Dow Jones Futures: Stock Market Rally Sells Off; GME Stock, AMC Tumble Late, Apple, Facebook, Tesla Report
Dow Jones futures edged lower Thursday night while S&P 500 futures and Nasdaq futures fell modestly, as Apple stock, Tesla (TSLA) and Facebook (FB) headlined a huge earnings night. The stock market rally suffered significant losses Wednesday, with selling resuming after the latest Fed meeting. Leading stocks struggled once again.
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Meanwhile, GameStop (GME) more than doubled once again, while AMC Entertainment (AMC) quadrupled as Reddit-led investors continue to rush into GME stock and other heavily shorted tickers. Express (EXPR) and Koss Corp. (KOSS) also had triple-digit gains.
GME stock, AMC stock, EXPR stock and KOSS stock fell sharply overnight as the Wallstreetbets Reddit chat room briefly went privat.
Apple (AAPL), Facebook stock and Tesla reported earnings late Wednesday, along with ServiceNow (NOW) and chip-equipment maker Lam Research (LRCX).
Apple earnings, Facebook earnings, ServiceNow earnings and Lam Research earnings all topped views. Tesla earnings fell short.
In overnight trade, Apple stock fell modestly after closing in range above a buy point. LRCX stock was little changed. NOW stock rose in extended trade. FB stock and Tesla stock retreated.
Apple, ServiceNow and Tesla stock are on IBD Leaderboard. ServiceNow stock is on IBD Long-Term Leaders. LRCX stock and Teradyne are on the IBD 50, along with many other chip plays.
Dow Jones Futures Today
Dow Jones futures slipped 0.2% vs. fair value. S&P 500 futures fell 0.4%. Nasdaq 100 futures sank 0.5%. Apple stock weighed on all the major indexes, with Facebook and TSLA stock hitting the S&P 500 and Nasdaq.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live.
Coronavirus News
Coronavirus cases worldwide reached 101.43 million. Covid-19 deaths topped 2.18 million.
Coronavirus cases in the U.S. have hit 26.16 million, with deaths above 439,000.
Stock Market Rally
U.S. Stock Market Today Overview |
||||
|---|---|---|---|---|
| Index | Symbol | Price | Gain/Loss | % Change |
| Dow Jones | (0DJIA) | 30302.97 | -634.07 | -2.05 |
| S&P 500 | (0S&P5) | 3750.95 | -98.67 | -2.56 |
| Nasdaq | (0NDQC ) | 13270.60 | -355.47 | -2.61 |
| Russell 2000 | (IWM) | 209.53 | -3.77 | -1.77 |
| IBD 50 | (FFTY) | 43.63 | -1.84 | -4.05 |
Last Update: 4:04 PM ET 1/27/2021 |
||||
The stock market rally suffered another retreat, with the major indexes down significantly, finishing close to their lows
Stocks rebounded from morning lows but resumed selling following the Fed meeting announcement. There was only a slight tweak in the Fed statement implying that coronavirus risk is less of a concern in the medium term as Covid cases fall and vaccinations pick up. Fed chief Jerome Powell largely sidestepped questions about whether asset prices are in a bubble, saying his focus is on restoring full employment.
The Dow Jones Industrial Average lost 2.05% in Wednesday’s stock market trading, closing just above its 50-day moving average after briefly undercutting that key level. The S&P 500 index sank 2.6%, knifing through its 21-day exponential moving average and moving close to its 50-day. The Nasdaq composite also sank 2.6%, but stopped short of its 21-day.
While squeeze plays such as GME stock and AMC stock kept soaring, traditional leading stocks had a tougher time.
Dow Jones giant Microsoft (MSFT) and AMD (AMD) reported strong quarterly results and raised guidance late Tuesday. But Microsoft stock erased a solid gain to close up 0.25%, just below a buy point. AMD stock tumbled 6.2%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) retreated 4%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 4.2%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 2.3%, with Microsoft and ServiceNow stock major holdings. The VanEck Vectors Semiconductor ETF (SMH) skidded 4.9%, with AMD and LRCX stocks key components.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Apple Earnings
Apple earnings climbed 34% to $1.68 a share. Revenue rose 21% to 111.43 billion, on strong demand for iPhones, wearables and services. Wall Street had forecast Apple earnings per share of $1.41 on sales of $103.28 billion.
Apple once again declined to give guidance.
Apple stock sank 3% to 137.50 in extended trade. Shares dipped 0.6% to 142.06 in the regular session. Apple stock seems likely to test its 138.89 cup-with-handle buy point, according to MarketSmith analysis.
Tesla Earnings
Tesla earnings shot up 95% to 80 cents a share, weighed down by higher-than-expected stock compensation. Revenue grew 45% to $10.74 billion. Analysts expected Tesla earnings of 90 cents a share on sales of $10.13 billion, according to Zacks Investment Research. Many other estimates had Tesla earnings at just over $1 a share.
Regulatory credits revenue, which is expected to decline sharply, tripled to $401 million.
Gross margins excluding credits were 20.7%, far below views for 24.2%.
The average selling price for Tesla vehicles fell 11% vs. a year earlier amid price cuts. Tesla has continued to cut prices in Europe, while introducing a much-cheaper, shorter range Model Y in the U.S.
