Dow Jones futures tilted lower Thursday morning while S&P 500 futures and Nasdaq futures fell modestly. The stock market rally retreated Wednesday as big recent winners such as Tesla (TSLA) and Snowflake (SNOW) stumbled. But the negative action, which may continue at Thursday’s open could be a long-term positive.
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An FDA advisory panel meets today for the Pfizer (PFE) and BioNTech (BNTX) coronavirus vaccine, with FDA approval and vaccinations set to follow quickly.
The Airbnb IPO will begin trading today after pricing above its recently raised range, following huge IPO debuts for DoorDash stock and C3.ai (AI). Recent IPO Asana (ASAN) is surging before the open, signaling a breakout.
Adobe earnings are early Thursday. Adobe stock closed near a buy point and just above its 50-day line.
Taiwan Semiconductor (TSM) reported November sales of 124.87 billion Taiwanese dollars ($4.82 billion), up 4.7% from October and 15.7% vs. a year earlier. In October, revenue climbed 12.5%. The figures are important for the world’s largest chip foundry but also for its customers. Taiwan Semiconductor makes chips for Apple (AAPL) and Apple iPhone chipmaker Qualcomm (QCOM) as well as AMD (AMD) and Nvidia (NVDA).
Taiwan Semiconductor stock was little changed in light trading early Thursday. On Wednesday, TSM stock dipped 1.15%, arguably still in buy range from a short consolidation or an odd-looking ascending base. Apple stock fell Wednesday back below an early entry after hitting resistance at another. Qualcomm is extended. AMD stock retreated to near its buy point. Nvidia fell through its 50-day line.
IPO Stock Debuts
DoorDash (DASH) spiked 86% to 189.51 in Wednesday’s debut for the food-delivery specialist, which competes against Grubhub (GRUB) and Uber (UBER) division Uber Eats. The DoorDash IPO raised $3.4 billion, pricing 33 million shares at $102 each, well above a raised price range of $90-$95. The original IPO range for DASH stock was $75-$85.
C3.ai stock shot up 120% to 92.49 in its debut, though it closed near session lows after hitting 115 intraday high. The pure-play AI priced 15.5 million shares late Tuesday at $42, far above the estimated range of $36 to $38. The original C3.ai stock price range was $31 to $34.
C3.ai CEO Tom Siebel was founder of software maker Siebel Systems, bought by Oracle (ORCL) in 2006. C3.ai recently formed an alliance with Microsoft (MSFT) and Adobe (ADBE) on customer relationship software.
The Airbnb IPO priced at $68 a share, raising $3.5 billion and valuing online marketplace for vacation rentals at $47 billion. Earlier this week, Airbnb (ABNB) raised the expected IPO price range to $56-$60 a share, up from $40-50. The Airbnb IPO will begin trading on the Nasdaq on Thursday.
Asana IPO Stock Breakout
Many IPOs have been big winners in the past few months, but investors should avoid buying new issues on the first day, even if the company is exciting and the stock soaring. Wait for a new IPO to set up and break out of an IPO base. That’s even more important now with the stock market rally at record highs, flashing some warning signs of a pullback.
Asana is a case in point. ASAN stock jumped in its Sept. 30 debut, hitting 29.96 intraday. The enterprise software IPO tumbled to 20.57 on Nov. 12 before rebounding. Asana stock flirted with the 30.06 IPO base buy point this week, but fell 2.3% to 28.34 on Wednesday.
After Wednesday’s close, Asana reported a smaller-than-expected third-quarter loss, and beat on revenue. Asana also guided higher on Q4 results.
Asana stock shot up 15% to 32.70 early Thursday, signaling a breakout above the 30.06 entry, according to MarketSmith analysis.
Adobe, Apple, AMD, Nvidia, Taiwan Semi and Tesla stock are on IBD Leaderboard. ADBE stock also is on IBD Long-Term Leaders. ADBE stock is on the IBD 50 list, along with AMD, Nvidia and TSM stock.
Dow Jones Futures Today
Dow Jones futures faded to fall 0.1% vs. fair value, while S&P 500 futures sank 0.2%. Nasdaq 100 futures fell 0.5%, with Apple, Facebook and Tesla stock all drags.
The European Central Bank is expected to expand stimulus efforts this morning, as new coronavirus shutdowns hit the eurozone economy.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live.
Coronavirus Vaccine Day
The FDA advisory committee meets today to decide whether or not to recommend the Pfizer coronavirus vaccine. Given the vaccine’s high efficacy rate of 95% and no notable safety concerns, the panel is expected to recommend emergency approval. The FDA itself could issue emergency use approval today, with actual vaccinations starting Friday.
The U.K. began immunizing people with the Pfizer vaccine on Tuesday after approving it last week. Canada OK’d the Pfizer and BioNTech vaccine on Wednesday, becoming the third country to do so after the U.K. and Bahrain.
On Dec. 17, the FDA panel will review the Moderna coronavirus vaccine. The Moderna vaccine, which also uses MRNA technology and has similar effectiveness, also is likely to win the panel’s support and quick FDA approval.
Pfizer stock fell 1.7% on Wednesday, reversing lower from a 15-month high intraday. BioNTech stock sank 4.1% a day after hitting a record high. Moderna stock tumbled 7.8% after a record close Tuesday.
Coronavirus Cases
Coronavirus cases worldwide reached 69.38 million. Covid-19 deaths topped 1.57 million.
