Dow Jones futures tilted higher Wednesday night, along with S&P 500 futures and Nasdaq futures. The stock market rally closed mixed after a weak jobs report and a continued retreat in crude oil prices weighed on real economy sectors, even as tech names edged higher. Roku (ROKU) and Etsy stock were big earnings losers overnight.
Advanced Micro Devices (AMD) and Robinhood (HOOD) surged again, as Reddit investors buzz about these names. Coming as “traditional” meme stocks such as GameStop (GME) and AMC Entertainment (AMC) continue to slide, the rise of AMD and HOOD stock suggest a key shift.
Roku stock, Etsy (ETSY), Revolve (RVLV), DXC Technology (DXC), Innovative Industrial Properties (IIPR) and Qorvo (QRVO), which makes chips for Apple (AAPL) and 5G devices, reported earnings after the close.
All six stocks beat earnings views. But Roku, Etsy and RVLV stocks were big losers, along with DXC. IIPR and QRVO stock rose slightly.
DXC stock is on IBD Leaderboard. Roku stock and IIPR are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures edged higher and Nasdaq 100 futures climbed 0.1%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally struggled amid falling crude oil prices, a weak ADP employment report and an earnings miss sell-off in General Motors (GM). Crude oil prices slid 3.4% to $68.15 a barrel, continuing a sharp drop this week. U.S. crude inventories rose last week, the Energy Information Administration said Wednesday morning. Copper prices also retreated. The 10-year Treasury yield rebounded to close up 1 basis point to 1.19%.
The Dow Jones Industrial Average fell 0.9% in Wednesday’s stock market trading. The S&P 500 index sank 0.5%. The Nasdaq composite eked out a 0.1% gain. The small-cap Russell 2000 skidded 1.25%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.5%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.15%. The VanEck Vectors Semiconductor ETF (SMH) advanced 1.1%.
SPDR S&P Metals & Mining ETF (XME) tumbled 4% and Global X U.S. Infrastructure Development ETF (PAVE) gave up 1.7%. U.S. Global Jets ETF (JETS) retreated 2.2%. SPDR S&P Homebuilders ETF (XHB) slid 1.1%. The Energy Select SPDR ETF (XLE) declined 2.7% and the Financial Select SPDR ETF (XLF) 0.8%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) popped 2.55%, back above its 200-day line. ARK Genomics ETF (ARKG) advanced 0.6%, but is still below its 200-day and 50-day lines. Roku stock is a major ARK Invest holding.
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Roku earnings crushed EPS views, but user growth came up short. Hours streamed on Roku devices also disappointed investors.
Roku stock tumbled 8.5% in extended trade. Shares had edged up 0.6% on Wednesday to 420.32, near their 10-week moving average again. Roku stock broke out from a 463.09 cup-with-handle buy point on July 23, but that quickly failed. A bullish rebound from the 10-week line, or a move above a new, high-ish handle entry of 490.86 are possible buying opportunities.
But right now, Roku stock looks poised to undercut an early entry of 397.79.
Etsy earnings beat, but revenue guidance was weak for the arts and crafts e-commerce giant.
Etsy stock plunged 14% overnight, signaling a gap below its 50-day and 200-day lines. Shares jumped 6.1% on Wednesday to 202.10. Etsy stock has an early entry at 211.92, with the official buy point at 251.96.
DXC earnings topped views, surging 300% and ending a long string of year-over-year declines. But it guided slightly lower on Q2 earnings.
DXC stock fell 6% in extended action. Shares fell 2.9% to 42.18 on Wednesday. DXC stock closed in range from a 41.85 flat-base buy point.
IIPR earnings topped forecasts for the cannabis-focused REIT.
IIPR stock climbed 2% overnight. Shares edged up 0.2% to 213.89 on Wednesday. IIPR stock is working on a 222.18 cup base going back to late February.
Revolve earnings also exceeded forecasts. However, Revolve stock slumped 6% in extended trade, though that was off after-hours lows.
RVLV stock slid 2.9% to 71.34 on Wednesday, reversing from a record high of 74.82. Shares cleared a short consolidation on Tuesday, but it’s not clear what would be a good entry after a strong rally. It’s possible RVLV stock will fall to its 50-day or 10-week line.
