Nasdaq futures trailed as Dow Jones futures took a strong bounce Friday, as the market looked to wrap up the first full trading week of the third quarter. Big tech names came under mild pressure as the White House aims to tighten reins on the sector. Analyst actions put General Motors at the head an automakers rally. And financials led the Dow Jones today, as a slide in bond yields paused.
Dow Jones futures jumped 0.7%, rebounding more than 230 points after a mixed-volume reversal on Thursday. S&P 500 futures bounced 0.5% above fair value. Nasdaq 100 futures recovered from an early dip, adding 0.1%.
Microsoft (MSFT) and Facebook (FB) faded to the bottom of the Nasdaq on news that President Biden on Friday will encourage tighter scrutiny by federal agencies of mergers and competition among big tech companies. The executive order specifically names Google, Facebook, Apple and Amazon, according to The New York Times.
Oil producers, cruise lines and airlines ran hot the S&P 500 in early trade. Financials were in motion as bond yields bounced. Discover FinancialDFS rallied 1.6%, after a price target hike from Barclays and an upgrade from Citi.
General Motors (GM) led the S&P 500, up 3.3% after Wedbush launched coverage with an outperform rating and an 85 price target. The note labeled the company a “renaissance” story, due to its “laser focus” on EV technologies.
Rebounding China-based names topped the Nasdaq 100, boosted by a central bank maneuver in China. The usual suspects — Pinduoduo (PDD), Baidu (BIDU) and JD.com (JD) — traded up more than 2% apiece after taking hard falls on Thursday.
Vaccine maker and IBD 50 stock Moderna (MRNA) climbed 1.2%, after rebounding 4.9% on Thursday from its 21-day exponential moving average. Pfizer (PFE) partner BioNTech (BNTX) surged 4.2% in premarket trade. Data release by the Centers for Disease Control and Prevention Thursday showed U.S. Covid-19 hospitalizations turned higher after a period of decline, due to spread of the Delta coronavirus variant.
Dow Jones Today: Apple, Microsoft
On the Dow Jones today, rising financials countered Apple‘s (AAPL) initial 0.2% slip and a 0.3% drop by Microsoft. Both big tech leaders pared early losses, after faring well in Thursday’s market reversal. Both tech leaders ended down less than 1% and suffered no chart damage.
Thursday’s slip rewound Apple stock to the top of its buy range above a 137.17 buy point.
Microsoft shares remain extended, although they dipped briefly back into a buy range on Thursday. The buy zone above the 263.29 buy point, runs to 276.45.
Leaderboard: ASML, Ford Climb
Chip equipment maker ASML Holding (ASML) paced the IBD Leaderboard list, rebounding 1.9% following a 2.4% drop on Thursday. A gain would technically place the stock in a buy range on a rebound form 10-week support. But Leaderboard commentary recommends regarding the stock “as extended as it makes yet another pullback” late in its advance.
Also on the Leaderboard list, Ford Motor (F) bounced 1.9%, possibly riding positive industry sentiment generated by GM. Ford stock found support Thursday at its 10-week moving average. The stock has surrendered nearly all of the advance that followed a late-May breakout.
Global Markets: China’s Banking Boost
Global markets received an early boost from China’s central bank, which announced Friday it would lower its reserve ratio requirement for banks. The move, to be enacted next Thursday, eases the amount of capital banks hold against possible losses — releasing an estimated $154 billion into the country’s interbank system. The bank said it a statement the move was a “routine operation after monetary policy normalization.”
Hong Kong’s Hang Seng Index rose 0.7%, snapping an eight-session losing streak. The Shanghai Composite edged a fraction lower. In Japan, Tokyo’s Nikkei 225 fell 0.7%, as it slips back toward its late-June lows.
Stocks rebounded nicely in Europe following China’s and the U.K. At midday, the CAC-40 in Paris was up 1.7%. Frankfurt’s DAX showed a 0.8% gain, and the FTSE 100 in London traded 07% higher.
Bond Rally Pauses, Yields Bounce
A four-day bond rally sent yields toward their seventh weekly decline in the past eight weeks. The 10-year Treasury yield rebounded briskly Friday to 1.34%, after settling just below 1.29% on Thursday.
For the week, yields had dropped nearly 10%. That was the worst weekly drop in a year (yields dived more than 22% in the week ended June 12 last year).
The 10-year yield struck a 13-month high above 1.76% on March 30. Yields remain up sharply from lockdown-era lows of around 0.5%. Looking at pre-pandemic norms, yields had ended 2019 just below 1.92%, down from levels above 3.15% in October 2018.
Oil Stems Slide
Oil prices ended a three-day slide Thursday, with West Texas Intermediate settling at $72.94 a barrel, down about 3% so far for the week. Prices Friday rose nearly 1%, to just below $74.
Oil and gas stocks have lost some market traction as institutional investors turn to more ESG-friendly targets. But the sector still represents almost $2.68 trillion in very active market capital. And that capital is highly influential when oil prices are in motion.
Oil and gas industry segments currently hold five of the 10 largest year-to date gains among the 197 industry groups tracked by IBD. The dividend yielding royalty trust group, including MV Oil Trust (MVO) and Permian Basin Royalty Trust (PBT), has rallied more than 98% through Thursday.
Domestic oil and gas producers, with names like Diamondback Energy (FANG) and Denbury (DEN), has gained almost 87%. Oil and gas drilling, international explorers and producers and Canadian explorers and producers have all gained between 60% and 70%.
Dow Jones Today: AmEx, Boeing
Interest rate sensitive issues fell hardest among Dow Jones stocks Thursday, with Travelers (TRV), American Express (AXP) and Goldman Sachs (GS) all ending down more than 2%. Goldman and AmEx remain two of the index’s fastest moving stocks so far this year, up 36.1% and 38.5% through Thursday.
But gains are now gone from Goldman’s early May breakout, and from a three-weeks tight breakout in early June. The stock needs to recover support at its 50-day moving average, and is likely to take its cues from bond yields/interest rates. So it is a stock worth watch-listing for now.
American Express has held up much more nicely, easing on Thursday for a neat test of support at its 21-day exponential moving average. The stock technically remains in a buy range following a late June rebound from its 50-day/10-week moving average. The buy range runs to around $174.
Both Goldman and JPMorgan were rebounding briskly, along with bond yields, early Friday.
Only a handful of Dow Jones stocks gained on Thursday. Boeing led that group with a 2.2% advance. That put it narrowly onto positive ground for the week, but still below its 10-week moving average, and in no obvious base pattern.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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