March 4, 2024

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Dow Jones Futures Rise After Stock Market Rally Pullback; Tesla Model Y China Deliveries Begin

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Dow Jones futures rose slightly Monday evening, along with S&P 500 futures and Nasdaq futures. U.S. stock markets were closed Monday for the Martin Luther King Jr. holiday.


The stock market rally fell last week as buzz from the Biden stimulus plan began to wane. But it’s been a constructive pullback so far. The major indexes fell modestly, holding short-term moving averages and letting longer-term averages catch up. Some euphoric market areas — such as new IPOs like Yatsen Holding (YSG) — suffered significant losses or sharp reversals.

Tesla (TSLA) began deliveries of its made-in-China Model Y crossover on Monday. Last week Tesla stock retreated, but after appearing to go on a climax run, the electric car maker is looking anti-climactic, which is a good thing.

U.S. tech giants aren’t participating. Apple stock, the only one that appeared to be trying to do well, reversed for solid losses. Most have been lagging the stock market rally for months and are stuck below their 50-day moving averages, including Microsoft (MSFT), Facebook (FB) and Netflix stock. Netflix (NFLX) reports earnings on Tuesday, with Walt Disney (DIS) and Disney+ rapidly becoming a serious rival. Disney stock has been doing much better than Netflix for several months.

Cyclical stocks are still looking strong. Eastman Chemical stock faded to just below a buy point. Eastman Chemical (EMN) has earnings in two weeks, as earnings season hits full force. JPMorgan stock rose last week and flirted with a buy point from a long deep base. JPMorgan Chase (JPM) earnings easily beat views Friday, but JPM stock retreated.

Find The Best Long-Term Investments With IBD Long-Term Leaders

The chip sector is still strong overall. Apple iPhone supplier and 5G wireless play Qualcomm (QCOM) flirted with a buy point last week. QCOM stock is still actionable now.

Cadence Design Systems (CDNS) and Synopsys (SNPS), which make software for designing semiconductors, are both just below range of recent breakouts. But CDNS and SNPS stock have set up three-weeks-tight patterns.

Match Group (MTCH) tried to clear a tight pattern last week, reversing lower. But Match stock rebounded from key support on Friday.

Biden Stimulus Buzz Fading?

President-elect Joe Biden unveiled a $1.9 trillion stimulus plan on Thursday night, but that didn’t buoy the stock market rally on Friday. Biden stimulus buzz had fueled cyclicals and the broader market in the new year. Democrats winning the Georgia Senate runoffs to have unified control of government makes it likely that much of the Biden stimulus plan will pass.

Still, with razor-thin majorities in the House and Senate, a Biden stimulus plan may face significant changes. Meanwhile, Biden also says he’ll propose another big spending bill later in the year, but that will come with significant tax hikes on corporations and capital gains.

Janet Yellen, Biden’s Treasury Secretary nominee, testifies at a Senate confirmation hearing Tuesday. The former Federal Reserve chief will make the case for the Biden stimulus plan, saying in her prepared remarks that now is the time to “act big.”

Biden Stimulus: Checks Now, Tax Hikes Soon

Trump Revokes Huawei Supplier Licenses

The Trump administration has told Huawei suppliers, including Intel (INTC), that it is revoking some licenses to sell to the China telecom gear giant, Reuters reported. It also plans to deny many applications to supply Huawei. It’s likely the final effort under President Trump to weaken the telecom giant on national security grounds.

In other news, Lumentum Holdings (LITE) reportedly is in advanced talks buy laser maker Coherent (COHR). Lumentum makes optical components as well as sensors for the Apple iPhone.

Apple, Microsoft and Tesla stock are on IBD Leaderboard. Apple stock and Match are on SwingTrader. Microsoft stock is on the IBD Long-Term Leaders list. CDNS stock and SNPS are on the IBD 50.

Dow Jones Futures Today

Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures climbed 0.3% and Nasdaq 100 futures advanced 0.2%.

U.S. stock exchanges were closed Monday for the Martin Luther King holiday, but other markets around the world were open.

China GDP grew 6.5% in Q4 vs. a year earlier, slightly better than expected. December industrial production climbed 7.3% vs. December 2019, slightly better than expected. Retail sales grew 4.6%, missing forecasts. Fixed asset investment popped 2.9%, below estimates.

