Dow Jones futures fell modestly early Friday, along with S&P 500 futures and Nasdaq futures, amid U.S.-China tensions and ahead of the July jobs report. The coronavirus stock market rally had a solid overall session Thursday as Apple (AAPL), Facebook (FB), Google parent Alphabet (GOOGL), Microsoft (MSFT), Amazon (AMZN), Salesforce.com (CRM) and Adobe (ADBE) had solid or strong gains, with many of these big caps in or near buy zones.
But Fastly (FSLY) triggered a cloud software retreat, including Datadog (DDOG) and Alteryx (AYX). Datadog stock and Alteryx stock plunged late on results and guidance. Like Fastly stock, these three cloud leaders beat views. All except AYX stock raised guidance. But, like FSLY stock, investors may have been expecting more.
Cloudflare stock fell slightly early Friday after retreating modestly Thursday. Cloudflare (NET) also beat views and raised guidance.
Apple stock is closing in on a $2 trillion valuation. Facebook stock and Salesforce stock surged and are at the edge of buy zones. Google stock is rebounding bullishly from key support. Adobe stock, Microsoft stock and Amazon stock are all near buy points and are arguably already actionable.
Still, with the Nasdaq composite starting to look extended again and a leading group unable to meet sky-high expectations, the sun may be shining on the coronavirus stock market rally, but there are clouds on the horizon.
In other news, the FDA approved Biogen (BIIB) Alzheimer’s drug aducanumab from priority review. Biogen stock jumped.
Apple stock, Amazon stock, Microsoft stock and Adobe stock are all on IBD Leaderboard. So is NET stock. AMZN stock and MSFT stock are on SwingTrader. Microsoft stock and ADBE stock are IBD Long-Term Leaders. GOOGL stock and CRM stock are on the Long-Term Leaders watchlist. Microsoft and Adobe stock are on the IBD 50 list.
Dow Jones Futures Today
Dow Jones futures fell 0.5% vs. fair value. S&P 500 futures slid 0.4% and Nasdaq 100 futures retreated 0.4%.
President Trump late Thursday said he signed an executive order halting all U.S. transactions with TikTok owner ByteDance and WeChat operator Tencent (TCHEY) after 45 days, widening his actions vs. Chinese social media. Trump has said he’ll ban TikTok from operating in the U.S. unless it’s sold, possibly to Microsoft.
Tencent stock, which trades over the counter in the U.S., fell sharply in Hong Kong. Alibaba (BABA) and other Chinese internet stocks were pointed lower early Friday.
At 8:30 a.m. ET, the Labor Department will report the July employment report. On Thursday, Labor reported weekly jobless claims fell to the lowest level since March.
Coronavirus cases worldwide are at 19.29 million. Covid-19 deaths have topped 718,000.
Coronavirus cases in the U.S. topped five million on Thursday, currently at 5.03 million. Deaths are above 162,000. New coronavirus cases are trending lower over the past several days.
Brazil is closing in on three million coronavirus cases, while India just topped two million.
Coronavirus Stock Market Rally Thursday
The coronavirus stock market rally started off slowly but built momentum as the session wore on.
The Dow Jones Industrial Average rose 0.7% in Thursday’s stock market trading. The S&P 500 index advanced 0.6%, less than 2% from an all-time high. The DJIA and S&P have rallied for five straight sessions. The Nasdaq composite climbed 0.7% to its fourth straight all-time high, extending its win streak to seven.
Congress and the White House are still far apart on a new coronavirus stimulus bill. President Donald Trump said he might sign an executive order on Friday or Saturday extending a moratorium on evictions as well as extending the now-expired extra unemployment benefits. The order would also include a new payroll tax holiday. House Speaker Nancy Pelosi said she’d favor an eviction moratorium extension but said Congress must OK funding for extra jobless benefits.
Apple Stock, Big Techs Strong
U.S. Stock Market Today Overview
Last Update: 4:08 PM ET 8/6/2020
Apple stock rose 3.5% to a new high, hitting a $1.975 trillion valuation. AAPL stock is well extended.
