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Dow Jones Futures: Netflix Jumps on Subscribers, Google Cuts 12,000 Jobs After Market Rally Breaks Key Levels

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Dow Jones futures were little changed early on Friday, while S&P 500 futures rose modestly and Nasdaq futures rose solidly. Netflix (NFLX) jumped on strong subscriber growth, with energy giant SLB (SLB) on tap. google parent Alphabet (GOOGL) will cut 12,000 jobs as massive tech layoffs continue.




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The stock market rally pulled back again on Thursday for the second straight day as major indices tested or cut other key levels. The Dow Jones turned negative in 2023.

New economic reports pointed to weaker economic activity, with one big exception: initial jobless claims hit the lowest level since last April. The bigger picture points to rising recession risks, but tight job markets keep the Federal Reserve hawkish.

Major stocks are pulling back by varying degrees. Investors should wait to see if this pullback is temporary or something more serious.

MELI stock, Medpace Shares (MEDP), Axon Enterprise (AXON), Vertex Pharmaceuticals (VRTX) and Exxon Mobil (XOM) are names that are doing relatively well, so far.

MEDP and Axon Enterprise shares are on the IBD Leaderboard. MercadoLibre and XOM shares are in the IBD 50. VRTX and SLB shares are in the IBD Big Cap 20. GOOGL shares are on the IBD Long-Term Leaders list.

Free market (MELI) was IBD’s stock of the day on Thursday. VRTX stock was as of Wednesday.

Dow Jones Futures Today

Dow Jones futures were little changed from fair value. S&P 500 futures were up 0.3%. Nasdaq 100 futures were up 0.7%. NFLX and Google stocks are giving Nasdaq futures a boost.

The 10-year Treasury yield rose 4 basis points to 3.44%.

Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate to actual trading in the next regular stock market session.

Strong Netflix Subscriber Growth

Netflix earnings were well below fourth-quarter views, while 2% revenue growth was in line. But Netflix subscribers increased by 7.66 million, far more than the expected 4.57 million. The streaming giant launched an ad-supported lower-priced subscription option on Nov. 3. Netflix no longer provides guidance for subscribers.

Meanwhile, co-founder Reed Hastings stepped down as coCEO to become executive chairman. Ted Sarandos will remain co-CEO, joined by Greg Peters, current COO.

NFLX shares jumped in premarket trading. Shares fell 3.2% to 315.78 in Thursday’s regular session.

Netflix’s subscriber growth is a positive sign for many other streaming players, including walt disney (DIS), paramount global (FOR), Warner Bros Discovery (WBD) and roku (ROKU). But stocks in DIS, Roku and others saw meager gains in extended action.

Google job cuts

Alphabet, parent company of Google, will lay off 12,000 employees, or 6% of staff. That’s according to a company memo. This follows Microsoft’s plans to cut 10,000 jobs, or 4.5% of staff, earlier this week with amazon.com (AMZN), salesforce.com (CRM) and many other tech giants downsizing.

Late Thursday, Google said it would delay 20% of bonus payments until at least March.

GOOGL shares rose solidly in premarket trading.

Google shares rose 2.1% to 93.05 on Thursday, moving above the 50-day line for the first time since early December. The 50-day line has been a resistance area for the internet giant since late 2021. Still, GOOGL stock remains a long way from its 200-day line.

Eli Lilly Falls Down on FDA’s Alzheimer’s Rejection

The FDA rejected Eli Lilly’s accelerated approval submission of its donanemab for Alzheimer’s treatment, seeking more data. Eli Lilly (LLY) declined modestly overnight. biogen (BIIB), which recently reported positive results in a similar Alzheimer’s drug, rose slightly ahead of the open.

SLB Earnings Top

SLB’s earnings and income modestly outperformed quarterly views and boosted its dividend. SLB, formerly known as Schlumberger, said in the statement that “we believe the macro backdrop and market fundamentals that support a strong multi-year growth cycle for energy remain very attractive.” Oil&Gas-Field Services is ranked No. 1 among the 197 industrial groups of IBD.

Shares in SLB were up 1% on Thursday. Shares rose 0.4% to 57.38 on Thursday after topping out of a recent baseline. But the SLB is slightly extended from a handle buy point of 53.97.


