Indexes Hold Strong, But Small Caps Lag: Netflix, Amazon, Insulet In Focus

0:00Ken Shreve:I'm Laura Thurow with Baird Private Wealth Management. You've been doing all the right things. Saving, investing, building toward your goals. Healthcare can be a major expense today, and an even greater one over time. Tools like long-term care insurance or a smart health savings account strategy can help protect what you've worked so hard to build. Learn more at bairdwealth.com slash WSJ guidebook.

0:40Ken Shreve:good afternoon everyone and welcome to stock market today for thursday august 14th it's alissa quorum here and a mildly mixed day with small caps lagging in the session joining me now to break down the action is my colleague ken shreve ken what do you have for us today let's take a look at two large cap tech names. Allie, want to start with Netflix, NFLX, also Amazon, AMZN, and finish off with a discussion of Insulate, which is a diabetes care company, PODD. Had a good earnings report and setting up pretty nicely here. All right. We'll take a look at those stocks. But first, as always, let's take a closer look at the major indexes.

1:22Ken Shreve:So we have the Nasdaq today fractionally lower, Ken, just by a hair here by sessions close and the S &P 500 fractionally higher on the day. Meanwhile, the Dow fractionally lower and the Russell 2000 lagged today down about 1.2%, though it did close off lows. And just for that step back perspective, it's still been a pretty big week for small caps with the Russell up about 3.7 % so far for the week. What are your thoughts on the action, Ken? Well, starting with the Russell 2000, go back to the daily chart. I mean, you had two days of fairly explosive gains for the small cap index. So this would be, you know, a decline of 1.2 percent.

2:08That actually looks pretty orderly to me. You know, it closed up near its highs. Buyers came in, lifted those small cap index off lows. So, again, after two days of big gains and an unequivocal breakout for the Russell 2000, And I think it digested gains pretty, pretty well today. So even though it lagged, I thought overall, you know, the market showed a lot of the broad market showed a lot of constructive action.

2:34Ken Shreve:Yeah. And here's a look at the Nasdaq. Anything notable about today's session for the tech heavy index? Other than the fact that we've just been talking about how strong the Nasdaq has been, you know, we've seen we've seen some some growth stocks start to come under selling pressure. We saw more of it today, but even when you look at a lot of top-rated growth stocks in the IBD50 or the market surge growth 250, there are still a lot of growth stocks that are holding above short-term support levels. So, you know, we had some pretty bad earnings sell-offs today for a name like Coherent, C-O-H-R, which had been performing pretty well.

3:17This is fiber optic cables and, you know, pretty ugly reversal yesterday. And then, you know, they reported earnings in Tapestry, TPR, pretty violent selling in Tapestry today. This is the parent of Coach. So even though the indexes are still holding near highs and trading very tightly, you're seeing some stocks start to get damaged below the surface. So we're just kind of looking. I mean, we focus on growth stocks, so it's important to pay attention to. So we're kind of balancing how are growth stocks acting and how is the general market acting. And while growth has come under a little bit of selling pressure, we're not seeing widespread sell signals yet.

4:00So still respecting this uptrend.

4:04Ken Shreve:What do you make of the market's action today in the context of the inflation data that we just got out? It was very similar to the reaction to the consumer price index earlier in the week. Yes, most of the CPI data was in line with expectations. I mean, core prices on a year-over-year basis rose to 3.1%. That was actually above expectations, but the market shrugged it off. So today we have the latest reading from the producer price index, which is basically a measure of wholesale prices. And that was much hotter than expected. Yet the market just kind of shrugged it off again. So the market clearly is placing its bets that the Fed has engineered a soft landing for the economy.

4:56The Fed is still concerned that inflation still could be sticky, but it's looking pretty likely that they're going to cut by a quarter point in September. So the market just seems to be focusing on the prospect of lower interest rates and the fact that inflation is not going to be an issue despite these tariffs. So we'll see if the market ends up being right because the Fed still still still has some questions about inflation and if we're going to see it elevated later this year. Right.

5:33Ken Shreve:OK, let's take a look at XLF and ETF. We've been keeping close tabs on that's the financial sector up about a half a percent today. Yeah, this is encouraging because, you know, we're seeing a lot of a lot of nice setups in the financial sector. We looked at Blackstone yesterday, BX and the asset management group. But I really like the like the setup here for for XLF. It is, you know, seems to be setting up for another possible breakout here. So I like the fact that financials, even though, you know, a lot of some growth stocks have come under selling pressure, You're seeing a lot of performance in the financial sector.