Of course, just because Dow futures currently suggest that the major indexes will hold their short-term moving averages doesn’t mean that will hold through Tuesday’s trading.

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.

Coronavirus News

Coronavirus cases worldwide reached 95.96 million. Covid-19 deaths topped 2.04 million.

Coronavirus cases in the U.S. have hit 24.60 million, with deaths above 408,000.

New coronavirus cases in the U.S. have trended lower over the past several days, but remain very high. Hospitalizations are just starting to roll over, slightly. The MLK holiday and Biden’s inauguration on Wednesday likely will disrupt coronavirus testing and reporting this week.

Coronavirus vaccinations also have slowed over weekends, particularly during the recent run of three-day holiday weekends.

Stock Market Rally Last Week

U.S. Stock Market Today Overview

Index Symbol Price Gain/Loss % Change
Dow Jones (0DJIA) 30814.26 -177.26 -0.57
S&P 500 (0S&P5) 3768.25 -27.29 -0.72
Nasdaq (0NDQC ) 12998.50 -114.14 -0.87
Russell 2000 (IWM) 210.67 -3.27 -1.53
IBD 50 (FFTY) 44.17 -0.50 -1.12
Last Update: 4:20 PM ET 1/15/2021

The stock market rally retreated from record highs. The Dow Jones Industrial Average fell 0.9% in last week’s stock market trading. The S&P 500 index and Nasdaq composite sank 1.5%. The QQQ, which tracks the big-cap Nasdaq 100, retreated 2.25%.

Apple stock sank 3.7%, back below its 21-day exponential moving average and getting close to its 10-week line. Netflix stock, (AMZN), Microsoft and ServiceNow (NOW) lost 2-3%, (CRM) and Google parent Alphabet (GOOGL) sank about 4%. Adobe (ADBE) skidded 5.6%. Facebook tumbled 6.1%, and to rally Friday to get back above its 200-day line.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rallied 2.9%, while the Innovator IBD Breakout Opportunities ETF (BOUT) jumped 3.3%.  The iShares Expanded Tech-Software Sector ETF (IGV) sank 2%. MSFT stock, Adobe, ServiceNow and Salesforce weighed on IGV, while CDNS stock and Synopsys also are are holdings. The VanEck Vectors Semiconductor ETF[symb=SMH] advanced 1.9%, with Qualcomm stock a key component.

Stocks To Watch

Qualcomm stock rose as high as 163.18 last week, briefly clearing a flat base but never closing above the 161.17 buy point, according to MarketSmith analysis. QCOM stock finished the week at 157.09. Just 4.8% above the 10-week line, Qualcomm is still actionable.

Note that Qualcomm is a Huawei supplier. Also, key customer Apple will report in two weeks, while Qualcomm earnings are in three weeks.

Eastman Chemical stock dipped 0.9% last week to 104.78, just below at 104.93 flat-base buy point. But EMN stock found support at its 21-day line. Eastman earnings are due Jan. 28.

JPM stock rose 1.9% last week to 138.64, briefly hitting a record high and clearing a 141.20 buy point from a yearlong consolidation. With the economy likely to get a stimulus boost and Treasury yields widening, bank profits should improve in 2021. While JPMorgan earnings fell in 2020, they rose 9% in Q3 and 47% in Q4. Citigroup (C) and Wells Fargo (WFC) reported mixed results Friday, while Goldman Sachs (GS) and Bank of America (BAC) are on tap Tuesday.

Cadence Design stock fell 1.1% last week to 134.64, but continued to hold support at a rising 21-day line. CDNS is just beyond the 5% chase zone from a prior flat base. The three-weeks-tight entry is 138.74.

Synopsys stock edged up 0.4% to 258.92, also finding support at its 21-day line. SNPS stock is just barely within the 5% chase zone of its prior flat base. But investors may want to focus on the tight entry of 264.72.

Euphoric Retreat

Seeing some euphoric areas of the market got a reminder that manic stocks can have depressing days. Investors were getting too used to brand-new IPOs, already richly valued, rising 10% or more for multiple days.

