Stocks ran sharply higher Thursday, ignoring another rising inflation gauge as the Dow industrials and S&P 500 faced key technical tests. Chip stocks led the early action with a broad advance. Tesla stock jumped as Bitcoin plummeted on a Tesla policy change. Meanwhile, Boeing leapt to the top of the Dow Jones today.
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The Nasdaq Composite scrolled up 1.5%, with ASML Holding (ASML) and Applied Materials (AMAT) leading the advance. The S&P 500 rose 1.3%, staging a healthy bounce off its 50-day moving average. The Dow industrials popped 420 points, a 1.25% gain on the stock market today.
Chip stocks headed the early gains, with ASML Holding and Applied Materials each up more than 4%, trading high on the Nasdaq 100. Lam Research (LRCX) topped the S&P 500 with a 6% gain. Intel (INTC) rallied 1.2% as it aimed to halt a steep three-day slide. The iShares PHLX Semiconductor ETF (SOXX) vaulted 2.7% in opening trade.
Tesla (TSLA) scrambled 2.4% higher, after declining in seven of eight recent sessions. The stock is positioned for a test of support at its 200-day moving average for the first time since March 2020.
MarineMax (HZO) led the IBD 50 list, scoring a 5% advance as it bounced off a test of its 50-day line.
Dow Jones Today: Apple, Microsoft, Disney
Apple (AAPL) rallied 1.6%, Microsoft (MSFT) rose 0.9% to lead the Dow Jones today. Rosenblatt initiated coverage on Microsoft and placed its price target at 301, more than 25% above where Microsoft stock closed on Wednesday. The report called Microsoft “the most important software company on the planet.”
The Dow Jones today fires its earnings calendar back up after a quiet week and a half, as Walt Disney (DIS) reports its fiscal second quarter earnings after the market close. Shares climbed 1.3% in opening trade. Disney stock has been in a downtrend since early March.
The company’s breadwinning theme parks in Paris and California remained largely closed during the quarter. But California theme parks Disneyland and California Adventure reopened on April 30 with capacity limits, after being shut down for more than a year.
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Jobless Claims Dip, Inflation Gauge Jumps
The Labor Department reported first-time applications for unemployment assistance fell to 473,000 in the week ended May 8. That was down from 498,000 applications in the prior week, falling slightly further than the 475,000 new claims projected by economists.
Inflation bears received another boost, as the April Producer Price Index jumped 0.6%, with a year-over-year gain of 6.2%. The index had climbed 4.2% in March, and 4.2% on an annual basis. Economists had projected a 0.3% advance in April, and a 5.9% year-over-year gain.
Stripping out food and energy, the index gained 0.7% vs. expectations for a 0.4% rise.
Earnings News: Yeti, Azek, Canada Goose
Artificial decking products maker Azek (AZEK) gained 2.8% after its fiscal second-quarter report. IBD 50 stock PLBY Group (PLBY) gained 2.7% after reporting a solid first-quarter sales and earnings beat late Wednesday.
Outdoor cooler and drinkware maker Yeti Holdings (YETI) reported powerful earnings growth early Thursday. The IBD 50 stock reversed early gains and slumped 1.6%, looking to reverse a three-day slide. Shares ended Wednesday narrowly above an 80.99 buy point in a 12-week cup base, after erasing essentially all of an almost 12% advance.
On the downside, A pair of China-based stocks, electric vehicle maker Xpeng (XPEV) and online entertainment leader Bililbili (BILI), dropped more than 2% each after reporting earnings. Luxury parka maker Canada Goose (GOOS) dived 4% on earnings news.
Bitcoin Drops On Tesla Suspension
Bitcoin prices tumbled more than 11%, after Tesla suspended its policy of accepting Bitcoin payments for its vehicles. Chief Executive Elon Musk tweeted on Wednesday that the company was “concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal.”
Musk said the company would begin trading and accepting Bitcoin again when the mining operations that support the cryptocurrency “transitions to more sustainable energy.” In the meantime, Tesla was looking into other cryptocurrency with lesser carbon footprints, Musk’s tweet said.
Bitcoin dropped to just above $50,000, after trading above $59,000 on Sunday. Bitcoin is down about 15% so far in May, but remains up about almost 70% since Dec. 31, after starting the year just above $29,000.
Colonial Pipeline/Gasoline Prices
Colonial Pipeline said in a statement released late Wednesday it had restarted operations across the 5,500-mile system that had been shutdown Friday following a ransomware attack. The company said it would require several days “for the product delivery supply chain to return to normal.”
Nationally, retail gasoline prices had jumped 8 cents a gallon vs. the prior week, the AAA reported. Some of the most serious regional price jumps reportedly occurred amid panic buying in the Southeast, but prices there remained well below normal levels in Illinois and across the western U.S.
RBOB gasoline futures — or reformulated blendstock for oxygenate blending, the price benchmark for U.S. gasoline products — dropped 2.2% to $2.11 a gallon. RBOB futures have been rising since March. Prices briefly rose above $2.21 a gallon on Monday, their highest mark since May 2018.
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Vital Signs: Oil, Copper, Bond Yields
West Texas Intermediate oil prices dived 2.7% Thursday, cutting back below $65 a barrel — down from the $66.76 high from last week, and holding well off the 33-month high of $67.98, recorded on March 8.
Copper backed off 1.4% higher to around $4.67, after climbing to new record territory above $4.78 per pound on Wednesday. Copper broke past its previous record, set in February 2011, on May 5.
Bond yields backed off, after April inflation data tripped a surge in the 10-year yield to above 1.69% on Wednesday, according to CBOE data. The 10-year yield traded at 1.68% early Thursday, after a four-day advance and, so far, the largest weekly increase since February. Yields had skirted pre-pandemic levels late in March, climbing to almost 1.76%, the highest level since January 2020.
Dow Jones Today: Hold That Line
The Dow Jones today will spend its first serious day below its 21-day moving average since the start of March. The Nasdaq Composite is attempting to avoid a fourth-straight decline, but is poised to undercut the 13,000 mark and potentially test late-March lows around 12,785.
While the Nasdaq is now well below its 50-day moving average, that level is the next line of technical defense for both the Dow and the S&P 500. Both benchmarks ended Wednesday just a fraction above their 50-day lines. Thursday’s early action suggested both indexes were set to test that support.
For more detailed analysis of the current stock market and its status, study the Big Picture.
For investors who haven’t already secured everything on deck, it is time to play defense. Wednesday’s Big Picture article advises reducing market exposure: narrow stock purchases to only exceptional breakouts, cut any loss to 7% or 8%, or even less, and avoid adding to existing positions.
The year has so far been frustrating for growth stock investors, with the Dow paring its year-to-date advance to 9.7%, the S&P 500 trimming back to an 8.2% gain and the Nasdaq limping along with a 4.5% increase.
It helps to keep in mind that the Dow Jones today still holds a 12-month gain of 41.3% and the S&P 500’s 12-month tally is 41.6%, while the Nasdaq is still trading 44.8% above where it closed on May 12, 2020.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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