Qorvo earnings beat fiscal Q1 views while the Apple chipmaker guided higher on earnings for the current quarter.
Qorvo stock edged higher in overnight action. Shares dipped 0.7% to 193.88 on Wednesday. QRVO stock has a 199.05 cup-with-handle buy point, according to MarketSmith analysis.
Apple stock was little changed late. Shares edged down 0.3% to 146.95 on Wednesday. Apple stock is slightly extended from a 137.17 cup-with-handle base, but it’s still in buy range from a longer cup pattern going back to January with a 145.19 entry. AAPL stock has been consolidating for a few weeks, creating a shelf that could turn into a short base.
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Meme Stock Shift?
AMD stock rose 5.5% to 118.77, in the heaviest volume in more than a year. Shares are up 30.5% in six sessions following earnings. AMD stock is now greatly extended from a 95.54 cup-with-handle buy point.
Robinhood stock shot up 50% to 70.39, spiking to 85 intraday. Shares fell somewhat overnight in still-active trade.
HOOD stock has more than doubled from its July 30 low of 33.25, the day after debuting with an IPO price of 38. The no-fee brokerage, in addition to Reddit buzz, has been cheered on CNBC’s Jim Cramer while ARK Invest’s Cathie Wood has made big HOOD stock buys in its short history.
Meanwhile, the original meme stocks, GME stock and AMC, continued to slump. GameStop stock fell 3.9% to 146.80, the lowest price since early May and 70% off its late January peak of 483. AMC stock tumbled 11% to 29.84, a two-month low and 59% off its June 2 peak of 72.62.
Meme investors embracing stocks like AMD stock and HOOD over GME stock and AMC suggests a fundamental shift.
GameStop and AMC Entertainment, despite a bump in business in 2021 vs. pandemic closures last year, are in rapid decline. While investors make various claims about how these companies could be big winners, they are highly speculative at best, especially at current stock valuations.
Meanwhile, AMD is highly profitable, with a bright future. Robinhood is growing rapidly and expected to be profitable again in 2022. While it may or may not be a big winner long-term, it’s clear that Robinhood has a real, growing business with a more-than-plausible bright future.
In other words, meme investing may be becoming a souped-up social media version of old school hyping up growth stocks. That could be much more appealing to IBD-style growth investors.
Market Rally Analysis
The stock market rally had a mixed session, but all of the major indexes continue to look healthy, close to all-time levels. The Dow Jones fell to its 21-day exponential moving average. The S&P 500 barely budged from just below record highs. The Nasdaq composite tilted higher.
Growth stocks had a solid session. Paycom Software (PAYC), Horizon Therapeutics (HZNP) and Sprout Social (SPT) gapped up or rose powerfully past buy points on earnings. ZoomInfo Technologies (ZI), which saw its Tuesday’s gap-up whither, rallied 7.3% on Wednesday, back to the top of the base.
Meanwhile, AMD stock kept running up while rival Nvidia (NVDA) and software leaders CrowdStrike (CRWD) and Shopify (SHOP) had solid gains.
Real economy names had a tougher time, with energy prices weak and some concerns about the economic outlook.
The Russell 2000 hit resistance again at its 21-day line, and is now 3% below its 50-day. That’s not a good sign for market breadth.
However, several top steelmakers are consolidating nicely in or near buy zones, while housing-related plays are also acting well. RH (RH), Wednesday’s IBD Stock Of The Day, flashed an early entry on Wednesday.
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What To Do Now
The after-hours selling in Roku stock, along with Etsy and Revolve, show why it’s so important to make hard decisions heading into earnings.
As earnings season shifts from a tsunami of earnings to a mere flood, the slew of big winners and losers may calm down. But with the broader market going sideways and sector rotation still a factor, it’s still a tricky market, especially for new buys.
Try to buy stocks as close as possible to the buy point, whether it’s an early entry or a traditional breakout. That will reduce the odds of being shaken out from choppy action and reversals. Catching stocks quickly means doing your homework — building up your watchlists and setting up alerts. Then be ready to act when those stocks flash buy signals. Also be ready to act if your holdings trigger your sell signals.
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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