Dow Jones futures tilted higher Friday morning, while S&P 500 futures and Nasdaq futures rose modestly. The stock market rally had a strong Thursday, fueled by positive reactions to earnings.
Dollar Tree, Williams-Sonoma and Macy's had strong results and at least solid guidance. Even more encouraging? Burlington Stores and Nvidia moved higher despite weak forecasts. That suggests that markets are pricing in bad news from cost pressures, supply-chain issues and wavering consumers.
Lithium plays Albemarle and Livent blasted through resistance areas, flashing buy signals. Delta Air Lines rallied above an aggressive entry while Ashland Global Holdings and W.R. Berkley moved above early buy points.
Key Earnings
Costco Wholesale, Ulta Beauty and Zscaler reported after the close.
Costco earnings were in line while sales just edged past fiscal Q3 estimates. Shares fell 2% in premarket trading after closing up 5.65% on Thursday.
Ulta Beauty earnings easily beat, with revenue up 21%. ULTA stock jumped 8% overnight, signaling a gap above the 200-day and 50-day lines. Shares already rebounded 7.1% in Thursday's session.
Zscaler earnings modestly beat, with the cybersecurity firm also giving upbeat guidance. ZS stock rose 4% in early Friday trade. Shares bounced 7.2% on Thursday, but are still close to an 18-month low.
ALB stock is on IBD Leaderboard. ASH stock was Thursday's IBD Stock Of The Day. WRB stock was Tuesday's Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures were less than 0.1% above fair value. S&P 500 futures climbed 0.2% and Nasdaq 100 futures advanced 0.45%.
The 10-year Treasury yield declined 3 basis points to 2.73%.
U.S. crude oil prices fell 1%.
The Commerce Department will release the April income and consumer spending report at 8:30 a.m. ET, offering a broad look at the health of consumer spending. The report's inflation gauge is the Fed's favorite.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally quickly gained momentum Thursday, with strong advances for the major indexes.
The Dow Jones Industrial Average rose 1.6% in Thursday's stock market trading. The S&P 500 index popped 2%. The Nasdaq composite rallied 2.7%. The small-cap Russell 2000 gained 2.2%
Several stocks, including Nvidia and Burlington Stores, rallied Thursday despite weak guidance. It's a welcome change from recent months when stocks sold off on seemingly good news. It suggests that the market has priced in bad news and bearish fears and is ready to rally.
Of course, it's never clear what's priced in. Gap and Workday skidded overnight on weak results.
U.S. crude oil prices jumped 3.4% to $114.09 a barrel.
The 10-year Treasury yield climbed 1 basis point to 2.76%.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF popped 2.6%, while the Innovator IBD Breakout Opportunities ETF climbed 1.85%. The iShares Expanded Tech-Software Sector ETF advanced 2.1%. The VanEck Vectors Semiconductor ETF gained 3.3%, with NVDA stock as a major holding.
SPDR S&P Metals & Mining ETF advanced 1.3% and the Global X U.S. Infrastructure Development ETF 2.2%. U.S. Global Jets ETF soared 5.1%, with DAL stock a core holding. SPDR S&P Homebuilders ETF popped 3.9%. The Energy Select SPDR ETF rose 1.1% and the Financial Select SPDR ETF 2.3%. The Health Care Select Sector SPDR Fund edged up 0.4%.
Reflecting more-speculative story stocks, ARK Innovation ETF rallied 3.9% and ARK Genomics ETF 1.3%.
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Stocks In Buy Zones
Albemarle stock jumped 7.4% to 255.05 in heavy volume, clearing key resistance near 248 going back months. That's a legitimate entry in a deep cup base with an official buy point of 291.58. Late Monday, Albemarle sharply raised full-year earnings guidance for the second time in less than a month. ALB stock briefly cleared the 248 area before pulling back.
The relative strength line is at a new high, a bullish sign. The RS line, the blue line in the charts provided, tracks a stock's performance vs. the S&P 500 index.
Livent stock popped 6.8% to 30.20, clearing resistance just below 30, offering an early entry. The official cup-base buy point is 33.14. In early May, the lithium producer crushed earnings views and raised guidance. The RS line for LTHM stock is at a new high.
Delta stock ascended 5.8% to 40.83, moving above its 50-day and 200-day lines as well as breaking a short trendline from the April 21 peak of 46.27. DAL stock and other travel plays rebounded Thursday, buoyed by raised revenue forecasts from Southwest Airlines and JetBlue.
Delta stock has hit resistance at the 45-46 area several times in the past year. The consolidation since late April is on track to be a proper base in another week. One could view this consolidation as a handle in a deep base going back to March 2021.
Ashland stock rose 4% to 105.76, breaking a downtrend in a flat base and extending a bounce from the 50-day line. The flat base, which could viewed as part of a consolidation going back to November, has a 111.15 buy point. The RS line is the highest in nearly three years.
WRB stock climbed 1.6% to 70.11, clearing short-term resistance just above 69, providing an early entry for the insurer. W.R. Berkley stock is in a flat base with a 71.63 buy point, according to MarketSmith analysis. The RS line for WRB stock is at a high.
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Market Rally Analysis
The stock market rally staged a strong advance Thursday, with significant gains on all the major indexes.
Notably, Nasdaq volume rose slightly vs. Wednesday. NYSE volume fell modestly.
The Dow Jones and S&P 500 moved above their 21-day moving averages, along with the Russell 2000. The Nasdaq is not quite there, but did clear its 10-day line and move above a short-term range.
After the 21-day line, the major indexes face resistance at the 50-day and 200-day lines. A power trend is still a long way off. The current market rally could fizzle out long before then.
The market showed strong breadth on Thursday. With the megacaps in no position to lead right now, a sustained market rally will need a broad advance.
Retailers had a strong session and were a big driver of Thursday's market gains. But most are still heavily damaged and need a lot of repair. The one exception, possibly, is DLTR stock. Dollar Tree vaulted 22%, back above its 50-day line and a trendline, recovering all its losses stemming from last week's stunning Target warning. Still, the bungee cord chart action over the past week is not normal.
Energy stocks had a strong session with the sector still the clear area of market strength. Drugmakers look solid, while lithium plays like ALB stock are in play.
Travel plays like DAL stock are starting to look interesting but have been prone to turbulence. Some steel plays are bouncing back.
While beaten-down growth stocks were among Thursday's big winners, they remain highly risky. If the market retreats, they'll be among the biggest losers.
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What To Do Now
Investors could tiptoe into the market, either via individual stocks or a broad market ETF. While some individual names are flashing buy signals, many are in the energy space. But you don't want to become too exposed to any one sector, even energy.
If this market rally has legs, you can steadily increase exposure as more names flash buy signals. If it's another short-lived advance, you'll want to step out quickly.
Get your watchlists in shape. Look for stocks that are ready, or nearly so. But also track quality names that are beginning to set up.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
