still less than 1% below a 125.48 flat-base buy point. The stock has posted a couple of strong-volume dives below its 50-day line recently. But its relative strength rating remains a strong 93, and its relative strength line is hovering near new highs. DFS moved up 0.7% in Thursday’s premarket trade.
Auto retailer CarMax continues to trade very tight, just below a cup-with-handle base with a 137.63 buy point.
Dow Jones Today: Heading Into August
Merck (MRK) shares dropped 1.8% after reporting mixed second-quarter results on the Dow Jones today. The blue chip index wraps up its heaviest week of the June-quarter reporting season on Friday, with results from Procter & Gamble (PG).
For more detailed analysis of the current stock market and its status, study the Big Picture.
The week leaves the performance of 23 out of 30 Dow stocks accounted for, heading into the traditionally weak month of August. Since 2010, the Dow industrials have averaged a loss of 0.68% for the month, vs. an average loss of 0.53% for the S&P 500 and a 0.37% rise for the Nasdaq Composite.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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