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Futures for the Dow Jones industrial average, S&P 500 index and Nasdaq composite rose Thursday morning ahead of key U.S. economic data and amid a report showing Chinese manufacturing contracting. Four recent tech breakouts — Apple (AAPL) iPhone supplier Analog Devices (ADI), Micron Technology (MU), Marvell Technology (MRVL) and Paylocity (PCTY) — remain in buy range.
XAutoplay: On | Off During Wednesday’s session, the major averages reversed lower as oil prices fell and bank stocks tumbled. But while financials remained weak, the S&P 500 and other key index closed with slim losses, capping a solid tech-led month of May.
Dow industrials futures rose fractionally vs. fair value. S&P 500 futures were up 0.1% while Nasdaq 100 futures climbed climbed 0.3%.
Futures briefly pared most of their gains following the private-sector Caixin survey that showed Chinese manufacturing activity contracting for the first time in nearly a year. That follows slow-but-steady growth from official government data, out earlier in the week, that focuses more on state-owned enterprises.
China’s Shanghai composite slid 0.5% Thursday. Japan’s Nikkei advanced 1.1%, ending a recent slide.
In the U.S., investors will get the ISM manufacturing index, the ADP employment report and domestic auto sales for May, ahead of Friday’s key jobs report.
IBD’S TAKE: Chinese regulators, worried about soaring credit growth, are starting to crack down, having an impact on the world’s No. 2 economy in short order. That’s the focus of our latest cover story: “Here’s Why China’s Latest Growth Scare Should Worry You.”
Analog shares rose 2.4% to 84.80 on Tuesday, just moving beyond an 84.34 buy point. On Wednesday, the Apple iPhone supplier shares shot up as high as 90.49, but closed at 85.76, just a 1.1% gain and near session lows. That’s not great action, and investors should be cautious. However, shares are well within the 5% chase zone from the entry point.
What sparked Wednesday’s big move? Analog Devices reported strong earnings and bullish guidance before the market open, though revenue was essentially in line.
Analog Devices has been touted as a likely big winner from the upcoming Apple iPhone 8, due out later this year.
As for Apple itself, shares dipped 0.6% on Wednesday, continuing to trade tightly over the last few weeks, close to record highs. Apple does not have a potential buy point current after a long run.
Analog Devices has a best-possible 99 Composite Rating, which means it outperforms 99% of all stocks based on a variety of IBD proprietary fundamental and technical data. Big-time winners tend to have Composite Ratings of 95 or more near the start of their runs.
Paylocity, the lone non-chipmaker highlighted here, is a cloud-based human resources software firm.
Paylocity cleared a 45.71 buy point from a cup-with-handle pattern on May 25, and shares have remained above the entry since then. Shares fell intraday Wednesday but closed up 0.2% to 46.85.
Other cloud-based HR software peers include Paycom (PAYC) and Workday (WDAY). Paycom has been hovering around a three-weeks-tight follow-on buy point, while Workday is modestly extended from a breakout. Workday, which competes against Oracle (ORCL) and SAP (SAP), is expected to report a 220% EPS gain late Thursday.
Paylocity has a 97 Composite Rating.
The memory chipmaker cleared a 29.97 flat base buy point on Tuesday, then edged up 0.2% to 30.77 on Wednesday, still well within buy range. Industry demand and pricing is strong, boosting profits of other memory chip players such as Samsung Electronics and Western Digital (WDC).
Micron’s CR Rating is an 89, reflecting a poor run of earnings until recently. Memory chip makers’ fortunes tend to be highly cyclical, so stocks often start to move on indications of improving industry fundamentals before big earnings come in. Micron is reporting strong results now.
Marvell cleared a 16.82 buy point on May 25, then reported strong earnings after the closing bell that session. The next day, shares popped to just out of buying range, but shares have come back modestly this week to 17.24 on Wednesday.
Marvell has a 92 Composite Rating.