Dow Jones futures were little changed after hours, along with S&P 500 futures and Nasdaq futures.

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The stock market rally was decidedly mixed Thursday. The Dow Jones rose for a ninth straight session while the Nasdaq suffered its worst loss in more than four months. Tesla (TSLA) and Netflix (NFLX) suffered sharp declines. Taiwan Semiconductor (TSM) may have been the most important loser, because its guidance weighed on the broader chip sector.

Still, the Nasdaq chart looks strong. A modest pullback would likely be constructive. Tesla stock could be getting a much-needed break, while TSM stock is testing key support again. NFLX stock had an ugly 8.4% drop, but isn’t down much for the week. Many leading stocks fell, especially in the chip and software fields, but generally look fine stepping back.

The biggest concern is for investors who bought stocks in the past few days and now are seeing gains wiped out and turning into losses.

On the upside, Novo Nordisk (NVO) flashed a buy signal as drug giants have done well this week.

TSLA stock is on IBD Leaderboard. Novo Nordisk was Thursday’s IBD Stock Of The Day.

The video embedded in this article reviews Thursday’s split market action and reviewed NVO stock, Taiwan Semiconductor and CrowdStrike (CRWD).

Earnings

After the close, Intuitive Surgical (ISRG), CSX (CSX) and Capital One Financial (COF) reported.

ISRG stock fell solidly after Intuitive Surgical reported strong earnings but the number of installed da Vinci robotic-surgery systems fell short. ISRG stock dipped 0.6% to 347.66 on Thursday. It’s been approaching record highs set at the end of 2021.

CSX stock retreated solidly after CSX earnings and revenue fell short. The rail operator dipped 0.3% to 33.71 on Thursday, continuing a bounce from the 10-week line this week. Investors could view 34.38 as a handle buy point on a base going back nearly 11 months.

COF stock edged higher in overnight trade after EPS topped views while revenue fell short.  Shares fell 2.5% to 114.99, just holding above a 114.91 cup-with-handle buy point.

Dow Jones giant American Express (AXP) and oil services giant SLB (SLB) report early Friday.

AXP stock on Thursday dipped 1 cent to 177.11, battling back intraday to hold just above a 177.04 cup-with-handle buy point, according to MarketSmith analysis. SLB stock reversed slightly lower to dip 0.2% to 57.26. Formerly known as Schlumberger, SLB has a 59.45 buy point but is extended from the 200-day line. It offered an early entry with a decisive break of the 200-day line on July 7.

Dow Jones Futures Today

Dow Jones futures edged higher vs. fair value. S&P 500 futures rose a fraction and Nasdaq 100 futures tilted lower.

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

Stock Market Rally

The stock market rally was mixed Thursday, with earnings driving a wedge between the major indexes.

The Dow Jones Industrial Average rose 0.5% in Thursday’s stock market trading, buoyed by earnings-related gains from Johnson & Johnson (JNJ), Travelers (TRV) and IBM (IBM). The S&P 500 index fell 0.7%. The Nasdaq composite sold off 2.05%. The small-cap Russell 2000 retreated 0.9%.

The Dow Jones is at a 15-month high. The S&P 500 and Nasdaq have just dipped from their own 15-month highs. The Nasdaq had its worst loss since March 9, but it hasn’t quite touched down on its 10-day yet. The Russell 2000 backed off 2023 highs but is up strongly for the week.

The Invesco S&P 500 Equal Weight ETF (RSP) only dipped 0.1%.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) shed 1.15%. But the Nasdaq 100 tumbled 2.3%, weighed down by Tesla, Netflix and a number of very large chip and software names.

Many leading stocks struggled, with a number of them wiping out recent buying opportunities. But most found support.

U.S. crude oil prices edged up 0.4% to $75.63 a barrel, closing well off intraday highs.

The 10-year Treasury yield jumped 11 basis points to 3.85%, adding to headwinds for growth stocks.

