S&P 500 Hits New High; ELF Beauty, Charles Schwab, Netflix In Focus

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0:25Good afternoon, everyone, and welcome to Stock Market Today for Wednesday, August 27th. My name is Ken Shreve. On today's show, as usual, we'll take a look at what happened in the stock market today. sort of a similar session to Tuesday where we saw modest gains and maybe a little bit of buyers coming in late in the session. But before we do all that, let me bring in my co-host, our news editor, Ed Carson, who has three stocks to watch. What you got, Ed? Yeah, I want to look at Elf Beauty, Charles Schwab, and Netflix. Very good. Very good. Well, we've got an important earnings report after the close.

1:09And we have several other actually noteworthy earnings reports. So we'll go through all of them here. Let me pull up a chart of the, well, we'll start with the Dow Jones. Like I said, the major stock indexes ended with modest gains. Seeing a look at the Dow Jones here, still showing a lot of technical strength above its short-term moving averages. That's up three tenths of a percent on the day let's take a look at the nasdaq composite that is up two tenths for the day s p 500 modest gain as well up three tenths of a percent we did get another day of outperformance from small caps with the russell 2000 up seven tenths of a percent so ed just taking a look at the NASDAQ composite here.

2:02Obviously, in a strong uptrend, market has been very stubborn about giving back those big gains from Friday post-Jackson Hole. Things looking pretty good, but we have NVIDIA's earnings after the close. We'll see if that moves markets. Yeah, so far, things have been going pretty well, incremental gains. Certainly would have understood if we had fallen back a little bit, especially on the NASDAQ heading into NVIDIA. We're seeing with, you know, the NASDAQ and Dow are basically pausing over the past couple of weeks, especially the NASDAQ. The S &P 500 hit a new high today. The Russell 2000 hit an eight-month high today.

2:42So we're seeing a lot of stocks having a chance to set up or maybe even move out. So we'll see. I mean, tonight will also be a good indication with the earnings from NVIDIA and some others. Will AI stocks sort of lead the rally? Will it be something else? Or will the rally struggle for a little while? I mean, we will see. And it may not be immediately obvious, all those questions. But right now, you know, heading into it, things are looking pretty good. Yeah, yeah, no doubt about it. S &P 500, getting close to that 6 ,500 level of a round number. Sometimes an index will get some resistance there.

3:19Although I will say the last the NASDAQ met a round number at 6 ,000, it really didn't have any problems at all punching through that level. Let's take a look at breadth today. I know we like to look at the equal weighted ETFs, obviously S &P, NASDAQ, market cap weighted index. So RSP, take a look at RSP here, basically performed in line with the S &P 500. QQEW, kind of a similar situation performing maybe a little bit better than the NASDAQ. But QQEW, Ed, and RSP have a slightly different look to them. RSP sitting up near highs here, kind of a little bit below the 190 level. QQEW, you know, kind of struggling for support near the 50-day moving average.

4:18Yeah, this is not – the QQEW is showing some weakness. That's the one area that, you know, all these indexes and ETS we've been looking at that look weak or weak-ish. All it would take is one good day, and all of a sudden you're almost at record high. So it's really just a matter of how – you know, it's just that the others are not at those levels. So, yeah, that's one thing to watch, but a lot of other things are looking good. Yeah, and then bond yields, they strengthened at the open. and they were flat, but it looks like that's kind of a reversal lower here. I remember in pre-market trading, I saw that 10-year yield up about three basis points to 429, but pretty big drop.

5:02Well, it looks like a big drop on the daily chart here, but it did reverse off highs, ended near its session low. So obviously, we've got a Fed meeting in September. Ed, I think at last check, the market is still feeling pretty comfortable about a quarter point cut in September. Yeah, I think they're pretty comfortable about that. I think it'd be really hard to back away from that, especially given all the political situation. We'll see after that. We do have the PC price index on Friday. There's still a number of indicators. So I would think it would really have to take something not to do at least a quarter point.

5:40And then we'll see. And you can just see with the 10-year Treasury yield, which is not super connected to Fed policy. There's other things. But there's just sort of been lower lows over the last few months, you know, going back to, say, May. And just the general trend, there's been lower highs going back, say, to generally since January. So the trend has been lower since then. Yeah, we look at that two-year Treasury yield is probably mostly closely tied to Fed policy. And that, at least where it's trading now, is still considering the possibility that there could be, if there is a rate cut in September, there could be two more rate cuts after that.