6:17And, you know, we have a name like J.P. Morgan, J.P.M. on leaderboard that is really, really acting well. This is one of XLF's top holdings. You can see a nice breakout from a double bottom base and just coming in very gently to its 10-week moving average here. Relative strength line is still strong. So, you know, J.P. Morgan is a good example. you know, financials showing strength and seeing still a lot of good setups out there. So encourage that the financials continue to do well here. And if honestly, if the economy were really headed for a soft patch, I don't think you'd see financials doing as well as they're doing right now.

6:57Ken Shreve:Great point. Okay, let's see. Savvy investors understand consistent growth is built on scale, resilience, and trust. For more than 60 years, Medline has proven this, driven by an unrelenting commitment to their customers. Today, Medline is proudly NASDAQ-listed and is the largest provider of medical surgical products and supply chain solutions serving all points of care. With a focus on what healthcare needs next, Medline strives to make healthcare run better. See how Medline is woven throughout healthcare and learn more at Medline.com. Take a look at more names of note, starting with Netflix right at that 50-day line trying to carve out the right side of a base, Ken.

7:40Yeah, there's a lot of great stuff going on at Netflix. You know, they recently stopped counting or releasing their subscriber numbers during their quarterly earnings announcements. But we just had a great story on the front page of IBD just a couple of weeks ago, talking about how Netflix is sort of kind of turning and taking a page out of Disney's playbook, looking for immersive in -person experiences, maybe capitalizing on some of their really successful shows. Like, I knew I was going to forget them. Stranger Things is one. So we'll see. They're going to try to reignite growth. Subscribers have 300 million subscribers at the end of last year.

8:29So they still have a lot of subscribers, but it's just not growing as fast as it did. So Netflix looking to open up some Netflix houses at the end of this year. I know one is going to be opening in Dallas and another one in Philadelphia at the end of the year. So Netflix doing some new things. they've been kind of branching into live sports, live entertainment. So some new things going on at Netflix that could fuel additional gains here. So Reed Hastings, tough guy to bet against. And Netflix is trying to form a new base here. We'll see if it can conquer the 50-day moving average. And we put it on the leaderboard watch list today.

9:12It's been in the leaderboard model portfolio before, just because it's always been a strong performer. But I like the way the base is setting up here.

9:20Ken Shreve:Yeah, perhaps with a little bit more oomph above that 50-day line, we might see a compelling early entry here. Yeah, yeah. It's kind of close to breaking out of a downtrend and not surprising. I mean, that 50-day moving average today at least was just a minor resistance level. But if we can, and volume, you know, did pick up the pace today. So if we start to see more subtle signs of accumulation here, I should be able to make more and more progress towards that recent high. Okay, let's check out another mega cap tech stock, and that's Amazon. Up 2.9 % on the day. Elevated volume here. We had news on Wednesday of Amazon expanding its grocery delivery service and analysts cheering that today.

10:08Ken Shreve:So a follow-up on that news today with an investor reaction and an actionable opportunity here, perhaps. Well, you know, it was a negative response to earnings a couple of weeks ago. That was a pretty bad gap below the 50-day moving average, but it didn't take long for Amazon to recover. The numbers weren't bad. There was a little bit of maybe a slowdown of decelerating growth at their cloud computing unit, Amazon Web Services. Their outlook for the third quarter was probably a little conservative. So that's what fueled the selling. But there's been some volume on the way back up here. And now it looks to me like Amazon is threatening a breakout here.

10:52Anytime you can see a marked high, 236.53, clear as day. Volume picked up the pace a little bit today. So we'll see if Amazon can eventually take out that recent high of 236.53. You know, we're still in a really nice uptrend here in terms of the major stock indexes. So I wouldn't be surprised to see, you know, Amazon continue to do well here. Another option because it's up, what, six days out of eight. Maybe as it gets closer to that 236 high, it'll start to drift lower a little bit. Either way, Amazon, not actionable at all after that earnings gap down, but it has righted itself. And I think it's on a candidate to break out here.

