The Nasdaq composite built on small early gains and closed 0.3% higher on the stock market today. A slew of corporate earnings came in Thursday morning, centered mainly on the enterprise software, consumer spending and energy sectors. The SPDR S&P 500 ETF Trust padded its recent winnings, rallying nearly 0.6% but still lagged a bullish move by small caps. Meanwhile, Super Micro Computer made another huge upside move, closing at a record 1,004 and notching its 13th gain in 14 trading sessions.
Understandably, Supermicro holds a top-notch 99 Relative Strength Rating on a scale of 1 to 99 within not only a 12-month time frame — meaning SMCI is outperforming 99% of all companies in the IBD database — but also in 3- and 6-month time frames, according to the Technical panel of its stock chart at MarketSmith.
The Nasdaq ended the session at 15,906 and held a 6% year-to-date gain. It blasted 43.4% higher in 2023 following a 33% bear-market decline the prior year.
Among other hot growth stocks, cryptocurrency trading platform Coinbase rose more than 6% initially but saw gains fade to 3% ahead of its fourth-quarter results due after the close. Then, Coinbase shares at one point blasted 12% higher in extended-hours trading after the company earned $1.04 a share, reversing a a big loss of $2.46 in the year-ago quarter. Revenue bulged 50% year over year to $905 million, $79 million above the FactSet consensus estimate, Dow Jones reported.
Small Caps Lead Stock Market
Investors continue to bargain hunt in smaller equities.
Emboldened by another cooling in long-term interest rates, the Russell 2000 accelerated its gain to more than 2.4%. At 2,061, the small cap index is up 1.7% since Jan. 1. The Russell has climbed 1% or more six times alone in February.
Watch to see if the Russell can climb past long-term upside resistance at 2000, seen since August of 2022.
SharkNinja lost early initial gains but managed to rise 1.1%, while coal miner Arch Resources slumped 4%. Both firms reported quarterly results. SharkNinja attempted a breakout from a flat base with a 53.40 buy point.
Step Aside, Super Mario
Without doubt, Wall Street's focus sharpened on Super Micro Computer — branding itself as Supermicro — which rallied more than 14% and hit an intraday high of 1,006.35. Volume surged to 24.7 million shares, the highest amount in a single session in at least two years. An analyst at Bank of America initiated a buy rating and set a 1,040 price target. Please see this IBD tech story for more news on Supermicro.
Earnings at Supermicro have jumped from 89 cents a share in fiscal 2018 to an expected $25.06 in FY 2025 ending in June that year. Trailing four-quarter sales have topped $9.24 billion, making it more than likely that Supermicro's trailing 12-month revenue will easily exceed $10 billion.
Although it's one of the best gainers in the stock market in 2023, growth investors should not chase after the stock. Why? It is far extended from any objective buy point. The supplier of components for artificial intelligence data centers initially broke out of a long consolidation pattern with a 357 proper entry point on Jan. 19 when the San Jose, Calif.-based firm gave a bullish outlook.
Since that breakout, the company has galloped 181% higher. Shares are poised for a seventh straight weekly advance.
Another risk to buying Supermicro stock now? Shares are trading more than 235% above the 200-day moving average, an extreme move. IBD research on the greatest stock market winners has found that when a leader rises more than 100% above this long-term 200-day line, it's ripe for a significant pullback, if not reaching a long-term peak.
IBD Big Picture: Will This Bullish Shift Continue?
Stock Market Today
Coinbase, up as much as 16% for the week, continues work on its latest base. A base provides a potential platform for high-quality stocks to break out to new highs, offering strong gains for alert investors.
For now, COIN is showing a cup without handle that offers a proper buy point at 187.39. But shares have not broken out yet, so it is not a buy.
According to IBD Stock Checkup, COIN shows a decent 89 Composite Rating on a scale of 1 to 99. Watch for that rating to rise on Friday.
According to Zacks.com, Wall Street expected the company to post a net loss of 9 cents a share.
Bitcoin at one point rallied more than 1.4% to $52,288, hitting a 52-week high. The CoinDesk Bitcoin Price Index edged up slightly to $51,720, the highest 4 p.m. ET level since Dec. 3, 2021 when it traded at $53,512.38, according to Dow Jones Data.
The Dow Jones Industrial Average rose 0.9% and reached a intraday high of 38,781. Leading the Dow were Goldman Sachs, Caterpillar, UnitedHealth and Honeywell. These stocks were among 13 blue chip components rising 2 points or more.
Economic News: Retail Sales Dive, Hitting Treasury Bond Yields
In The Stock Market: Tech Leaders And Laggards
Three stocks soared on positive quarterly results. AppLovin shares catapulted 24% on volume running five times its 50-day average. JFrog launched 28% on volume that soared 10-fold. And Informatica surged 12%, also on heavy volume.
AppLovin has soared past the 20%-25% profit zone from a buy point at 44.57. For months, APP had struggled to surpass resistance near 45. The company's earnings late Wednesday came in at 49 cents a share vs. a net loss of 21 cents a year earlier. Expect AppLovin's Earnings Per Share Rating, currently at a decent 81, to rise sharply. The company lost money in 2020 and 2022 but finished 2023 strong with profits of 98 cents a share. The Street currently sees earnings vaulting 367% this year to $4.58 a share.
The mobile app development platform's sales jumped 36% to $953 million, marking a second quarter in a row of growth rate acceleration.
JFrog has soared more than 30% for the week and rolled more than 37% past a flat base showing a 35.35 buy point. It is sharply extended from the 5% buy zone, which went up to 37.11.