6:20The market is still debating that, I think. Yeah. So let's take a look at FFTY because we did see growth stocks come under some pressure today. FFTY, which is sort of a proxy for the health of leading growth stocks in the market. We saw this lag a little bit today after some volatility. FFTY recently came down through its 50-day moving average, but rallied right back with the market. And after four gains in a row, Ed, that 0.8 % decline, pretty tight intraday range. Doesn't look too bad. No. I mean, we'll see what tomorrow brings. But today, yeah, after those big gains, that's fine. Yeah, yeah.

7:02Well, you mentioned economic data this week. On Friday, we've got the PCE, Personal Consumption Expenditures Index, core prices on a year-over-year basis. Expected to tick higher a little bit, 2.9%. That would be slightly higher than June's reading of 2.8%. And then tomorrow, we do have the second estimate to second quarter gross domestic product. I think that's expected to edge just a little bit higher to 3.1%. So still looking at pretty strong growth for the economy in Q2. All right, let's shift and talk about some leading stocks here. This podcast is brought to you by Federated Hermes. We put our investments through a ruthless vetting process because the market can be unpredictable and we don't think your investments should be.

7:51Learn more at federatedhermes.com slash US. Investments are subject to risk and may lose value. I'm seeing some pretty good action in the retail sector. I want to start with Elf Beauty, a former big-time leader. Let's just go to the weekly chart here and show what a tremendous performer Elf Beauty was. This was back in 2023, most of 2023 into 2024, and then it topped like a lot of leading stocks do. It has, after a really sharp pullback down to the 50 level, it has come strongly off lows and is now in a decent technical setup here. This one's on the radar and for good reason, Ed. Yeah, I mean, technically it looks really good.

8:40Really powerful move today. technically the buy point is probably 123.94, 95. There is a handle in that double bottom base. But essentially, get over 124, there you go. And there was trend lines you could have probably done, a few different trend lines you could have done intraday ahead of that, even from the top of the ultimate consolidation. If you did that on a weekly, you could probably get something similar to that. It's sort of – the one issue I would say, so a lot of here, one issue is that, look, the growth is not as strong as it was. I mean, for quarter after quarter, it was crushing views and raising guidance tremendously.

9:19Terrorists could be an issue now. Some people have said, well, when the economy gets bad, women may cut out expensive clothes, but they'll still want some lipstick. And it's not like Elf Beauty is, you know, like sort of cosmetics. And I don't want to be that, but that would be, that's an old quote, like, it's a relatively cheap way to do that rather than other things. So it's supposed to bounce back, some of it because of easier comparisons. So there's that. But I do think that people have to put in their mindset that it's not going to necessarily go on this massive run. It's just not that same thing.

9:50Not saying you can't go, and it's already gone a lot. It's already doubled. It's already doubled from the lows. So now I'm not saying you can't have a good run. I just want to just caution in that sense. You can't say, well, it'll just go another 400 % run. It's like, well, I don't know about that. But nice action here. Well, single digit revenue growth for two quarters in a row. And you can see that the top line growth that they were reporting when the stock was really ramping higher. So growth slowed a little bit the past two quarters, but looking pretty good in coming quarters. You've got an earnings decline in their last quarter.

10:27Earnings expected to decline again and then pick up the pace again. So nice technical move for Elf Beauty today. Maybe the market's optimistic that fundamentals might be turning again here, but we'll see. Anytime a stock stages a technical breakout like this, you typically want to see follow through the next day. So maybe we will see Elf Beauty extend gains. Breakouts have been tricky lately. Sometimes you We see a stock breaking out, and then it turns tail quickly afterwards. So we'll continue to watch Elf Beauty. Let's go into the financial sector, take a look at brokerage Charles Schwab. We haven't talked about this name recently on the show, but it seems to be a stock that is trending quite well here.

11:17Yeah, it's not actual right now, but it's found support off the 10-week line. You know, I suppose somebody could have bought off of that, though it might have tested that 10-week a couple of times. After this week, it's supposed to have a flat base. So that's another thing. So it's just acting well here. And the earnings are pretty strong on this company. The revenue growth is not tremendous. But, you know, just sort of pausing here after a nice run. And it's just something to be looking for. I think that investors do want to be casting a wide net. Now, we'll see. Maybe AI will all go crazy again after today, but there are a lot of sectors and a lot of things in the financial sector that are doing well and are maybe just less exposed.

