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Futures

Futures: Growth Stocks' Bounce Amid Inflation Data

2024-12-11

The stock market landscape on early Wednesday presented a mixed picture. Dow Jones futures showed little change, while S&P 500 futures and Nasdaq futures experienced a slight rise. The highly anticipated CPI inflation report was set to be released early in the day.

Unraveling the Stock Market's Intricacies

Stock Market Rally and Its Implications

During Tuesday's trading session, the stock market rally was narrowly mixed. The Dow Jones Industrial Average fell by 0.35%, the S&P 500 index gave up 0.4%, and the Nasdaq composite slipped 0.25%. The small-cap Russell 2000 also retreated by 0.4%. The Dow Jones and Russell 2000 are currently testing their 21-day lines. The Nasdaq, although no longer extended, remains above all its moving averages. The Invesco S&P 500 Equal Weight ETF (RSP) fell 0.6%, below the 21-day line, and has been in a downward trend for four consecutive sessions. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) lost 0.8%. U.S. crude oil prices edged up 0.3% to $68.59 per barrel. The 10-year Treasury yield rose two basis points to 4.22%, continuing Monday's bounce but still down sharply from mid-November.

Tech Stocks and Their Volatility

Tech and growth stocks faced another challenging day. Nvidia (NVDA) and big AI chip peers Taiwan Semiconductor (TSM) and Broadcom stock broke key levels. Taiwan Semi's sales and Broadcom's (AVGO) earnings announcements likely contributed to this. Palantir Technologies (PLTR) and AppLovin (APP), among the hottest stocks, also fell. However, Nvidia and Palantir showed signs of bouncing early Wednesday as many, but not all, growth stocks rose. Nvidia stock fell 2.7% to 135.07, closing below the 50-day for the first time since September 20. It's possible that Nvidia stock will form a new, shallow base next to the prior consolidation. But the AI giant is not far from flashing sell signals. Nvidia rose 1% early Wednesday, still below the 50-day line. Taiwan Semiconductor stock fell 3.6% to 191.94, just holding the 50-day but below the 10-week. Shares could be working on a handle to a shallow cup base. Broadcom stock retreated 4% to 171.81, back below the 50-day line. AVGO stock has a 185.05 buy point from a double-bottom base next to another consolidation. Investors could use Monday's high of 180.79 as an early entry. Broadcom reports fiscal Q4 earnings on Thursday night. TSM and Broadcom edged higher early Wednesday.

Blue-Chip Stocks and Their Movements

Google-parent Alphabet (GOOGL) broke out, rising 5.6% to 185.17 and clearing a 182.49 cup-with-handle buy point. The relative strength line, which tracks a stock's performance vs. the S&P 500 index, topped a short-term high but is still well off highs. Shares ran Tuesday as Google touted its new Willow quantum computing chip. Google stock edged higher early Wednesday, perhaps in reaction to General Motors (GM) scrapping Cruise robotaxi plans. Tesla (TSLA) continued to run, rising 2.9% to 400.99 and nearing the November 2021 record intraday high of 414.50. Morgan Stanley's Adam Jonas became the latest Wall Street analyst to hike his TSLA stock price target. Tesla EV registrations also powered higher again in China, helping to offset weakness in the U.S. and Europe. Shares rose slightly early Wednesday, with Tesla, or at least TSLA, another possible beneficiary from GM Cruise's robotaxi exit.

Other Market Indicators and ETFs

Dow Jones futures were even vs. fair value. S&P 500 futures climbed 0.1% and Nasdaq 100 futures rose 0.2%. The 10-year Treasury yield climbed to 4.25%, around its 21-day line. Crude oil rose more than 1%. Among growth ETFs, the Innovator IBD 50 ETF (FFTY) tumbled 2.1%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 1.5%, with Palantir stock and AppLovin now significant holdings. The VanEck Vectors Semiconductor ETF (SMH) slumped 2.5%. Nvidia stock is the dominant SMH member. ARK Innovation ETF (ARKK) fell 1.2% and ARK Genomics ETF (ARKG) climbed 0.4%. Tesla stock is a major weight across Ark Invest's ETFs. Cathie Wood also built up a big Nvidia stake. SPDR S&P Metals & Mining ETF (XME) retreated 1.4%. U.S. Global Jets ETF (JETS) ascended 0.9%. SPDR S&P Homebuilders ETF (XHB) shed 2%. The Energy Select SPDR ETF (XLE) slipped 0.6% and the Health Care Select Sector SPDR Fund (XLV) declined 0.4%. The Industrial Select Sector SPDR Fund (XLI) dipped 0.2%. The Financial Select SPDR ETF (XLF) lost a fraction.

What to Do in the Current Market

The stock market rally remains near record highs. However, with a few exceptions like Tesla, growth names are struggling in the very short term, including Nvidia, Palantir, and AppLovin. It's a time to be cautious. If you do make new buys, be ready to exit quickly. But investors should still be heavily invested. Keep looking for setups and potential entries, especially if the market pauses for a time. If the selling in hot stocks continues, or broadens out to the wider market, be ready to curb exposure. Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.