But while earnings and Treasury yields may have been the catalyst for Thursday’s growth stock slide, the odds of a pullback had been elevated with the Nasdaq extended from the 50-day line.

Thursday could be a one-off or the start of some sort of pullback over days and weeks. Earnings season is likely to swing stocks, sectors and the overall market for the next couple of weeks.

Why This IBD Tool Simplifies The Search For Top Stocks

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) slumped 2.7%. The iShares Expanded Tech-Software Sector ETF (IGV) gave up 2.4%%, ending an eight-session win streak. The VanEck Vectors Semiconductor ETF (SMH) shed 3.5%, giving up very recent gains to close just below the 21-day line. TSM stock is a major SMH component.

Reflecting more-speculative stocks, ARK Innovation ETF (ARKK) tumbled 5.7% and ARK Genomics ETF (ARKG) 4.2%. Tesla stock is the No. 1 stock across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) fell 0.7%. U.S. Global Jets ETF (JETS) lost 1%. SPDR S&P Homebuilders ETF (XHB) stepped down 2%. The Energy Select SPDR ETF (XLE) gained 1.2% and the Health Care Select Sector SPDR Fund (XLV) ran up 1.7%.

The Industrial Select Sector SPDR Fund (XLI) added 0.45%, a fresh record high.

The Financial Select SPDR ETF (XLF) climbed 0.7%. The SPDR S&P Regional Banking ETF (KRE) slipped 0.4%, but is still up sharply for the week.

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TSM Stock

Taiwan Semiconductor topped quarterly views, but margins contracted. Meanwhile, TSMC guided low on current-quarter sales and signaled that capital spending will come at the low end of its range.

TSM fell just over 5% to 97.86, undercutting the 50-day line, the low of its shallow base and a prior buy point. Perhaps Taiwan Semi will now find support here and set up again in a few days or weeks. But for investors who bought a trendline entry on July 13, modest gains have turned into losses of 5% or more.

The chip foundry giant makes semiconductors for the likes of Apple (AAPL) and Nvidia (NVDA), so it’s viewed as an industry bellwether.

Meanwhile, many chip stocks had a rough outing. Monolithic Power Systems (MPWR), Advanced Micro Devices (AMD), Rambus (RMBS) and more are among them. ASML (ASML), which tumbled more than 5% on Wednesday following earnings, sank 5.5% on Thursday, breaking below its 50-day line and the low of its current base.

Tesla Stock

TSLA tumbled 0.7% to 262.90, below the 21-day line but only giving up its July gains. Late Wednesday, Tesla earnings and revenue topped views, but shares fell amid ongoing margin concerns. Operating profit fell 2.6% vs. a year earlier despite a 47% revenue jump.

From a technical perspective, a slightly larger pullback and pause over a few weeks could create a much-needed handle on Tesla’s deep cup base.

Tesla stock fell slightly overnight.

What To Do Now

If you bought stocks recently, you may have decisions to make. If you bought MPWR stock, Cloudflare (NET), Google parent Alphabet (GOOGL), CRWD stock or other such names in the past few days, you’re almost certainly down, perhaps triggering the 7%-8% sell rule. Along with upcoming earnings, investors may need to peel back new positions or add-on buys.

But for longer-held positions with larger cushions, Thursday’s action wasn’t too troubling in most cases, even Netflix and Tesla stock. But you should review your portfolio and consider which stocks you might want to take some partial profits on.

What’s your game plan if the Nasdaq drops to the 21-day line, or even the 50-day?

Strength in drugmakers such as NVO stock, as well as travel, industrials and oil services, highlights the upside of having a diversity of leadership.

If the market rally stages another modest pullback, a slew of new buying opportunities should develop, with some of Thursday’s losers likely among them.

So keep working on your watchlists, spotting those emerging setups.

As Thursday’s action showed, earnings season is here, and it’s going to be more intense next week.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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