Stock Market Today: Russell 2000 Leads Indexes Higher, Dow Jones Up; SMCI Eyes 1,000
The Nasdaq composite built on small early gains and traded 0.3% higher during late-afternoon trading on the stock market today, as a slew of corporate earnings came in Thursday morning, centered mainly on the enterprise software, consumer spending and energy sectors. The SPDR S&P 500 ETF Trust (SPY) padded its winnings, rallying nearly 0.6% but still lagged a bullish move by small caps. Meanwhile, Super Micro Computer (SMCI) made another huge upside move.
X
Running at 15,899 around 2:40 p.m. ET, the Nasdaq held a 6% gain year to date. It blasted 43.4% higher in 2023 following a 33% bear-market decline the prior year.
Among other hot growth stocks today, cryptocurrency trading platform Coinbase (COIN) rose more than 6% initially but saw gains fade to around 2% ahead of its fourth-quarter results due after the close. SharkNinja (SN) lost early initial gains to edge lower while coal miner Arch Resources (ARCH) slumped more than 4%. Both firms reported quarterly results.
Without doubt, Wall Street’s focus sharpened on Super Micro Computer — branding itself as Supermicro — which rallied more than 11% and hit an intraday high of 999. An analyst at Bank of America initiated a buy rating and set a 1,040 price target.
Although it’s one of the best gainers in the stock market in 2023, growth investors should not chase after the stock. Why? It is way extended from any objective buy point. The supplier of components for artificial intelligence data centers initially broke out of a long consolidation pattern with a 357 proper entry point on Jan. 19 when the San Jose, Calif.-based firm gave a bullish outlook.
Since that breakout, the company, has galloped 169% higher. Shares are poised for a seventh straight weekly advance.
Please see this IBD tech story for more news on Supermicro.
Another risk to buying Supermicro stock now? Shares are trading 235% above the 200-day moving average, an extreme move. IBD research on the greatest stock market winners has found that when a leader rises more than 100% above this long-term 200-day line, it’s ripe for a significant pullback.
IBD Big Picture: Will This Bullish Shift Continue?
Stock Market Today
Coinbase, up as much as 19% for the week, continues work on its latest base. A base provides a potential platform for high-quality stocks to break out to new highs, offering strong gains for alert investors.
For now, COIN is showing a cup without handle that offers a proper buy point at 187.39. But shares have not broken out yet, so it is not a buy.
Also, keep in mind that the manager of cryptocurrency assets for institutions and individual traders reports fourth-quarter results after the market close. According to IBD Stock Checkup, COIN shows a decent 89 Composite Rating on a scale of 1 to 99.
According to Zacks.com, Wall Street is expecting the company to post a net loss of 9 cents a share.
Bitcoin at one point rallied more than 1.4% to $52,288, hitting a 52-week high.
The Dow Jones Industrial Average rose 0.8% and reached a session high of 38,745 with an hour remaining in the trading day. Leading the Dow were Goldman Sachs (GS), Caterpillar (CAT), UnitedHealth (UNH) and Honeywell (HON). These stocks were among 11 blue chip components rising 2 points or more.
Economic News: Retail Sales Dive, Hitting Treasury Bond Yields
In The Stock Market: Tech Leaders And Laggards
Three stocks soared on positive quarterly results. AppLovin (APP) shares catapulted 24% on volume running five times its 50-day average. JFrog (FROG) launched 28% on volume soared 10-fold. And Informatica (INFA) surged 13%, also on heavy volume.
AppLovin has soared past the 20%-25% profit zone from a buy point at 44.57. For months, APP had struggled to surpass resistance near 45. The company’s earnings late Wednesday came in at 49 cents a share vs. a net loss of 21 cents a year earlier. The mobile app development platform’s sales jumped 36% to $953 million, marking a second quarter in a row of growth rate acceleration.
JFrog has soared more than 30% for the week and rolled more than 37% past a flat base showing a 35.35 buy point.
