Stock futures shifted sharply lower Friday, reflecting action in global trade, as markets headed toward the final trading session of July. Earnings news drove dramatic early moves from Amazon.com, Atlassian, Dexcom and KLA. Biotech test leader Qiagen set up for a possible early breakout. Meanwhile Chevron led, Caterpillar lagged on the Dow Jones today, following their quarterly reports.
Dow Jones futures slumped 0.3% in early action, threatening to haul the index back below 35,000. S&P 500 future dropped 0.7% below fair value. Nasdaq 100 futures tumbled 1.1%, as Amazon.com (AMZN) and Skyworks Solutions (SWKS) swooned to the bottom of the Nasdaq 100. A handful of China-based names were also near the bottom of the list, along with eBay (EBAY) and Peloton (PTON).
Chip equipment maker KLA (KLAC) jump almost 5%, leading the S&P 500, after a late-Thursday earnings report. Deutsche Bank lifted its price target on the stock to 400, more than 25% above Thursday’s closing price. Qiagen (QGEN) climbed 2% on its earnings report, positioning for a possible move above an early, alternate entry at 52.94.
Avantor (AVTR) was the sole early advancer among IBD 50 stocks, up 1.9% after reporting a square second quarter sales and earnings beat late Thursday. Avantor, also an IBD Leaderboard listing, is extended following a mid-June breakout.
Second-quarter employment costs, and June income and consumer spending numbers are due out at 8:30 a.m. ET.
Dow Jones Today: Chevron Up, CAT Down
Chevron (CVX) led, Caterpillar (CAT) lagged, on the Dow Jones today, as reports from Caterpillar, Chevron and Procter & Gamble (PG) wrapped up the index’s heaviest week of action in the June-quarter reporting season.
Chevron popped 2% after reporting earnings and revenue well above analysts’ second-quarter targets. The company also launched a share repurchases aiming for $2 billion to $3 billion per year. Chevron ended Thursday with a 3.8% gain for the week, in its second week of a rebound from a test of 40-week support.
CAT stock dropped 1.7%, despite easily clearing second-quarter sales and earnings expectations. The company’s construction equipment segment surged 40%, not quite enough to meet consensus projections. Shares are attempting to climb off their 40-week moving average, down about 14% from a June high.
Amazon earnings topped views, but revenue came in light. The e-commerce and cloud-computing giant also guided lower on Q2 sales. Shares, which have been holding in range from a cup-with-handle buy point of 3,524.96, were down 6.6% in early trade. A dive below 3,242,96 would trigger the automatic sell rule.
China Volatility, Global Markets
China-based stocks remained volatile, as markets in Asia took another leg down on Friday. Hong Kong’s Hang Seng Index dropped 1.35%. The Shanghai Composite took a 0.4% loss. That left the Hang Seng 5% lower for the week, and with a 9.9% loss for July — its worst month since October 2018.
Chinese regulators continued to ramp up reform efforts on Friday, with Bloomberg reporting that the Ministry of Industry Information Technology ordered 25 of the country’s largest internet and hardware companies including Alibaba Group Holding Ltd. and Tencent Holdings Ltd. “to carry out internal reviews and rectify issues ranging from data security to consumer rights protections. “
China’s markets beginning selling off aggressively a week ago, as authorities rolled out a series of reforms reframing regulations for education companies, food delivery operations and companies listing on exchanges outside of China.
In the U.S., the iShares MSCI China ETF (MCHI) hit a low on Tuesday, and by Thursday had narrowed its loss for the week to 4.2%. The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) recovered to a 4.6% loss by Thursday, and shed 0.5% in premarket trade Friday.
Technology tracker KraneShares CSI China Internet ETF (KWEB) ended Thursday down 6.3%, up from a 17.2% decline. The ETF slumped another 1.8% in premarket trade on Friday.
Tokyo’s Nikkei 225 dropped 1.8% Friday, ending not quite 1% lower on the week. Markets moved lower in Europe, with Frankfurt’s DAX and London’s FTSE 100 off 0.9% near midday. The CAC-40 in Paris held to a 0.3% loss. The SPDR Portfolio Europe ETF (SPEU) had advanced 1.5% for the week through Thursday, recovering back above its 10-week moving average, and moving up the right side of a possible cup base.
Vital Signs: Oil Prices, Bond Yields, Bitcoin
Oil prices eased, after surging almost 3% over the past two sessions. West Texas Intermediate crude futures dipped 0.4%, holding above $73 a barrel. Oil prices are up almost 2% for the week, and have rebounded 12% from a July 20 low. WTI climbed to $76.98 on July 6, its highest mark since November 2014.
Bond yields dipped early Friday to 1.24%, after settling just below 1.27% on Thursday. Yields are tracking toward their tenth decline in the past 11 weeks, after touching a high above 1.76% in April.
Bitcoin dropped sharply, down more than 3% to below $39,000. The cryptocurrency had traded above $40,600 on Wednesday— its highest mark in more than two months. Bitcoin traded generally below $34,000 in July, after touching a record high near $65,000 in April.
Stocks To Watch: Pool, Icici, Discover, CarMax
Tracking the four names pinpointed as stocks to watch this week by IBD’s Investing Action Plan, three of four remained near their buy points early Wednesday.
Pool is now extended, ending Thursday more than 6% above a 449.54 buy point. The swimming pool services and supplies leader retook the entry a week ago, after pulling back to test support at its 50-day moving average. The buy zone extended to 472.02. Pool shares were flat early Friday.
India-based Icici Bank is climbing higher in its buy range, after retaking its 18.27 cup-with-handle buy point with a powerful 2.3% advance on Wednesday. The move rode trading volume that was 40% above average, qualifying the breakout. The buy range runs through 19.18. Shares slipped 1.5% early Friday.
Discover Financial gained 2% for the week through Thursday, closing just a penny above a 125.48 flat-base buy point. The stock has posted a couple of strong-volume dives below its 50-day line recently. But its relative strength rating remains a strong 93, and its relative strength line is hovering near new highs.
Auto retailer CarMax has traded effectively flat for the week, holding just below a cup-with-handle base with a 137.63 buy point. Shares dropped 2.8% in early morning trade on Friday.
S&P 500, Nasdaq, Dow Jones Today: August Surprises
The Dow Jones today coasts toward the open toting a gain of less than 0.1% for the week. It has a 1.7% gain for the month through Thursday, narrowly trailing the 2% gain it has averaged in Julys since 2010. The Nasdaq is down 0.4% for the week, putting its gain so far for the month at 1.9%. That is well shy of its average July gain of 3.3%.
The S&P 500 is a different story. It has recovered to a 0.2% gain for the week. That hoists its July advance to 2.8%, outpacing its 2.5% average July increase since 2010.
The Dow and S&P 500 touched record intraday highs on Thursday, but did not notch new closing highs, although the Dow did hold above 35,000. That Nasdaq closed Thursday less than 1% below its record high.
For more detailed analysis of the current stock market and its status, study the Big Picture.
Historically, August has been treated as a sleepy month for the market. But that has been less true in the recent past, with the back-to-school month turning out its share of fireworks. The Dow posted losses for the month of deeper than 4% in 2010, 2011, 2013 and 2015. All three of the big benchmarks dived more than 6% in 2015.
The Nasdaq led August rallies with a 4.8% gain in 2014, a 5.7% advance in 2018 and last year’s 9.9% August scorcher. The extremes lead to some mundane averages. The Nasdaq has logged an average August gain of 0.37% since 2010. The S&P 500 has averaged a 0.53% decline, and the Dow has an average August loss of 0.68%.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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