The Dow Jones Industrial Average pressed against weekly highs in the first half of Friday's session, adding to Thursday's monster short-covering rally. Amazon.com trapped bulls overnight after warning about declining AWS growth. Intel stunned skeptical market watchers, breaking out after another weak quarter. Its 2024 287% growth forecast has forced investors to look past current headwinds.
Intel shares got sold after the chipmaker reported an expected Q1 loss and lowering Q2 earnings guidance in Thursday's post-market. All eyes were on Amazon at the time, while the megacap soared by double digits in reaction to an upbeat Q1 report.
The tables turned when Intel revealed it gained market share in the first quarter while, at the same time, Amazon warned about declining cloud-computing demand. Traders scrambled to hit their buttons as fast as they could, dropping AMZN to even and lifting INTC into a notable breakout above the 200-day moving average.
The strong price action should confirm a successful test of the November-to-March double-bottom pattern. Adding to the bullish picture, INTC stock will also confirm a weekly reversal at the 10- and 50-week lines if the rally holds into Friday's close.
Taken together, Intel could be entering the first major uptrend since the 2021 top.
So, What's Up With Intel?
FactSet estimates forecast this Dow Jones stock will post fantastic 287% earnings growth in 2024, and many investors may be looking for the best entry.
However, the same folks are warning about a 74% earnings decline this year, as Intel works through a turnaround plan. Not surprisingly, Intel guided Q2 to another loss during last night's release, so there's still plenty of short-term risk on the table.
Benchmark analyst Cody Acree outlined the bull setup Friday, noting that "results and outlook now reflect a worst-case scenario considering the current macroeconomic climate and accordingly we believe it is prudent to begin to take a more positive stance on Intel's shares and are increasing our rating to Buy from Hold and setting a 12-month price target of 39."
If true, his wrap-up could translate into significant gains for patient investors.
"Intel has reached a revenue, gross margin, and profit trough through this first half of '23 and that subsequent quarters will provide a more constructive backdrop for the improved efficiencies of its operations to deliver incrementally stronger results," the analyst concluded.
INTC stock traded 4.5% higher at midday Friday.
First-Quarter Blowups
First-quarter earnings blowups continued at a feverish pace.
Amazon punished overeager bulls last night, rallying 13 points in reaction to an upbeat report and then collapsing after warning about cloud-computing growth. AMZN stock traded 18 points below the rally high in the first half, in a bull trap that undermines Big Tech sentiment and buying power.
Even-uglier post-earnings declines in First Solar (14%), Cloudflare (25%), Snap (18%) and Pinterest (17%) continued through the first half.
PINS and SNAP results affirmed long-term stress in social-media advertising revenue, despite the recent Meta Platforms report. Smaller players are the most at risk, as clients direct shrinking budgets into deals with the biggest operators.
The Innovator IBD 50 ETF shook off earnings busts, rising 0.8%.
Chevron ticked higher after the oil and gas giant beat Q1 top- and bottom-line estimates on a 6.6% year-over-year revenue decline. ExxonMobil delivered a mixed report that also got buying interest. CVX stock added 0.4% while XOM stock rose 2.1%, still in buy range from a 117.28 buy point.
March personal income and personal spending, April consumer sentiment and the Q1 employment report all met or beat expectations, showing no signs of an economic slowdown.
The March personal consumption expenditures (PCE) price index posted a 0.1% uptick, right on expectations. However, the core PCE index has gotten too sticky, meeting 0.3% estimates after last month's identical reading. On an annual basis, the PCE dropped to 4.6% after 4.7% in February.
This is the Federal Reserve's favorite inflation gauge.
Dow Jones: Quiet Friday After Stunning Week
The Dow Jones Industrial Average added 0.6% while the S&P 500 gained 0.5%. The Russell 2000 small-cap rallied 1%. The Nasdaq composite underperformed with a modest 0.2% uptick.
NYSE volume surged while NYSE volume fell compared with the same time on Thursday.
Asian markets were higher across the board after the Bank of Japan kept stimulus measures in place. European markets were mixed.
The 10-year Treasury fell 9 basis points to 3.44%. Bitcoin reversed 1.1% after testing new resistance at the $30,000 level.
Gold powered back to the $2,000 level while West Texas Intermediate crude oil attracted solid buying interest, lifting to $76.50 per barrel. It seems about right, with Americans headed into the summer driving season and supplies well matched with demand.
The Nasdaq, S&P 500 and Dow Jones showed excellent strength Thursday and remain well above their 50-day and 200-day moving averages. The rally was a step in the right direction, but market indexes need higher prices and more time to cancel out recent distribution days. Until then, IBD's more cautious "market under pressure" outlook makes sense.
Follow Alan Farley on Twitter at @msttrader.