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stock market rally

The stock market rally extended Wednesday’s losses into Thursday morning, recovering somewhat in the afternoon, but fading again towards the end.

The Dow Jones Industrial Average was down 0.8%. in Thursday’s stock market trading, along with the S&P 500 index. The Nasdaq composite sank nearly 1%. The small-cap Russell 2000 was down 1%.

Solar stocks were big losers amid growing concerns about the residential solar market.

US crude oil prices rose 1.1% to $80.33 a barrel, continuing to trade around the $80 level. Gasoline futures rose 2.9% to a high of two-month closing.

The 10-year Treasury yield rose 3 basis points to 3.4%.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) was down nearly 2%, while the Innovator IBD Breakout Opportunities (BOUT) ETF was down 1.2%. The iShares Expanded Tech-Software Sector (IGV) ETF lost 0.8%. The VanEck Vectors Semiconductor ETF (SMH) was down 2.45%.

Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) was down 3.2% and the ARK Genomics ETF (ARKG) lost 3.3%.

The SPDR S&P Metals & Mining ETF (XME) was down 0.2%, along with the US Global Jets ETF (JETS). SPDR S&P Homebuilders ETF (XHB) fell 3%. The Energy Select SPDR ETF (XLE) advanced 1.2%, with XOM shares at number one and the SLB also a major component. The Financial Select SPDR ETF (XLF) was down 1.2%. The Health Care Select Sector SPDR Fund (XLV) was up 0.2%.


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Actions to watch

Shares in MELI were up 0.4% to 1,072.74, stalling this week after a big rush to start 2023. The Latin American e-commerce and payments giant is just below a buy point of 1,095.44, but really needs a control to let the main averages catch up. MercadoLibre stocks held up pretty well, but use some depth on any handle to shake up weak holders.

MEDP shares fell 1.5% to 228.84, close to an official buy point of 235, according to MarketSmith analysis. Stocks surged above the 50-day line on Jan. 10, offering an early entry. Now Medpace’s stock could use a strap.

XOM shares tested their 50-day line but closed up 0.6% to 111.32. The stock is not far from a 114.76 buy point from a flat basis.

Shares in VRTX fell 0.6% to 307.94, still above the 50-day line. The stock breached the 50-day line on Tuesday, offering an early entry at the time. Investors should wait to see if biotech can break past Tuesday’s high of 312.35. The official flat bottom buy point is 324.85.

AXON shares rose 1% to 184.06, continuing to work on a handle on a cupbed that would slightly lower the buy point from the current 193.95. Axon, which makes Tasers, body cameras and digital storage for law enforcement, released an early entry on Jan. 9 when it crossed the 50-day line.

Market Rally Analysis

After Wednesday’s sharp reversal to the downside, the stock market rally showed further weakness. While the major indices rallied from their late morning lows, they disappeared at the close.

The S&P 500 index, after falling below its 200-day line in the previous session, broke below its 50-day line on Thursday. The Nasdaq also lowered its 50-day line, but bounced off its 21-day line. The Russell 2000, which nearly hit late 2022 highs on Wednesday morning, tested its 200 days on Thursday but closed above that line.

The Dow Jones had its third consecutive significant decline, testing the following day’s low of Jan. 6. A close below the FTD low would be a bearish signal for a market rally, although the S&P 500 and Nasdaq are well above their Jan. 6 lows for now.

Indices closing lows offer hope that the current pullback is just a healthy pause, allowing major stocks to create handles and other new buying opportunities. But this can be more serious. Breaking below Thursday’s lows would be worrying.

Some leading stocks such as Axon, MercadoLibre and MEDP are holding up very well. But others are suffering greater losses. deere (DE), which posted an early entry on Tuesday morning, cut the low of its flat base on Thursday.


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What to do now

With the market recovery receding, many major stocks are paring recent gains or even skidding below inflows.

Investors should hold off on further purchases for now. At the very least, they want to reduce modest exposure, if only for the sake of action in individual holdings.

Despite some recent losses, a large number of stocks have been forming. A good day or two can significantly improve the technical picture of the market recovery and provide many new buying opportunities. So have your watchlists ready.

But just because a stock is rallying doesn’t mean it will breakout or give a buy signal, or that any such move will work.

Earnings season looks set to hit the market with individual stocks and the overall uptrend at a tenuous moment. Tread carefully.

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

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

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