Tesla said it’s starting production of a newly revamped Model S and X this month with Model S Plaid deliveries starting in February. It also plans to launch its long-awaited Tesla Semi later this year. That suggests that the Tesla Cybertruck pickup will not launch in 2021. Elon Musk said on the conference call that Tesla would be lucky to make a few Cybertrucks by year-end.
Tesla touted continued big capacity growth, with the Berlin and Austin factories set to begin production sometime in 2021. It expects to grow deliveries 50% annually over time, but outpace that in 2021. That means more than 749,325 vehicles this year, vs. 499,500 in 2020.
But Tesla signaled Q1 will be weak. It blamed the Model S changeover, as well as a chip shortage that’s hitting much of the auto industry. Other data suggest weak U.S. orders to start 2021.
Tesla stock fell 5% overnight. Shares sank 2.1% to 864.16 on Wednesday. Arguably Tesla stock has been in a high-tight-flag pattern
Facebook Earnings
Facebook earnings jumped 52% to $3.88 a share, with revenue up 33% to $28.07 billion. Analysts expected Facebook earnings per share of $3.19 on revenue of $26.4 billion.
Facebook said it had 1.84 billion daily active users in Q4, and 2.8 billion monthly active users.
Facebook stock retreated 2%. FB stock dropped 3.5% to 272.14 on Wednesday, back to its 50-day line. Rebounding above Tuesday’s intraday high of 285.39 could offer a very early entry. The official buy point is 304.77.
ServiceNow Earnings
ServiceNow earnings rose 22% to $1.17 a share, with revenue up 31% to $1.25 billion. Analysts expected ServiceNow earnings of $1.05 on sales of $1.21 billion.
NOW stock rose almost 3% in extended trade. ServiceNow stock lost 3% to 516.50, to close below the 50-day line. A rebound above the 50-day line and last week’s high of 554.34 could offer an early entry. NOW stock is in a flat base with an official buy point of 566.84.
Lam Research Earnings
Lam Research earnings leapt 51% to $6.03 a share. Fiscal Q2 sales grew 34% to $3.46 billion. Wall Street predicted Lam Research earnings of $5.72 a share on $3.333 billion in revenue.
The chip-equipment giant guided higher for the current third quarter.
LRCX stock edged lower overnight. Lam Research stock tumbled 6.8% to 515.04 on Wednesday. LRCX stock retreated to the top of a prior short consolidation, closing just above the 10-week moving average.
GME Stock, AMC Stock
GME stock shot up 135% to 347.51. Melvin Capital and Citron Research said before Wednesday’s open that they closed their GME stock short positions, but the buying frenzy continued. GME stock is up 1,745% in 2021 so far.
AMC stock erupted for a 301% gain to 19.90. EXPR stock vaulted 214% and KOSS stock 480%.
Late Wednesday, the subreddit chat room Wallstreetbets, which has generated mass movements vs. short sellers in GME stock, AMC stock and more, briefly went private Wednesday evening.
Group-chat platform operator Discord banned r/WallStreetBets server. But Discord said it was over hate speech violations, not the GME short squeeze saga.
By 7:45 p.m. ET, the Wallstreetbets subreddit was open again, though the Gamestop forum was closed to new comments.
Overnight, GME stock lost 16% and KOSS stock 14%. AMC stock tumbled 27% and EXPR stock sank 24%.
The moves by GME stock, AMC stock and others are just incredible. A social media-driven short squeeze into a dying mall-based video game retailer and theater chain almost seems like a parody. The risks are extremely high trying to play these stocks — long or short.
Suffice to say that GME stock is not the type of name that CAN SLIM investors usually look at.
Stock Market Analysis
The stock market rally suffered its worst losses in weeks on the major indexes.
While short squeezes like GME stock and AMC stock kept defying gravity and just about everything else, leading stocks struggled once again. It’s possible that hot money is flooding into GME stock at the expense of traditional growth and leading stocks.
But whatever the reason, chips, software, genomics and cyclicals sold off. Many had losses of 5% or more. Some recent IPOs did well, such as Airbnb (ABNB) and Palantir (PLTR), but many others sold off or erased intraday gains.
Leading stocks under pressure is a bad sign for the stock market rally.
Thursday’s action could be another one-day pullback or the start of something more serious. The market reaction to the Apple, Tesla and Facebook earnings reports will be key.
If the Nasdaq rebounds quickly, how much upside would there be? The composite closed 4.8% above its 50-day line, down from 8.2% on Monday. That’s below the 6% level generally seen as extended, but it’s not far from being so.
The Nasdaq has had a few brief, relatively modest pullbacks in the past few weeks. Technically, that eases the pressure in the short run. But quick recoveries convince investors to become even more bullish and less fearful.
The CBOE Volatility Index did jump 38% on Wednesday to a two-month high.
What You Should Do Now
It may take a deeper, longer pullback or correction to drain the market of enthusiasm. That doesn’t have to happen for a while. But investors should be prepared for it.
The risk/reward ratio for being deep on margin is not nearly as strong as in the first several weeks of a new stock market rally. While you don’t need to be defensive, yet, investors should be more focused on preserving their big gains since April rather than trying to step on the gas. So have a game plan for your stocks. Which stocks do you really want to hold and which are expendable?
Also, an exit strategy doesn’t have to be a stampede. You might decide to sell one-third of XYZ stock if it does this, another third at this point, and closing out the position if this occurs.
One advantage of selling into strength or locking in partial gains is that it can give you the confidence to hold through shakeouts and pullbacks, and minimize your losses in a bigger market retreat.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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