The expert in software development tools grew fourth-quarter earnings 375% to 19 cents a share on a 27% jump in revenue to $97.3 million. JFrog Chief Executive Shlomi Ben Haim told Barron's that the company at year-end locked in 37 customers each generating at least $1 million in annual revenue, up from 19 such clients a year ago.
Fastly Takes A Steep Tumble
On the downside, Fastly got crushed on its earnings. Fastly tanked 30% and cut through its 50- and 200-day moving averages, a sell signal. Another diver, Twilio gapped down and plunged 15% on a weak first-quarter sales outlook.
Fastly posted fourth-quarter earnings of a penny per share, better than the Yahoo Finance analyst consensus forecast for a net loss of 2 cents. Revenue rose 15% to $137.8 million, but that slowed from year-over-year gains of 20% and 18% in the prior two quarters.
Futures: Why You Should Be Cautious
Retail Sales Lead To A Damp Start
Beyond the stock market, the key Treasury 10-year note's yield fell as much as 7 basis points to 4.19% following a disappointing retail report. January retail sales in the U.S. fell 0.8% vs. the prior month. Econoday earlier called for a 0.1% decline. The 10-year yield finished the day at 4.24%, down 2 basis points.
Sam Millette, director of fixed income at Waltham, Mass.-based Commonwealth Financial Network, said in a note to IBD that winter storms in early January "may have discouraged potential buyers." Millette added the "slowdown was widespread as nine of the 13 categories showed falling signs during the month."
James Knightley, chief international economist at ING, points out that the data from both retail sales and the CPI report implies that "consumer spending fell in real terms in January, which would be the first decline since August." Knightley notes that retail sales make up around 45% of total consumer spending.
On the bright side, furniture sales rose 1.5% while department store activity expanded 0.5%. Sales of eating and drinking out increased 0.7% to offset a 1.7% drop in auto sales and a 4.1% month-on-month dive in building materials.
Meanwhile, weekly jobless claims fell 8,000 in the latest week to 212,000, below views of 219,000. But the four-week average of initial unemployment claims rose by 5,750 to 218,500. Traders will be closely watching data on wholesale prices for January before Friday's market open.
Elsewhere in the stock market, the Dow Jones transportation average initially outperformed the Nasdaq with a gain of nearly 0.5%. Its gain then cooled to 0.4%. Midday data showed winners topping losers on the New York Stock Exchange by a more than 4-to-1 margin. On the Nasdaq, gainers led decliners by more than 3 to 2.
Investor's Corner: Will This Sell Rule Apply To SMCI Too?
Supermicro Stock: More Fundamental Analysis
Going back to Supermicro: The expert in AI and accelerated computing hardware has shown brilliant growth on both the top and bottom lines. Over the past eight quarters, sales on average climbed 48% vs. year-ago quarters.
Amid that time frame, Supermicro's sales fell just once, a 5% dip in the March-ended quarter of 2023. Yet since then, sales have revved higher, rising 34%, 14% and 103% in the last three quarters.
Earnings rose 5% in calendar first quarter of 2023, 34% in Q2, edged a penny higher in Q3, and soared 71% in Q4 of calendar year 2023. Supermicro's fiscal year ends in June.
Wall Street has revised its profit estimates multiple times and currently sees profit in the fiscal year ending June 2024 rising to $21.70 a share, then rising another 16% to $25.06 in fiscal 2025. In fiscal 2020, during the year of the Covid pandemic, Supermicro posted earnings of $2.77 a share.
Supermicro has grown to $56 billion in market value, squarely in large-cap territory. It has 55.9 million shares outstanding and a float of 45.9 million freely traded shares.
Stock Market Leader In Restaurant Field
Elsewhere, Shake Shack soared 26% in huge volume and hit as high as 98.90 after reporting an adjusted profit of 2 cents a share as sales rose 20% to $286 million. A year earlier the burger, fries and milkshake chain lost 6 cents a share. Gross margin held steady vs. the prior quarter at 44.5%.
Shake Shack stock earns a 94 Composite Rating on a scale of 1 to 99.
Shares initially cleared a relatively deep cup with handle at 76.74 on Jan. 29. The 5% buy zone went up to 80.58. A post-breakout move showed initial bumps, yet the restaurant play did not fall 7% below the buy point. So, Shake Shack stock did not trigger the golden rule of investing.
Please read this Investor's Corner on what a true breakout should look like on stock charts.
Shake Shack saw mutual fund holders shrink a tad to 396 funds at the end of the fourth quarter, down from 409 in Q3, according to MarketSmith data. However, Shake Shack also boasts three members of IBD Mutual Fund Index as investors. They include Lord Abbett Developing Growth (LAGWX), Invesco Discovery (OPOCX) and Alger Small Cap Growth (ALSAX).
Oil Leads Commodity Gains
Beyond the stock market, crude oil futures gushed 1.8% higher to $77.74 a barrel. Also nicknamed black gold, oil is having a strong 2024 so far, up almost 9%.
Gold has displayed muted action so far this year amid a strong U.S. dollar. On the Comex, gold's near-expiration futures rallied 0.6% to $2,016 per ounce. Silver futures traded at $22.98 an ounce, up 2.7%.
The WSJ Dollar Index edged 0.4% lower on Thursday yet holds a 2.9% gain year to date. The euro rose to $1.0773, while traders exchanged 1 U.S. dollar for 149.94 Japanese yen.
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