Yatsen stock exploded for a 13.4% gain on Thursday, moving into a buy zone, but then tumbled 13.4% on Friday. While still up 2% for the week, anyone who bought YSG stock the official buy point suffered sharp losses. Airbnb (ABNB) and DoorDash (DASH) had big weekly gains. But they reversed lower late in the week, closing below official buy points after racing high.

EV stocks also suffered reversals. Nio (NIO) popped 6.4% on Monday to a new high on its Nio Day news. But the Nio stock ended the week down 4.5%. Li Auto (LI) leapt 12% on Tuesday and finished the week down 5%. Xpeng (XPEV) closed up 5%, but gave most of Tuesday’s 22% spike.

Tesla Stock

Tesla fell 6% last week, but that looked relatively modest and controlled, especially after a 25% spike in the prior week. That huge run-up in Tesla stock flashed several climax top signals, raising the risks of a major sell-off. But TSLA stock neither accelerated nor crashed. Ideally, Tesla would consolidate for several weeks, forming a base and letting the major indexes catch up. Of course, TSLA stock didn’t even touch its 10-day line last week. It’s still 35% above its 50-day line. It is not in buy range.

Tesla Model Y China Deliveries Begin

Tesla Model Y deliveries began in China on Monday. The made-in-China Model Y is expected to a key growth area for Tesla in 2021, if not the most important. It’s unclear how quickly the Tesla Shanghai plant will ramp Model Y production. Initial demand reportedly is high.

The Tesla Model Y is slightly cheaper than the Nio EC6, but is significantly more expensive than the VW ID.4, which has a shorter range. The ID.4, which already launched in Europe, is set to launch in the U.S. and China in the first quarter. China preorders for the ID.4 may begin this week.

Tesla earnings are in less than two weeks, with 2021 guidance on production and deliveries in focus along with updates on the Cybertruck and two factories under construction.

Stock Market Rally Analysis

The major indexes fell last week, but not too badly. On Friday, the Nasdaq found support at its 10-day line. The Dow Jones, S&P 500 index and QQQ held their ground at the 21-day exponential moving average.

The modest pullback also reined in the Nasdaq, which was getting extended. The composite is now 4.6% above its 50-day moving average vs. 8% at the end of the prior week. As long as the Nasdaq is within 6% of that key level, near-term pullback risks are relatively low. Meanwhile, the QQQ is 2.9% above its 50-day, with the S&P 500 and Dow up 2.7%.

The modest pullback in the major indexes and more-significant losses in tech titans and sharp retreats in IPOs and other speculative stocks might bring down bullish sentiment.

The bulls vs. bears reading has had bullish sentiment near multiyear highs, at levels often associated with tops. Meanwhile put/call ratio, CBOE Volatility Index and other psychological indicators. at long-time lows. Margin debt is rising solidly vs. a year earlier. It’s not at extremely levels historically, but leveraged ETFs and stepped-up options use might mask how exposed investors are.

Is the market pullback done? The Nasdaq no longer looks extended and the major indexes did find support at short-term averages. The major indexes certainly could undercut their 21-day lines and fall to the 50-day lines. While more painful, that retreat could still be normal and healthy long term. But right now, the market remains in a confirmed uptrend.

In the next few weeks, the stock market rally is likely to take its cue from earnings season. But Biden stimulus buzz could return as Congress works on yet-another relief package.

5 Stocks Near Buys On Covid Trends

Market Rally Game Plan

Consider your overall market exposure. The major indexes just touched their 10-day or 21-day lines, but many hot stocks suffered big losses on Friday and for the week. Imagine the impact on your portfolio if the Nasdaq dropped to its 50-day line or below.

Are you too exposed in IPOs or other speculative areas? Are you stuck in too many big techs like Apple or Microsoft stock. Having some in your portfolio can make sense, but with those giants out of favor you don’t want to miss out on a solid stock market rally. Do you have any cyclical stocks. Don’t let a tech or growth bias keep you from considering the stocks and sectors are thriving now.

After deciding on any broad adjustments, make a game plan for your stocks. What is your line in the sand for taking partial profits and selling entirely? Do you have enough cushion to hold through earnings? Make those decisions on the weekend or outside of trading hours and then stick to those rules. You don’t want to panic sell or panic freeze when the market is moving.

Make sure to look at daily and weekly charts. A drop might look worrisome on a daily but less so on a weekly.

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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