The Dow Jones Industrial Average jumped over 500 points Thursday, but Apple and Tesla stock slid on earnings results. GME stock plunged as much as 67% after Robinhood blocked new GameStop stock purchases.
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Among the Dow Jones leaders, Apple (AAPL) fell almost 2% after its earnings results, while Microsoft (MSFT) rallied nearly 3% in today’s stock market. McDonald’s (MCD) rallied 0.5% in the wake of its disappointing results.
Tesla (TSLA) cut losses to 2% Thursday following the company’s earnings report. Facebook (FB) gained just 0.5% on earnings, while earnings sent ServiceNow (NOW) up 6% and nearer to a new buy point.
Short-squeeze target GameStop (GME) plunged 67% in midday trade before paring some losses.
Apple, Microsoft and Tesla are IBD Leaderboard stocks.
Dow Jones Today
On Thursday, the Dow Jones Industrial Average traded up 1.95%, while the S&P 500 rose 1.8%. The tech-heavy Nasdaq composite gained 1.2% in midday trade.
Among exchange traded funds, Innovator IBD 50 (FFTY) traded up 1.2% Thursday. Nasdaq 100 tracker Invesco QQQ Trust ETF (QQQ) rose 1.4%. Meanwhile, the SPDR S&P 500 ETF (SPY) moved up 1.5%.
Stock Market Rally Too Extended?
Looking back at the current uptrend, November was a key month for the stock market. IBD’s The Big Picture flagged the new uptrend following the market’s bullish follow-through day on Nov. 4. Meanwhile, more than halfway through January, the Dow Jones Industrial Average, Nasdaq and S&P 500 made record highs.
Wednesday’s Big Picture commented, “A wave of selling hit the stock market Wednesday, resulting in fresh distribution days for the S&P 500 and Nasdaq composite.”
Investors should continue to use the stock market’s strength to buy breakouts. Be patient and wait for powerful breakouts instead of chasing extended stocks. If the new breakouts work, then add more exposure. But if breakouts start to fail, then you can back away.
In particular, focus on stocks with strong relative strength. Find them by using the relative strength line. The RS line measures a stock’s price performance vs. the S&P 500. If the stock is outperforming the broader market, then the RS line angles upward. If a stock is performing worse than the broad market, then the line will point lower.
Stocks To Watch: IBD Long-Term Leaders
Stocks to watch include IBD Long-Term Leaders, companies with stable earnings growth and price performance. Veeva Systems (VEEV) is the latest addition to the list, as it tries to break out past an early entry at 292.90, while the conventional buy point remains at 314.09.
Elsewhere in the IBD Long-Term Leaders, Thermo Fisher Scientific (TMO) is trying to break out above a 519.10 buy point in a cup with handle.
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Dow Jones Earnings: McDonald’s
Dow Jones stock McDonald’s reported weaker-than-expected fourth-quarter earnings, though U.S. demand was strong. McDonald’s EPS dropped to $1.70, while revenue eased to $5.31 billion. Wall Street expected earnings per share to fall 11% to $1.75. Revenue was seen dipping 0.4% to $5.33 billion.
Shares of the restaurant stock moved up 0.5%, as they trace a flat base with a 232.01 buy point, according to IBD MarketSmith chart analysis. But the stock is about 10% off its 52-week high and below its 50-day line.
Stock Market Earnings: Facebook, ServiceNow
Facebook gained 0.5% after the company reported Q4 results late Wednesday that came in above Wall Street estimates on the top and bottom line but warned of upcoming challenges.
Facebook stock is forming a long consolidation with a 304.77 buy point, while an early entry exists at 304.77.
ServiceNow beat the Street’s Q4 estimates late Wednesday as the software maker continues to land big contracts.
The stock is approaching a 566.84 buy point in a flat base, according to IBD MarketSmith chart analysis, as it recovers its 50-day line amid Wednesday’s 6% rise.
According to IBD Stock Checkup, NOW stock shows a solid 92 out of a perfect 99 IBD Composite Rating. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.
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GME Stock Short Squeeze
The GME stock short squeeze continued Thursday morning, as shares plunged more than 67% before paring losses to about 22%. GameStop briefly surged 39% to hit an intraday high at 483. Just after the stock market open, Robinhood blocked clients from making new purchases, only allowing clients to sell their existing positions.
According to Robinhood, “We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only.”
This week alone, the stock is already up an astonishing 434% through Wednesday’s close.
Tesla Stock
IBD Leaderboard stock Tesla cut losses to about 2% after the company’s earnings results late Wednesday. Tesla missed Q4 earnings estimates, but sees 2021 delivery growth accelerating from 2020’s pace and confirmed new Model S and X versions are coming.
The Jan. 8 IBD Stock Of The Day column signaled that Tesla was flashing several signs of a climax top amid a sharply vertical run over the past few weeks. But so far the stock is showing tremendous resilience after hitting record highs on Monday.
On Monday, Tesla stock hit a record high at 900.40. Shares are about 75% above a 466 buy point in a cup with handle amid Thursday’s sharp decline.
Dow Jones Leaders: Apple Earnings
Among the top Dow Jones stocks, Apple fell almost 2% Thursday despite beating earnings and sales estimates late Wednesday. Apple earned $1.68 a share on sales of $111.44 billion in its fiscal first quarter ended Dec. 26. Analysts expected Apple earnings of $1.41 a share on sales of $103.28 billion. On a year-over-year basis, Apple earnings rose 34% while sales climbed 21%.
Shares remain barely above a 138.89 buy point in a cup with handle.
Meanwhile, Microsoft rallied nearly 3% Thursday morning, on pace to extend a win streak to eight sessions.
Shares of the software giant broke out past a 228.22 buy point in recent sessions, according to IBD MarketSmith chart analysis. The stock is in the 5% buy zone that goes up to 239.63.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.
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