Facebook stock leapt 6.5% to 265.28, clearing another entry after a short pause following last week’s earnings gap. The 5% chase zone ended just before 265. CRM stock popped 2.5% to 207.79, still within range of a 202.92 entry from a short consolidation above a larger base.
Google stock climbed 1.75%, rebounding from its 10-week line and closing just above its 21-day line. GOOGL stock is right at a downward-sloping trend line. A move above that would make the search giant actionable.
Microsoft stock and Amazon stock rose 1.6% and 0.6%, respectively, still consolidating following last week’s gap-ups within short consolidations. Investors could buy MSFT and AMZN stock now or wait for them to clear their gap-up highs. Adobe stock rose 3%, near the top of short consolidation after a recent 10-week line test. Adobe stock has moved above a very short-term resistance area, giving investors an early entry.
Along with AAPL stock, Microsoft, Amazon and Google stock all boast trillion-dollar valuations. FB stock is at $756 billion, while Adobe stock and CRM stock are “only” worth about $200 billion. When these megacaps and big caps move, they move markets. All of these stocks are on the S&P 500, while Apple and Microsoft are DJIA components.
Fastly Stock, Growth Leaders Struggle
However, many growth names retreated Thursday, notably in cloud software. Fastly stock plunged 18% Thursday following better-than-expected Q2 earnings and raised guidance. But investors may have been expecting even better results or guidance, while Fastly’s exposure to top customer TikTok may have raised some concerns.
DDOG stock and Alteryx stock both closed down about 5%. After the close, Datadog earnings topped views, while the outlook was above consensus. Alteryx earnings also beat views, though guidance was mixed. But Datadog stock and Alteryx stock both sold off sharply overnight, signaling drops through their 50-day lines. DDOG stock pared losses somewhat by Friday morning.
Cloudflare earnings and guidance modestly topped views. Unlike Fastly and Datadog, Cloudflare stock only fell slightly overnight after retreating 2.7% Thursday. A move over this week’s high could offer a buy point for NET stock.
The sell-off in FSLY stock, DDOG stock and other cloud names underscores the danger of holding a hot stock heading into earnings. With volatile highfliers, investors may want a larger cushion when holding into quarterly results. Meanwhile, the retreat in cloud software highlights the risk of being too concentrated in a particular group or sector.
In addition, Fortinet (FTNT), Dropbox (DBX) and Everbridge (EVBG), all software stocks in consolidations, sold off overnight on their results and guidance. BlackLine (BL), just above a short consolidation, also fell notably.
Among the best ETFs, Innovator IBD 50 (FFTY) closed flat. The iShares Expanded Tech-Software Sector ETF (IGV) rose 0.3%. While highflying cloud names such as Fastly stock tumbled, big IGV components MSFT stock, ADBE stock and CRM stock advanced. The VanEck Vectors Semiconductor ETF (SMH) dipped 0.2%, as weak results from Western Digital (WDC) weighed on memory-related chip names.
Stock Market Rally Warning Signs
The coronavirus stock market rally has been looking strong, but there are some concerns. Thanks to Apple stock, Microsoft stock and Facebook stock, the Nasdaq is once again hitting the top of short-term and long-term channel lines, raising the risks of a pullback. While the stock market rally has had some abrupt pullbacks along the way, they’ve been very brief. But that doesn’t mean the next one will be.
The furious sell-off in Fastly stock, Datadog stock and several other cloud software leaders also suggests that highflying stocks have been getting a bit too close to the sun.
It’s not a good sign when a number of leading stocks get hammered. The stock market rally may continue to power ahead, but risks being even more reliant on a handful of megacap tech leaders.
Still, there’s no need to panic. Investors might decide to take some profits, especially in stocks with small gains that are pulling back. Pay close attention to the overall coronavirus market rally, leading stocks and your own holdings.
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.
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