11:42Ken Shreve:Yeah, I think it depends on your perspective. This was our stock of the day today. I think perhaps some aggressive traders could have used the high from a couple of days ago around that$2.26 area as a signal to perhaps initiate a position. Also, if you look at the weekly chart, a retake of the 10-week line. So for more information, you can check out our Stock of the Day article. And last on our list to review here before some earnings after the close, let's take a look at medical products name Insulate, ticker Pond. PODD. Yeah, this is a diabetes company. They have this Omnipod platform. It's basically the Omnipod insulin management system.

12:29And this is kind of very unique, very different from Dexcom and some of these other diabetes companies. The Omnipod system, basically, people get their insulin underneath the skin. So it's called subcutaneous. And what's interesting with insulate is that this omnipod platform, they're actually looking to it outside of diabetes. So this is their main moneymaker right now as just an insulin delivery system for diabetics. They don't have to prick their fingers. It's just delivered underneath the skin. But they're looking at other drugs that this platform could possibly be used for. So I think this is interesting for Insulet.

13:12And anytime a stock moves, this is two straight quarters where the stock has really jumped on earnings. Three months ago, you can see it gapped up powerfully over that 300 level. It gapped up again just recently, closed off highs, but it seems to be writing itself here. If you look at the results over the past two quarters, I think it's worth noting here because you had the bottom line in the first quarter was up 67%. It accelerated up 113 % in Q2, and the revenue has also been accelerating. So you like to see that in a stock. Not only does it tell you that they're selling a lot of product, but that that growth could continue.

13:59And if they can find other indications for this Omnipod platform, it could drive even more growth here. So fundamentals look good, and the technical setup doesn't look bad either.

14:13Ken Shreve:All right. Let's check out Applied Materials earnings out after the closing bell. Ken, looks like this chip equipment maker not faring so well. The early reaction shares down 11%. Yeah, this is interesting because this is probably one of the laggards in the chip equipment group. Applied Materials is obviously a giant and a well-known name and a bellwether in the chip equipment industry group. But you see its relative strength rating of 51 just hasn't performed nearly as well as other high-quality names in the group, like Lamb Research, LRCX, also KLA. You can see their relative strength ratings are much higher.

14:56They've been showing much better price performance. So what AMAT says could move chip equipment stocks, no doubt about it, with the stock down 11 percent. But I think, you know, you probably see the cream rise to the crop in this industry group. You want to focus on the leaders. Applied materials has been lagging, you know, for a while. So we'll see what the numbers look like, but negative reaction so far.

15:24Ken Shreve:Yeah, it looks like the outlook was poor here. And as of now, it is hitting these two peers that are better performers that you mentioned, KLA and LRCX. CX. I'm seeing both down about 5%. As of now, we'll have to see how that reaction plays out in the regular session come Friday. Yeah. Just to mention one thing on breath, which I didn't mention at the beginning when we were talking about the indexes, but it was sort of like a flip-flop of yesterday. Today, we had a pretty weak breath, negative by about 2 to 1 on the NASDAQ and it was almost 3 to 1 on the NYSE. So on a day where the S &P 500 was flat, here again, you have your equal weighted RSP performing a lot worse than the S &P 500.

16:17And same with QQEW. I believe that was down more than the NASDAQ 100 today. So you're kind of getting breadth swinging back and forth each day. Tough to get a read on that. You have some growth stocks under some selling pressure. So it's a bit of a strange market right now. But for growth investors, you've got to tread cautiously. We saw a rotation yesterday into some of the home builders and even biotech stocks did well. And we'll see if money is going to rotate out of growth stocks. It's still very early, but I really like how the indexes are holding up well here. All right.

17:00Ken Shreve:Great comments to end on there. We appreciate it, Ken. Thanks everyone for tuning in. That is it from us for today, but we will be back with more tomorrow morning on IABD Live investors.com slash IABD Live for all the details on our daily morning live stream starting 10 minutes before the opening bell. So we'll see you there at investors.com slash IABD live. And we'll also see you right back here tomorrow after the close for our Stock Market Today video featuring myself and IBD's Senior Market Strategist, Mike Webster. We'll see you then.

17:51Ken Shreve:if your organization isn't managing its data with every pure then it's likely scattered all over the place my lord for three days have i ridden to bring thee warning the records thy great The AI machine requires us strewn across five kingdoms. Yeah. The Everpure data management platform unifies data so you can always find it. No messenger needed. No more running around. Get out of the data dark ages with Everpure, a new era in data management.