A divided start weakened into losses on Thursday, with Facebook (FB) and Microsoft (MSFT) driving the Nasdaq to a new record high, while heavy losses from 3M (MMM) dragged down the Dow Jones industrials.
The Nasdaq Composite reversed early gains and slipped 0.1%, despite strong moves from Facebook, Microsoft and Lam Research (LRCX).
The Dow Jones industrials fell 0.9% — about 240 points. 3M — which constitutes almost 6% of the index’s weighting — led the declines. Microsoft muscled nearly 4% higher to lead the Dow.
The S&P 500 lagged 0.4%. Facebook rose highest among S&P 500 stocks. 3M and chipmaker Xilinx (XLNX) held the worst declines. Growth stocks ran toward the low end of Thursday’s opening action, with the Innovator IBD 50 ETF (FFTY) showing an early 0.8% decline.
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Along with 3M, early earnings reports on Thursday also sent Nokia (NOK) and Patterson Energy (PTEN) into nosedives. IBD 50 stocks Xilinx and Spirit Airlines (SAVE) fell hardest among the S&P 500 stocks reporting late on Wednesday.
Lam Research, Aaron’s (AAN) and IBD Leaderboard stock ServiceNow (NOW) set up for potential early breakouts. Hershey (HSY) positioned itself to extend recent gains. The recent rally in chip stocks was divided between Xilinx and Lam Research.
Cloud Computing Boosts Facebook Stock
Facebook earnings rose 12% while revenue jumped 26% — both clearing analyst estimates. Facebook stock soared 7% in opening trade. UBS upgraded Facebook stock to buy, from neutral, early Thursday. The company said it had set aside $3 billion, preparing for potential resolution of a Federal Trade Commission investigation into data privacy issues. It recorded that $3 billion in its costs for the quarter. The company reported mobile ad revenue rose 91% during the quarter, to 93% of its total ad revenue.
Thursday’s gain moved Facebook stock to about 12% below a 218.72 buy point within a deep cup base. Cloud computing services rival Amazon.com (AMZN) climbed 1% in early action, ahead of its first-quarter report due out after today’s close.
Microsoft, 3M Divide Dow Jones
Microsoft earnings and revenue easily topped analyst expectations, sending shares ahead 4.1%. Cloud computing revenue surged 41%, to $9.6 billion.
Microsoft stock is working on its seventh-straight weekly advance, and Thursday;s move pushed shares more than 20% above a 108 cup-with-handle buy point. That placed the stock in a profit-taking zone.
3M stock dived 10% after a steep first-quarter earnings and revenue miss. Management cut guidance, citing “slowing conditions in key end markets,” and said it had accelerated its restructuring plans.
3M shares had gained 24% from a December low, and were moving up the right side of a 14-month consolidation.
Breakouts: ServiceNow, Aaron’s
Cloud-based workflow software developer ServiceNow hammered out an 8% advance after reporting a 20% earnings increase and a 34% rise in revenue for its first quarter. Both numbers easily cleared analyst hurdles. Canaccord raised its price target to 285, from 240, and maintained its buy rating on the stock. Keybanc held its rating at overweight and hoisted the price target to 270, from 250.
The move produced a breakaway gap for the IBD Leaderboard stock, opening well above a 251.75 buy point in a five-week flat base. The breakaway gap establishes a buy zone beginning at the stock’s opening price of 261.89.
Electronics and furniture leasing chain Aaron’s spiked 6%. First-quarter earnings rose a better-than-expected 33%. Revenue gained 6% to clear $1 billion for the first time. The early gain on Thursday sent the stock past a 54.13 buy point in an eight-week cup-with-handle base. This could also be considered a breakaway gap, although the stock lagging Relative Strength line leaves some doubt about the strength of the breakout. Shares opened at 55.05.
Durable Goods, Jobless Claims Data
Orders for durable goods surged 2.7% in March, the Commerce Department said, reversing February’s 1.6% decline and blasting past views for a 0.7% advance. Transportation was the determining factor, without which orders rose a mere 0.4% — up from a 0.1% gain in February. Core capital goods gained 1.3%, up from a 0.1% slip and besting estimates for a 0.1% rise.
First-time unemployment claims filed in the week ended April 20 jumped almost 20%, to 230,000, the Labor Department reported. That was above forecasts for an increase to 209,000 claims, and the biggest jump in claims filed since September 2017.
Dow Jones: A Bullish Ace?
The Dow Jones Industrial Average recorded a 0.1% gain for the week through Wednesday, maintaining its incremental pace over the past two weeks. The Dow is creeping toward its prior high, ending Wednesday 1.3% below that mark.
The Nasdaq briefly punched through its prior peak on Wednesday, then retook that mark on Thursday, as well as the August high of 8,133. The S&P 500 remains smashed up below its September record, ending a fraction below the mark on Wednesday.
A move above the prior peaks would effectively erase all of the hit taken after incremental upticks in trade war tariffs and Iran sanctions drove the major benchmarks off their peaks between August and October last year. The resolution of those matters remains a potential upside, a pair of bullish aces for global markets and economies, and for the Trump administration heading into the 2020 election cycle.
For more detailed analysis of the current stock market and its confirmed uptrend, study the Big Picture.
Shanghai Slides On Stimulus Worries
In China, stocks in Shanghai sold off as regulators continue contemplating an easing of economic stimulus measures that drove better-than-expected first-quarter growth. The Shanghai Composite dived 2.4%. Hong Kong’s Hang Seng index fell 0.9%. The Shanghai Composite is up 28.4% since the start of the year.
The scene was brighter in Japan, where Tokyo’s Nikkei 225 climbed 0.5%. Earnings reports were generally positive, and the Bank of Japan announced it would hold both short- and long-term interest rates at current, historically low levels at least until spring 2020.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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