Dow Jones Futures: Jobs Report Will Test Market Rally ‘Soft Landing’; Tesla Stock Split Approved

Dow Jones futures rose slightly on Friday morning, along with S&P 500 and Nasdaq futures, as the July jobs report loomed. Tesla ( TSLA ) shareholders approved a 3-for-1 stock split Thursday evening.

The stock market rally ended a mixed day on a relatively quiet Thursday for the major indexes, but there were some big gainers.

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

Dow Jones futures today

Dow Jones futures were up 0.3% at fair value. S&P 500 futures advanced 0.2% and Nasdaq 100 futures advanced 0.3%.

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

Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next normal stock market session.

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Jobs 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 sharp decline in employment in June. It’s more error-prone than payroll, but it often shows that the labor market turns first.

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

Jobless claims rose to 260,000 in the last week, the highest in nine months. Job openings, while still high, have fallen rapidly in the past 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 buy into the idea that the economy will weaken enough to cool inflation enough to spur the Federal Reserve to slow and then stop the Fed’s rate hikes, without causing a big drop in demand and employment.

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Biotechnological gains

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

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

Shares of NBIX fell slightly overnight after Neurocrine’s earnings and revenue beat. The company raised revenue guidance for its key drug, but also dropped a treatment that didn’t perform well. Shares rose 2% on Thursday to 95.93, recovering from the 50-day line. NBIX stock has a buy point of 100.10.

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

Tesla Stock Split, Annual Meeting

Tesla shareholders approve a 3-for-1 stock split Thursday evening 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 playing options cheaper.

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

Musk hinted that Cybertruck pricing and specs will be different from what Tesla initially announced in 2019, citing inflation. Reduced prices and specs 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 getting upgrades to increase capacity, while Tesla has two new factories in Berlin and Austin that have ramped up at a glacial pace. Musk said Tesla could 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. Shares rose 0.4% to 925.90 in Thursday’s regular session, just above the 200-day line. TSLA shares had rallied strongly on the stock-split news, 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 1,208.10 buy point. A consolidation near the 200-day line or a move higher could create a buying opportunity.

China Electric Vehicle Actions

Meanwhile, China’s electric vehicle manufacturers are showing some strength. BYD ( BYD ), which reported a July sales boom on Wednesday, rose 2.6% to 38.10 on Thursday, above its 50-day line. BYD shares will likely make a new base after another week, but a move above the 38.35 high on August 1 could provide an early entry.

Li Auto ( LI ) rose 1% to 34.32, continuing to trade between the 21-day and 50-day lines. LI stock should make a new base on a weekly chart after Friday. Li Auto stock is in the IBD 50.

Nio (NIO) rose 3% to 20.90, bouncing off the 50-day line. NIO shares are still below the 200-day line.

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Stock market collection on Thursday

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

The Dow Jones Industrial Average fell 0.3% in Thursday’s trading. The S&P 500 index fell 0.1%. The Nasdaq composite rose 0.4%. The small-cap Russell 2000 lost 0.2%.

The price of US crude fell 2.3% to $88.50 a barrel, hitting its lowest levels since before Russia’s invasion of Ukraine in late February. Gasoline futures fell 4.1%, signaling a continued decline in prices at the pump.

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

ETFs

Among top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 0.35%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose another penny. The iShares Extended Technology Software Sector ETF ( IGV ) gained 0.2%. The VanEck Vectors Semiconductor ETF ( SMH ) rose 1%.

The SPDR S&P Metals & Mining ETF (XME) rose 1% and the Global X US Infrastructure Development ETF (PAVE) rose 0.8%. 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 Select Healthcare Sector SPDR Fund ( XLV ) retreated 0.5%.

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

Top Five Chinese Stocks to Watch Now

Analysis of market concentration

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

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

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

Oil and gas stocks are struggling again, with energy prices, especially crude oil, falling. It’s hard to see the sector making significant progress 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 profit winners on Thursday, the profit losers showed the dangers of having little cushion towards the results. Aris Water Solutions ( ARIS ) fell 21% after earnings after closing in a bought zone on Wednesday. Fortinet ( FTNT ) fell 16%, Eli Lilly ( LLY ) and Quanta Power ( PWR ) fell modestly, but further from buy points.

Lantheus (LNTH) had a wild session, hitting a record high of 81.43 right after the open, falling to 66.26 a few minutes later, turning positive briefly before closing up 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 increasing exposure quickly. A pullback could mean a temporary setback for the indexes, but perhaps big losses for many individual names. There is still a significant risk that the market recovery will soon fizzle out and pull back significantly, though perhaps not to recent lows.

Be careful with earnings.

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

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

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