Stock futures showed strength early Friday, as stocks looked to snatch back declines in the holiday-shortened week. A phone call between presidents Joe Biden and Xi Jinping of China, and rising optimism toward monetary policy in Europe boosted the mood across global markets. Earnings news sent Affirm Holdings and Zscaler sharply higher.
Dow Jones futures upshifted 0.5%, pointing to an early rise of around 170 points. S&P 500 futures moved 0.4% above fair value. Nasdaq 100 futures climbed 0.4% on the stock market today. Small caps outpaced in early action, with Russell 2000 futures rallying 0.9% before the opening bell.
A nice mix of market segments led the Nasdaq in early trade. Leaderboard stock ASML Holding (ASML) rallied 2.8%. Other chip stocks outperformed, with Lam Research (LRCX), Advanced Micro Devices (AMD) and Qualcomm (QCOM) leading the pack.
China-based Pinduoduo (PDD), Baidu (BIDU) and JD.com (JD) moved to extend their rebounds. IBD 50 stock Moderna (MRNA) climbed 1.2%, as the Biden Administration moved to impose broad vaccine mandates on federal workers and contractors.
Oil producers traded high on the S&P 500, as oil prices and other commodities moved higher early Friday. Wells Fargo (WFC) gained 2%, after a $250 million fine from banking regulators, related to lack of progress in correcting problems in its mortgage lending operations, were deemed moderate and management by a JPMorgan report.
In earnings news, San Francisco0-based Affirm Holdings (AFRM) sailed 22% higher, as revenue surprised in an otherwise mixed fiscal fourth-quarter report. Deutsche Bank raised the stock’s price target to 105 from 67. The January new issue remains deep below its February peak, but aggressive investors might plot an early entry at 101.10. The stock holds a weak Composite Rating of 52 from IBD.
Zscaler (ZS) traded atop the IBD 50 list, up 2.7% as analysts ratcheted price targets higher following a strong fiscal Q4 report late Thursday. IPOs Doximity (DOCS) and DLocal (DLO) also traded high in the IBD 50, up about 2% each in early trade.
Among the stocks to watch for Friday, Hubspot (HUBS), Atkore (ATKR), Crocs (CROX) and Builders FirstSource (BLDR) all traded near buy points.
Producer price data for August are due from the Labor Department at 8:30 a.m. ET.
Overseas Markets Move Higher
In China, Hong Kong’s market bounced back from Thursday heavy losses as the Hang Seng Index jumped 1.9%. That left the benchmark up 1.2% for the week, snapping a two-week sell down. The Shanghai Composite added 0.3%, acing a weekly 3.4% gain while adding a third week to its rebound rally. The index marked its highest closing level since August 2015.
President Joe Biden spoke with Chinese President Xi Jinping on Thursday, in their first conversation since February. The two discussed cooperative opportunities in Covid prevention, economic recovery and on major international and regional issues, according to CNBC. Chinese regulators have continued to pump support into the economy, counter-balancing the impact of the country’s tightening of regulations against tech, internet and social media companies.
The mood carried over into Japan, where Tokyo’s Nikkei 225 rallied 1.3%, ending the week sharply higher — up 4.3%, leaving it 12.7% above a late-August low.
Among China-based ETFs, the iShares MSCI China ETF (MCHI) was unchanged early Friday. The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) traded 1.8% higher. The KraneShares CSI China Internet ETF (KWEB) climbed 1.8%.
Europe’s markets were firmly higher near midday. Frankfurt’s DAX swung 0.5% higher. London’s FTSE 100 traded up 0.4%, equaling the morning gains on the CAC-40 in Paris. The SPDR Portfolio Europe ETF (SPEU)was inactive following a 0.3% dip on Thursday. The fund continues to trade just below a 44.06 entry in what IBD MarketSmith analysis marks as an 11-week flat base.
Stocks To Watch: Hubspot, Atkore, Builders FirstSource, Crocs
Hubspot is trading in a buy range above a three-weeks-tight buy point at 679.29.
Atkore continues to struggle with its breakout attempt, but the stock rebounded to a 0.9% gain Thursday. That put it within 3% of a 90.18 entry in a 13-week cup.
Builders FirstSource, primarily a wholesaler to contractors, has been creeping higher above a 52.82 buy point in a cup-with-handle base since Aug. 27. It remains in a buy range through 55.46.
Footwear maker Crocs is finding support at its 10-week moving average. Crocs holds a best-possible Composite Rating of 99 from IBD.
Nasdaq S&P 500 and Dow Jones Today: Small Caps Test Support
A four-day slide leaves the Dow Jones today below its 50-day moving average, and with a 1.4% weekly loss through Thursday. The Nasdaq Composite is down 0.8% on the week, and holding nicely at its short-term 10-day moving average. The S&P 500 has notched modest declines for four straight days, leaving it down 0.9% through Thursday.
For more detailed breakdown of current stock market and its status, study the Big Picture.
For the Dow, it is the index’s sixth dip below the 50-day since May. The four-day decline is its longest since a five-day pullback that initiated a 4.5% pullback in June. The Dow has not dropped for a test of its 200-day moving average since October.
Walt Disney (DIS) has led the index this week, up 2.7% since Tuesday. It is now up almost 11% from a low in May, and above all its key moving averages as it climbs the right side of a 26-week basing pattern. Disney shares were initiated with a buy rating and a 263 price target from Arete Research on Thursday. Shares closed 9% below the current pattern’s standard buy point, at 203.12. Aggressive investors might plot an aggressive entry at 187.68.
Drugmakers were three of the Dow’s four weakest performers through Thursday. Amgen (AMGN), Merck (MRK), Johnson & Johnson (JNJ) fell, following an industry downgrade from Morgan Stanley on Tuesday.
The week has been tougher on small caps, with the Russell 2000 down 1.9% and the S&P Smallcap 600 booking a 2.1% loss through Thursday. But both of the indexes were due for a pause after strong two-week rallies. Friday’s action could provide hints as to where small caps head next, with both the Russell and the Smallcap 600 poised at tests of 50-day/10-week support.
Please follow Alan R. Elliott on Twitter @IBD_Aelliott
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