Dow Jones Futures Tumble On J&J Vaccine News; GME Stock, Apple Chipmaker, Novavax Soar

Dow Jones futures fell Friday morning, along with S&P 500 futures and Nasdaq futures, back near morning lows. The stock market rally rebounded Thursday after Wednesday’s sell-off, but gave up much of its strong intraday gains as Apple (AAPL) faded into the close.

Novavax (NVAX), Moderna (MRNA), GameStop (GME) and AMC stock were big movers in premarket, along with Apple chipmakers.

Microsoft (MSFT), Google parent Alphabet (GOOGL) and ServiceNow (NOW) moved into buy areas, but Apple stock retreated below its buy point following strong earnings. All but Google stock — due next Tuesday — have quarterly results out of the way.

Meanwhile, Reddit-fueled GameStop (GME), AMC Entertainment (AMC), Express (EXPR) and Koss (KOSS) plunged Thursday amid massive intraday swings. Robinhood joined other brokerages in restricting trading in GME stock, AMC stock and some other short squeezes.

But GME stock, AMC stock and others roared back overnight as Robinhood said it would allow “limited buys” of the affected securities.

The Novavax coronavirus vaccine was just over 89% effective in a late-stage trial, the biotech said late Thursday. That’s slightly less than the roughly 95% mark set by the Pfizer (PFE) and Moderna (MRNA) vaccines, but the Novavax details were more encouraging. NVAX stock skyrocketed, signaling a breakout.

Early Friday, Johnson & Johnson (JNJ) said its one-shot coronavirus vaccine was 72% effective in the U.S., but less so in other parts of the world. JNJ stock fell solidly early Friday.

Visa (V), Atlassian (TEAM), Skyworks Solutions (SWKS) and Western Digital (WDC) all beat views after the close. WDC stock looks like it will clear a short consolidation.

Skyworks surged on its results, also lifting fellow Apple iPhone chipmakers Qorvo (QRVO) and Qualcomm (QCOM), which report next week.

Caterpillar (CAT) edged higher early Friday on its earnings report, close to an aggressive entry.

Apple (AAPL), Microsoft and NOW stock are on IBD Leaderboard. Microsoft stock and ServiceNow are on IBD Long-Term Leaders list. ServiceNow stock also is on the IBD 50.

Dow Jones Futures Today

Dow Jones futures fell 0.95% vs. fair value. S&P 500 futures lost 0.8%. Nasdaq 100 futures retreated 0.85%. Futures fell back again on the JNJ vaccine news. Apple, Microsoft, Google and Tesla stock fell about 1% in the premarket, while JNJ stock hit the Dow.

Bitcoin prices surged more than 10%, as Tesla (TSLA) CEO Elon Musk added #Bitcoin to his Twitter profile.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Novavax Coronavirus Vaccine

After the close, Novavax said that its coronavirus vaccine is 89.3% effective in a late-stage trial in the U.K. It was 95.6% effective vs. the original coronavirus strain and 85.6% effective against the U.K. strain, which is seen as highly contagious.

So the Novavax vaccine may stand up well next to the Pfizer and Moderna vaccines.

Further, Novavax said its Covid vaccine was 60% effective in a Phase 2b trial in South Africa, where a new variant appears to be slightly harder for current vaccines to block. The U.S. is running its own Novavax vaccine trial in the U.S. and Mexico that should be finished in mid-February. The FDA approval process likely would start after results are in from that trial.

Johnson & Johnson (JNJ) said early Friday said that its coronavirus vaccine was 72% effective in the U.S. But it was 66% effective in Latin America and 57% in South Africa.

The JNJ vaccine requires only one shot vs. the two-shot Pfizer and Moderna vaccines.

Novavax stock skyrocketed 55% to 208 early Friday. That signals a bullish gap-up from a base with a 150.60 buy point and clearing a larger consolidation with a 189.40 high. NVAX stock had closed up 2.2% at 134.01.

JNJ stock fell 4% in early trade.

Moderna stock jumped 27% in the premarket after Thursday’s 2.45% gain to 159.55. MRNA stock is signaling a breakout past a 178.60 buy point from a cup base.

Pfizer stock rose solidly. BioNTech (BNTX), Pfizer’s coronavirus vaccine partner, popped early Friday after rallying 3.8% on Thursday.

The U.S. vaccinated roughly 1.7 million people on Thursday, a fresh record and the ninth straight day of at least one million doses.

Coronavirus Cases

Coronavirus cases worldwide reached 102.13 million. Covid-19 deaths topped 2.20 million.

Coronavirus cases in the U.S. have hit 26.33 million, with deaths above 443,000.

