Dow Jones futures fell early Friday, along with S&P 500 futures and Nasdaq futures, amid rising China tensions. The coronavirus stock market rally sold off sharply, as tech giants Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Google parent Alphabet (GOOGL) and Tesla (TSLA) suffered significant losses.
Chipmakers were in focus overnight with Intel (INTC) and Apple iPhone chipmaker Skyworks Solutions (SWKS) reporting earnings. Intel stock tumbled as the chip giant delayed a next-generation semiconductor shift. Skyworks stock fell modestly despite a beat-and-raise quarter. Those reports are important for the broader chip sector, notably Advanced Micro Devices (AMD). AMD stock spiked on Intel’s woes.
The coronavirus stock market has rallied in large part on the trillion-dollar trio of Apple stock, Microsoft stock and Amazon stock, along with turbocharged Tesla stock. So it’s not a surprise to see the major indexes retreat with those tech titans retreating. Meanwhile, some “real economy” leaders fared relatively well.
Apple stock, Microsoft stock and Amazon stock are all on IBD Leaderboard. MSFT stock is an IBD Long-Term Leader. GOOGL stock is on the Long-Term Leaders watchlist. AMD stock is on the IBD 50. Microsoft stock, AAPL stock and INTC stock are all Dow Jones stocks.
Dow Jones Futures Today
Dow Jones futures fell 0.5% vs. fair value. S&P 500 futures retreated 0.4%. Nasdaq 100 futures sank 0.8% vs. fair value. Intel stock is weighing on the DJIA, S&P 500 and Nasdaq.
Futures weakened as China ordered the U.S. to close its consulate in Chengdu. That comes after the U.S. ordered China to close its consulate in Houston, citing concerns about intellectual property and American’s private information
The Shanghai composite retreated more than 2%.
Coronavirus cases worldwide have reached 15.65 million. Covid-19 deaths are at 635,000.
Coronavirus cases in the U.S. have topped 4.16 million, with deaths above 147,000.
Coronavirus Stock Market Rally
The coronavirus stock market rally started off mixed but soon selling took hold, led by DJIA components Apple and Microsoft as well as other tech winners. The Dow Jones Industrial Average fell 1.3% in Thursday’s stock market trading. The S&P 500 index sank 1.2%. The Nasdaq composite, so heavily weighted to Apple stock and other big techs, lost 2.3%, nearing its 21-day line once again.
Apple stock fell 4.55% amid a report that several states are launching a consumer deception probe. Also, a Japanese report said the iPhone maker would delay the launch of its 5G handset. Finally, Goldman Sachs reiterated that investors should steer clear of the Dow tech titan.
Microsoft stock retreated 4.35% following strong earnings late Wednesday, though revenue guidance for the current quarter was a little light. Amazon stock lost 3.7% and Google stock 3.1%. AAPL stock, AMZN stock and GOOGL stock have earnings next week. All four of these megacaps have market caps above $1 trillion.
Microsoft undercut its 21-day exponential moving average again. Apple stock fell through that short-term line after not touching it since its late April breakout. FANG giants Amazon stock and Google stock are approaching their 21-day lines.
Meanwhile, Tesla stock reversed lower to close down 5%. Late Wednesday, Tesla earnings easily beat views, thanks to a surge in emission credits. TSLA stock is still up slightly for the week and a whopping 40% so far in July — after spiking 29% last month.
Meanwhile, several cloud software names that recently found support at their 21-day lines are testing or undercutting those levels once agin, including Datadog (DDOG), Shopify (SHOP), Fastly (FSLY) and Cloudflare (NET). During the coronavirus stock market rally, rebounds from short-term levels have worked because the Nasdaq itself has rebounded so quickly. But at some point the Nasdaq and these hot stocks will fall to sturdier support levels.
Meanwhile, leading stocks outside of techs fared much better, though many did reverse lower. Uniform rental specialist Cintas (CTAS) broke out after earnings. Mastercard (MA) flirted with an official buy point while Brazilian payment play StoneCo (STNE) tried to break out.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.8%. The iShares Expanded Tech-Software Sector ETF (IGV) sank 2.2% with Microsoft stock as a top holding. The VanEck Vectors Semiconductor ETF (SMH) skidded 1.65%, with INTC stock and AMD stock notable holdings. The iShares U.S. Home Construction ETF (ITB) reversed from a record high to edge down 0.1%.
Intel earnings rose 16% to $1.23 a share as sales popped 19% to $19.73 billion. Wall Street forecast Intel earnings of $1.11 on sales of $19.73 billion.
Gross margins missed expectations and Intel gave mixed Q3 guidance. But the real headline is that the Dow tech giant said its transition to 7-nanometer chips will be pushed back by another six months.
Intel stock tumbled nearly 11% overnight. INTC stock fell 1.1% to 60.40 on Thursday. Intel stock has a 65.21 buy point from a flat base next to a deep prior consolidation, according to MarketSmith analysis. But the relative strength line has been falling throughout the coronavirus market rally. That shows that Intel stock has been lagging the S&P 500 index and far behind the semiconductor leaders.
The RS line is the blue line in the charts provided.
The Intel earnings report couldn’t have been better for AMD. A main rival beat views, signaling strong overall demand, but is lagging AMD on key tech.
AMD stock jumped 8% in extended trade. Shares fell 3.6% on Thursday to 59.57. On Wednesday, AMD shot up 8.4%, breaking out past a 59.10 buy point, on new PC chips.
Skyworks earnings per share sank 7% to $1.25 as fiscal Q3 revenue fell 4% to $736.8 million. Analysts expected Skyworks earnings of $1.13 a share on sales of $690.8 million.
The chipmaker guided higher for the current Q4 and raised its quarterly dividend to 50 cents a share from 44 cents.
Skyworks stock fell 3.2% in extended trade. SWKS stock dipped 0.7% to 135.35 on Thursday, once again topping a 138.32 flat-base buy point intraday. Skyworks stock has an early entry point of 135.33.
Stock Market Rally Trends
Thursday’s action wasn’t necessarily fun, but it’s healthy and normal for the coronavirus stock market rally. The Nasdaq has been running up at an unsustainable pace, butting up against short-term and long-term channel lines. So a pause or pullback over several weeks could help the market rally continue for a much longer period. Some leading stocks could form new bases or find support at their 50-day/10-week lines. Datadog stock, for instance, isn’t far from its 10-week line.
Real economy stocks coming on also bodes well for the coronavirus stock market rally. It broadens out the leadership, taking some pressure off the Nasdaq, tech giants and cloud software names to keep surging. If the S&P 500 can catch up to the Nasdaq, rather than the Nasdaq falling toward the S&P 500 and DJIA, that would be ideal.
As an investor, Thursday’s action shows the importance of not being overly exposed to one particular sector. Continue to review and grade your holdings, and update your watchlists. If the coronavirus stock market rally is due for a pullback, you may want to trim your overall exposure. If the section rotation or expansion continues, it’s a good idea to shift somewhat into “real economy” growth names.
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