11:58And so you don't want to portfolio all of AI, say, and then have a day where your portfolio is down 8 % because it's been just a really terrible day. So I just like that. I like the pause. It's done. It did it sort of right around the profit-taking zone. Somebody could have chosen. and I'm just getting out of here. But part of what happens at a profit-taking zone is that sometimes it comes all the way back. Sometimes it runs on. Sometimes it just consolidates for a while. And here it is. It's consolidated for a while. And earnings are out of the way. Nothing there for a while. It just seems like something that people want to keep an eye on that could be something that moves in the next coming days.

12:36Yeah, definitely. Typically, when you see a flat base formed, that's usually just kind of tight sideways trading. Charles Schwab had a couple of downside reversals in this base. So it's not perfect, but still holding the 10-week line. And you just got some higher levels of resistance here as a result of those two reversals in the base. But solid name in our database. Composite rating of 95. That tells you that fundamentals and technicals are pretty much in check here. That's a look at Charles Schwab. And let's let's finish by taking a look. Well, not quite finish, but let's take a look at Netflix, a longtime a longtime leader that is, you know, forming forming another base here.

13:28What do you see? What do you see here? it. Look, this is like a great thing. It's right below the 50-day line. It's been hitting resistance at the 50-day line. And one, people should be an eye on it. I think if it decisively gets above the 50-day, there'd be a trend line. And then there's the short-term high, which sort of acts like a too low handle. So there's things there. But this is also, sometimes people want to cheat. And this is the perfect time, in my view, not to cheat. I mean, because there is a decent chance it will hit resistance at the 50-day line and get rejected. But if you just wait for it to go like, 1%.

14:00And when you think about the insurance, the odds of it succeeding are probably a lot higher. So just feel like the risk reward from cheating, you get a little more reward, but a lot more risk. I mean, right here, there are certain points just below a buy point, just below a resistance where people are tempted. Oh, I want to get it. They, you know, it's getting impatient. I get impatient. I'm looking at stocks like that, but I've just found that I don't get a whole lot out of it. If this goes up to 1500, will I care if it's 1223 that I paid for it or 1230? No, But I will care if I buy it today and then it reverses lower and goes to a thousand.

14:33You know, so I just think that. Sure. But all that aside, I think it's going well. Strong growth. It's just consistent. People don't seem to want to cancel Netflix. The streaming wars seem to be over. Netflix is a winner. It just feels like it's not just strong growth, but it feels like this is solid growth you can count on for a while. Like there's not going to be like, oh, no, Netflix completely, you know, underperforms. I think that's really nice. You know, that's comforting when you think about things. How will things go this way or that way in the economy? You know, I think that, you know, to a fairly strong extent for a growth stock, this you can feel confident in the growth.

15:08Netflix has made a tremendous run. You can see here on the weekly chart, you know, it was a$340 stock in September 23 and, you know, has pretty much tripled, quadrupled in price. But what's interesting about Netflix, Ed, is that it really is a company that is, yeah, they've won the streaming giant. They've won the streaming wars. But they really are kind of reinventing themselves with a market cap just north of$500 billion. And we had a great front page story in IBD not that long ago, several weeks ago, talking about how Netflix is trying to take a page out of, you know, Disney's playbook and trying to become this kind of broadened out entertainment platform.

15:56Yeah, they're definitely not sitting on their laurels. So they're doing other things. You know, if some of those things don't work, well, they'll back off of them. I remember they did a ton of comedy specials and then that sort of petered out. So if they don't work, they can back off some of those things. but their core business is strong and they're still trying new things. It's a, it's an impressive operation here. They have some Netflix houses, these immersive houses that are set to open later this year in Philadelphia and Dallas. I believe will, they'll be playing off the success of some of their shows like stranger, stranger things and a squid game.

16:29They're going to be offering food to eat called Netflix bites. So kind of some interesting stuff in, in, in the pipeline here. and then, of course, the K-pop movie, which I'm sure you ran out to see, Ed, K-pop Demon Hunters, their most successful streaming movie yet, and just had a box office debut for this movie as well. That's a first for Netflix. Yeah, especially to go the other way around because it was on Netflix for a while. It's one thing to have that limited run and then, ah, it's coming on to Netflix in a week, but this was the other way around. That's how popular it was. I have not seen that.