Netflix (NFLX) has been making waves in the stock market. Just recently, it hit a new all-time high on Wednesday. This remarkable feat was accompanied by JPMorgan's decision to give a significant bump to the price target. The streaming service's end-of-year lineup and its 2025 advertising outlook seem to be the driving forces behind this upward trend. JPMorgan boosted the price target from $850 to $1,010 while maintaining a "overweight" rating. Analysts believe that subscriptions will continue to grow, supported by strong content, healthy organic growth, and the ramping up of Ad Tier contribution. In recent trading, the stock was up about 3% at around $940 and has gained nearly 90% since the start of the year. Data also shows significant improvement in global download and daily active user (DAU) trends through the current quarter, largely driven by the company's programming, such as the highly watched recent boxing match between Jake Paul and Mike Tyson. JPMorgan further increased its estimate for net fourth-quarter subscriber additions to 10.0 million from 9.0 million and predicted that 2025 revenue will be supported by healthy organic and secular growth, the ramping of Advertising contribution, and price increases.

Netflix's Stock Surge Driven by JPMorgan's Confidence

Netflix's End-of-Year Lineup and Its Significance

The end-of-year lineup of Netflix is a crucial aspect that has caught the attention of investors. It showcases a diverse range of content that is likely to attract a wider audience. This variety in programming not only helps in retaining existing subscribers but also attracts new ones. The success of the streaming service depends heavily on the quality and popularity of its shows and movies. With each new release, Netflix is able to maintain its competitive edge in the market. The recent boxing match between Jake Paul and Mike Tyson is a prime example of how such events can drive up user engagement and subscription numbers. It highlights the power of content in driving the growth of the streaming platform.

JPMorgan's Role in Shaping Netflix's Future

JPMorgan's decision to raise the price target for Netflix has a significant impact on the company's valuation and market perception. By increasing the price target, the bank is signaling its confidence in Netflix's growth prospects. This, in turn, can attract more institutional investors and lead to increased buying pressure in the stock. The "overweight" rating given by JPMorgan also indicates that the bank believes Netflix is undervalued and has the potential for further upside. The analysts' view that subscriptions will grow, supported by strong content and other factors, provides a clear roadmap for Netflix's future. It gives investors confidence in the company's ability to continue expanding its user base and generating revenue.

Netflix's Stock Performance and Market Sentiment

The stock's performance since the start of the year has been nothing short of remarkable. It has gained nearly 90%, reflecting the market's positive sentiment towards the company. The recent hit of a new all-time high further solidifies Netflix's position as a leading player in the streaming industry. However, market sentiment can be fickle, and it is important to monitor the stock's performance closely. Any changes in the company's financials or market conditions can have a significant impact on the stock price. Investors need to be aware of the risks associated with investing in Netflix and make informed decisions based on a thorough analysis of the company's fundamentals and market trends.

Global Trends and Netflix's Adaptability

The improvement in global download and daily active user (DAU) trends through the current quarter is a positive sign for Netflix. It shows that the company is able to adapt to changing market dynamics and attract users from around the world. In today's globalized economy, it is essential for companies to have a strong international presence. Netflix has been successful in expanding its user base globally, and this trend is likely to continue. The company's ability to produce content that resonates with audiences in different countries and cultures is a key factor in its global success. By leveraging its global reach and adapting to local preferences, Netflix can continue to grow and thrive in the highly competitive streaming market.

Intercontinental Exchange, Inc. (NYSE:ICE) has made significant strides in the crude oil market. On November 20, 2024, its ICE Midland WTI (ICE:HOU) crude futures achieved a remarkable record open interest of 160,600 contracts, surging over 130% year-over-year. This growth showcases the increasing importance and acceptance of HOU as a benchmark price for Midland-origin and Midland-quality crude.

Unlock the Potential of ICE Midland WTI Crude Futures

Record Open Interest and Market Impact

Since its launch, HOU has emerged as a widely recognized benchmark. In November, a record 20 million barrels of Midland WTI crude were delivered through the exchange settlement for HOU and via EFPs. EFPs offer customers the flexibility to deliver barrels to various locations and choose flexible delivery dates. This flexibility has contributed to the growing popularity of HOU.Continental Resources' decision to switch a portion of its Permian production to price off of HOU is a significant endorsement. By replacing the differential to WTI Cushing, HOU has firmly established itself within Midland WTI pricing. Platts, part of S&P Global Commodity Insights, has proposed to launch a daily price assessment of Midland WTI crude as a differential to HOU, effective January 22, 2025. This further validates HOU's position.

ICE HOU Pricing and Market Connectivity

ICE HOU pricing reflects the current fundamentals in Houston, delivering physical crude into two major crude oil systems on the U.S. Gulf Coast - the ONEOK Magellan East Houston (MEH) and Enterprise Crude Houston (ECHO) terminals. These terminals are connected to Platts-approved water terminals, facilitating the delivery of Midland WTI into Brent. HOU is the only exchange-guaranteed source of ratably deliverable Midland WTI, with its quality spec matching the Platts spec for Midland WTI.ICE offers various spreads to help customers manage price risk. HOU time spreads and inter-commodity spreads with Brent and WTI Cushing (Domestic Light Sweet) provide valuable tools. Customers can also benefit from high margin offsets of up to 98% when clearing HOU alongside other oil positions cleared at ICE. These offsets are available across a wide range of over 800 oil contracts.

Global Oil Complex and Open Interest Growth

Across ICE's global oil complex, open interest stands at 14.3 million contracts, showing an approximately 20% year-over-year increase. Alongside the record highs in HOU, ICE's broader oil futures markets reached a record open interest of 9.5 million contracts on November 28, 2024. Oil is just one part of ICE's extensive global commodity markets, where open interest stands at 63.8 million contracts, up over 10% year-over-year. This growth highlights ICE's dominant position in the commodity market.Jeff Barbuto, Global Head of Oil Markets at ICE, emphasizes the significance of these milestones. He expresses gratitude to partners and customers for their work and support in developing this physically deliverable benchmark for crude oil in the U.S. Gulf Coast.