Coronavirus cases in the U.S. have hit 15.82 million, with deaths above 296,000. New Covid cases topped 200,000 once again on Wednesday, with deaths topping 3,200 for the first time.
Stock Market Rally
The stock market rally stumbled Wednesday, with growth stocks leading the decline.
The Dow Jones Industrial Average slipped 0.35% in Wednesday’s stock market trading. The S&P 500 index fell 0.8%. The Nasdaq composite retreated 1.9%, its biggest loss since Oct. 30, which marked the low of the short consolidation.
What caused the stock market rally sell-off? Stimulus deal hopes dimmed as Democrats, Republicans and the White House can’t agree on the size of the relief package or key components. JPMorgan downgraded a number of software stocks, including CrowdStrike (CRWD) and Zoom Video (ZM).
The Facebook antitrust suits, while not a surprise, didn’t help either.
Finally, the stock market rally was simply due for at least a down day.
Bullish Sentiment, Leading Stocks Too Hot?
The Nasdaq composite had been rising steadily for the past two weeks, approaching levels that might be seen as extended. The bulls vs. bears reading, which tracks sentiment among investment newsletter writers, edged lower in the latest week, but is still right at the highest levels since early 2018.
Meanwhile, growth stocks have been running hot. Many suffered significant losses Wednesday. Tesla stock fell 7%. Unity Software tumbled 9.1% and Snowflake stock lost 4.8%. AMD stock retreated 3.3% to 89.83, still in a buy zone but approaching the 88.82 buy point.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) sank 2.4%. The iShares Expanded Tech-Software Sector ETF (IGV) also retreated 2.4%, with Adobe stock a major holding.
The VanEck Vectors Semiconductor ETF (SMH) tumbled 3.1%, with AMD, Nvidia and TSM stock all top holdings.
Apple Stock
Apple stock sank 2.1% to 121.78, dipping below a 122.01 early entry. Intraday, AAPL stock reached 125.95, briefly topping a 125.49 entry that almost qualifies as the official entry. Shares have not been leading the market rally since early September, but Apple stock is faring better than many big techs.
Apple is working with Taiwan Semiconductor on a chip for an autonomous vehicle, the so-called Apple Car, according to Taiwan-based Digi Times.
Facebook Antitrust Action
On Wednesday, the Federal Trade Commission (FTC) and 48 states filed antitrust lawsuits vs. FANG stock Facebook (FB), a long-expected move. Notably, the lawsuits want Facebook to unwind its Instagram and WhatsApp acquisitions. Facebook has been tightly integrating those features, hoping to making them more useful — and harder to unwind. Still, even if Facebook loses the antitrust case, it could be years before a final settlement or remedy is reached.
Facebook stock fell 1.9% on Wednesday to 277.92, but found support at its 50-day line and generally recouped its losses following the antitrust headlines. FB stock fell slightly before Thursday’s open.
Google parent Alphabet (GOOGL) sank 1.85%, back into a recent short consolidation just above a prior base. The Justice Department filed an antitrust suit vs. Google-parent Alphabet in October, with several states mulling whether to join that action or file a separate suit. Still, GOOGL stock rallied solidly since that DOJ antitrust filing.
President Donald Trump and many Republicans want to repeal “Section 230,” which provides liability protection for content on social media giants such as Facebook and Google.
Adobe Earnings Preview
Wall Street forecasts Adobe earnings will rise 16% to $2.66 a share, which would be the smallest gain in six quarters. Revenue should climb 12% to $3.36 billion, which would be the slowest growth in several years.
Adobe stock fell 2.3% to 483.74 in Wednesday’s trading. Shares are working on a 519.70 double-bottom buy point, with 502.63 as an early entry. ADBE stock is up less than 1% vs. the 10-week line. The 10-week line can be a good place to buy a Long-Term Leaders stock like Adobe, but investors should wait to see if it rallies on earnings and clears at least the 502.63 entry.
Sell-Off Good For Stock Market Rally
Here’s the upside of down for the stock market rally. Wednesday’s sell-off tamped down on some of the euphoria in the broader market and especially some of the big winners.
Tesla stock and recent IPOs Snowflake and Unity had all surged in the last few weeks. But Tesla, Unity and SNOW stock remained above their fast-rising 10-day moving averages. Tesla China EV rivals Nio (NIO), Li Auto (LI) and Xpeng Motors (XPEV) tumbled Wednesday after reclaiming their 21-day lines Tuesday.
Tesla stock fell 5% early Thursday, while its China rivals also slipped.
Many growth stocks that have been moving toward buy points are getting constructive shakeouts. Some stocks, such as Shopify (SHOP), that have been forming handles or quasi-handles in recent days haven’t really had much of a decline, especially on a weekly chart. Wednesday’s sell-off likely shook out some weak holders, with SHOP stock down 5.8%. If and when stocks break out, Wednesday’s shakeout suggests they are a little more likely to succeed.
What To Do Now
Of course, Shopify and other stocks setting up may not break out, especially if Wednesday’s retreat is the start of something more serious. A pullback over a few days, however, might flush out excessive bullishness along with weak holders, while letting moving averages catch up to the major indexes and leading stocks.
But, if there’s a more serious pullback or correction, investors don’t want to get caught out. Consider your overall exposure and what stocks are in your portfolio. Could you handle 10%, 15%, 20% losses? If not, you may want to pare some stocks, especially brand-new breakouts that are fizzling.
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