17:04I haven't either. I haven't either. It probably won't, but yeah, that premiered, the streaming version of K-pop Demon Hunters premiered all the way back on June 20th on the streaming service. So, all right, well, we do have several companies reporting earnings after the close today. Let's just see if we have any number. Netflix is out. Oh, Netflix is out. NVIDIA is out. NVIDIA is out, so. NVIDIA is out, all right. Go ahead, Ed. Yeah, what happened is that they beat views slightly. Now, maybe they didn't beat as much as some wanted. I saw some reference that maybe data center revenue was a little weaker than expected.

17:43I saw something about cautious guidance. There is a$60 billion buyback. I mean, this does tend to have some big swings overnight and sometimes the next day. Right now, it's down. We're seeing some other names like AMD and some others down more modestly as a result. So this could have an impact on things. But we also have Snow is a big winner. Yeah, I just wanted to say, you know, big gain for Netflix headed into earnings. Good support at the 10-week line last week. You know, stock right now down about 4 % in after hours. But we'll see if support at that 10-week line holds. If there's a bad break of support here and, you know, a heavy volume break of that 10-week line, maybe problematic for the market.

18:33Maybe not, but we'll see where Netflix ends up in the after-hour session. We'll see how it opens tomorrow. But I know a lot of current longs are watching to see if support holds at the 10-week moving average here. All right, let's go to Snowflake, which is making a nice move in after-hours trading. This is data enterprise software firm, stocks up 12%, almost 13%. Yeah, this one beat Fuse. Haven't seen how the guidance was, but I'm going to assume the guidance was pretty strong. So this is a nice move here. This is nice to see because a lot of software stocks have struggled in the past couple of months.

19:12And this is nice. On the other hand, CrowdStrike, not so good. That one isn't looking great. Again, I don't know what happened here, but that one is down pretty significantly. Looks like it might undercut the 200-day line in the$400 level. Viva, ticker V-E-E-V, that one is down modestly. That one swung around a fair amount. That one today closed in a buy zone, might fall back out of it. We'll see. Urban Outfitters, this had closed in a buy zone. It already rose in a buy zone, but it was tumbling something like 7 % after hours. I don't know the details on this one. And we'll see. But this one looks like it'll now fall significantly below the 50-day line.

19:55So not great. Five below is another. Another top-performing retailer. Absolutely. Rising modestly, it was already out of a buy zone, though maybe you could argue that there was another short consolidation, but it's going to pop up from there. And then a few other names. There's three data storage plays, NetApp, NTAP, that's down solidly. Some of these names were starting to come up and they're falling back. Pure Storage, that one's surging. PSTG, that's up like 15%. And so that one's going to all of a sudden surge up the right stand of a base. And Nutanix, which is a software company that's sort of in the same space, that one is tumbling as well, or at least falling significantly.

20:40So a lot of movers, you know, one of the last big nights for tech. NVIDIA is obviously the main headline. And we'll see. That one is only off 3 % after hours, so could easily turn around. Yeah, not too bad at all, considering the run that this stock has made, and now down about 2, 2.5%. So it'll be whippy and after hours trading and probably a little volatile in the morning as well. So we'll see where NVIDIA opens. This is a leaderboard, a leaderboard, or a member of the leaderboard model portfolio. We put NVIDIA on back on June 24th when it was just starting to break out over that 143 level. So nice profit cushion.

21:29And we're already seeing NVIDIA pairing losses. All right, folks, that's going to do it for today. Ed, as usual, thanks a lot for that earnings color on Netflix and all those other stocks. We do appreciate it. All right. And again, that's it for today. We appreciate you joining us. Don't forget, IBD Live happening tomorrow morning at 6.20 a.m. Eastern Time. Rachel Fox will be in the host chair. And we are excited on Friday to welcome back Charles Harris, a popular guest and still a portfolio manager for William O 'Neill and company. So we always like getting his take on the market. He'll be on Friday.

22:17But before that, like I said, Rachel Fox will be in the chair tomorrow. We'll have another good IBD live show for you. And then tomorrow, yeah, we're going to be a little bit different. Hope you're not sick of Ed yet. Ed's going to be on for the third day, this time with Lexi, Alexis, tomorrow. So hope you have a great rest of the day. Thanks for watching, everybody.

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