Stock Market Rally

The stock market rally rebounded on Thursday after the worst losses in weeks. But the major indexes lost much of their intraday gains, especially the Nasdaq.

The Dow Jones Industrial Average rose 1% in Thursday’s stock market trading. The S&P 500 index also climbed 1%. The Nasdaq composite advanced 0.5% after running up 1.8% intraday.

Growth stocks had a solid session. Among the best ETFs, the Innovator IBD 50 ETF (FFTY) climbed 0.9%, while the Innovator IBD Breakout Opportunities ETF (BOUT) popped 2%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.8%, with Microsoft and NOW being key components. The VanEck Vectors Semiconductor ETF (SMH) advanced 2.1%.

Apple Stock

Apple stock fell 3.5% to 137.99, dropping below a 138.89 cup-with-handle buy point. Late Wednesday, Apple earnings easily beat views, with strong gains across the board. But the Dow tech giant sees slowing growth in wearables and tougher comparisons for services revenue. Last week AAPL stock jumped 9.8%, rebounding from its 50-day line to break out.

Big Techs In Buy Zones

Microsoft stock popped 2.6% to 238.93, closing above a 232.96 buy point for the first time. Shares have risen for eight straight sessions. Microsoft earnings were much better than expected late Tuesday, with EPS and sales growth accelerating for a second straight quarter. Revenue guidance also was strong.

ServiceNow stock jumped 7.3% to 554.24, retaking the 50-day line but closing just below last week’s high of 554.34. Investors could buy NOW stock now, or wait for a slight uptick over that early entry. NOW stock is also close to the 566.84 flat-base buy point, according to MarketSmith analysis. ServiceNow earnings beat views late Wednesday, with revenue growth slowly accelerating for a second straight quarter.

The Microsoft and ServiceNow earnings reports are good news for business software makers. Many business software stocks have struggled to make headway or hold their ground over the past month.

Google stock rose 1.9% to 1,853.20, back above an 1,843.93 buy point from a flat base within a base-on-base formation. Shares broke out on Jan. 20, but then tumbled 4.7% on Wednesday. Alphabet earnings are on Feb. 2, however, making any GOOGL stock buy now risky.

GME Stock: Game Over?

On Thurssday GME shot up as high as 483 and plunged to 112 before closing down 44% at 193.60. AMC stock crashed 57% to 8.63. Koss stock, which spiked 480% on Wednesday, more than doubled Thursday morning before reversing for a 28% loss to 41.96. EXPR stock tumbled 51% to 4.70.

American Airlines (AAL), a new Reddit fave, did rally 9.3% to 18.10 following earnings, but that’s well off intraday highs of 21.77.

Robinhood and Interactive Brokers on Thursday restricted trading in GME stock and some other short-squeeze names. That followed some limits by TD Ameritrade on Wednesday.

But the game may not be over for GME stock and other short squeezes. Robinhood’s announcement that it would allow some trading spurred strong overnight rallies. GME stock and Koss stock doubled at one point but have backed off somewhat. AMC and Express rallied sharply.

AMC is mulling a stock sale to take advantage of the high share price.

Yet for growth investors, these stocks are extremely extended and volatile and generally lack sound fundamentals. Forget about the 7%-8% sell rule; with GME stock you might face a 70%-80% sell rule in minutes.

It’s best to avoid these names and stick to the stocks and strategies where you have an edge.

It’s nice to see the stock market rally show some strength. The Dow Jones rebounded from its 50-day line. The S&P 500 regained its 21-day line. The Nasdaq composite bounced from its 21-day line.

The Nasdaq has had several one-day pullbacks in the past couple of months — Dec. 9, Jan. 14, Jan. 15 and Jan 27 — with a quick return to new highs. The problem is that the Nasdaq quickly gets extended again.

Even with Thursday’s weak close, the Nasdaq is 5% above its 50-day line. While that’s off Monday’s peak of 8.2%, it’s not far from the 6% level that typically means it’s getting extended.

That may limit the potential upside for the market rally and leading stocks. On the downside, the risks of another pullback remain high. While the last several pullbacks have been short-lived, eventually there will be a more serious sell-off.

The risk-reward ratio on new buys isn’t as attractive as in the early stages of a confirmed stock market rally.

In any case, there aren’t many stocks that are offering good buying opportunities right now. A number of stocks are staging solid rebounds from their 50-day or 10-week lines, but often from steep sell-offs. (Target (TGT), which had a less-steep retreat to the 50-day line and the top of its recent consolidation, may be an exception.)

A longer pullback or sideways action by the stock market rally would let the 50-day line truly catch up to the Nasdaq. It would also allow more stocks to form new bullish bases or rebounds.

But the market is going to do what it’s going to do.

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