The expert in software development tools grew fourth-quarter earnings 375% to 19 cents a share on a 27% jump in revenue to $97.3 million. JFrog Chief Executive Shlomi Ben Haim told Barron’s that the company at year-end locked in 37 customers each generating at least $1 million in annual revenue, up from 19 such clients a year ago.
Fastly Takes A Steep Tumble
On the downside, Fastly (FSLY) got crushed on its earnings. Fastly tanked 29% and cut through its 50- and 200-day moving averages, a sell signal. Another diver, Twilio (TWLO) plunged 14% on a weak first-quarter sales outlook.
Fastly posted fourth-quarter earnings of a penny per share. Revenue rose 15% to $137.8 million, slowing from year-over-year gains of 20% and 18% in the prior two quarters.
Investors continue to bargain hunt in smaller equities. Emboldened by another cooling in long-term interest rates, the Russell 2000 accelerated its gain to more than 2.4%. The key Treasury 10-year note’s yield fell as much as 7 basis points to 4.19% following a disappointing report: January retail sales in the U.S. fell 0.8% vs. the prior month. Econoday earlier called for a 0.1% decline.
Meanwhile, weekly jobless claims fell 8,000 in the latest week to 212,000, below views of 219,000. But the four-week average of initial unemployment claims rose by 5,750 to 218,500.
Elsewhere in the stock market, the Dow Jones transportation average initially outperformed the Nasdaq with a gain of nearly 0.5%; gains have cooled to 0.4%.
Midday data showed winners topping losers on the New York Stock Exchange by a more than 4-to-1 margin. On the Nasdaq, gainers led decliners by more than 3 to 2.
Investor’s Corner: Will This Sell Rule Apply To SMCI Too?
Supermicro Fundamentals
Going back to Supermicro: The expert in AI and accelerated computing hardware has shown brilliant growth on both the top and bottom lines. Over the past eight quarters, sales on average climbed 48% vs. year-ago quarters.
Amid that time frame, Supermicro’s sales fell just once, a 5% dip in the March-ended quarter of 2023. Yet since then, sales have revved higher, rising 34%, 14% and 103% in the last three quarters.
Earnings rose 5% in calendar first quarter of 2023, 34% in Q2, edged a penny higher in Q3, and soared 71% in Q4 of calendar year 2023. Supermicro’s fiscal year ends in June.
Wall Street has revised its profit estimates multiple times and currently sees profit in the fiscal year ending June 2024 rising to $21.70 a share, then rising another 16% to $25.06 in fiscal 2025.
Supermicro has grown to $54 billion in market value, squarely in large-cap territory. It has 55.9 million shares outstanding and a float of 45.9 million freely traded shares.
Stock Market Leader In Restaurant Field
Elsewhere, Shake Shack (SHAK) soared 25% in huge volume to as high as 98.67 after reporting an adjusted profit of 2 cents a share as sales rose 20% to $286 million. A year earlier the burger, fries and milkshake chain lost 6 cents a share. Gross margin held steady vs. the prior quarter at 44.5%.
Shake Shack stock earns a 94 Composite Rating on a scale of 1 to 99.
Shares initially cleared a relatively deep cup with handle at 76.74 on Jan. 29. The 5% buy zone went up to 80.58. The post-breakout move showed initial bumps, yet the restaurant play did not fall 7% below the buy point. So, Shake Shack stock did not trigger the golden rule of investing.
Shake Shack saw mutual fund holders shrink a tad to 396 funds at the end of the fourth quarter, down from 409 in Q3, according to MarketSmith data. However, Shake Shack also boasts three members of IBD Mutual Fund Index as investors. They include Lord Abbett Developing Growth (LAGWX), Invesco Discovery (OPOCX) and Alger Small Cap Growth (ALSAX).
Beyond the stock market, crude oil futures gushed 1.8% higher to $77.74 a barrel. Black gold is having a strong 2024 so far, up almost 9%.
Gold has displayed muted action so far this year. The near-expiration futures rallied 0.6% to $2,017 per ounce. Silver futures traded at $22.98 an ounce, up 2.7%.
Please follow Chung on X/Twitter: @saitochung and @IBD_DChung
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