Dow Jones futures rose solidly Monday morning, along with S&P 500 futures and Nasdaq futures, signaling a rebound for the stock market rally after losses last week. Tesla and Apple stock rose, while Chinese and solar stocks were strong early gainers.
The major indexes retreated modestly in a holiday-shortened week but held key levels even as Federal Reserve policymakers signaled big rate hikes are likely for several more meetings. But it's unclear if the recent market action was bullish or bearish.
Investors can have slim-to-modest exposure, but need to be ready to step back.
Chinese Stocks Rally
Hong Kong's Hang Seng index rose 2.7% on Monday. Chinese stocks rallied on a variety of factors. Beijing lifted some Covid restrictions, a few days after Shanghai ended its lockdown. Regulators are reportedly close to wrapping up a Didi Global probe, raising hopes for an easing tech crackdown. Alibaba and JD.com were higher Monday morning.
China EV stocks such as Li Auto rose on general optimism and with several new models set to be unveiled or begin deliveries in the next several weeks.
U.S. and Chinese solar stocks bounced, including Enphase Energy, as President Biden reportedly moves to allow solar-related imports for the next two years.
Apple holds its annual Worldwide Developers Conference all week. Apple will show off its latest operating system changes. There's buzz that Apple WWDC will reveal an NFL streaming package. Still, Apple stock fell solidly on Friday, closing lower for the week.
Tesla stock tumbled on Friday and for the week as Tesla CEO Elon Musk reportedly wants to cut 10% of salaried jobs amid a "super bad feeling" about the economy. Musk later clarified those remarks.
Beyond the Tesla move itself, it's a reminder that volatile, highly valued growth names can make big moves off the bottom, but also sell off hard.
Tesla and Apple rose before Monday's open.
Stocks To Watch
Northrop Grumman, Dollar Tree, Flex LNG, Albemarle and ZIM Integrated Resources are five stocks trading near buy points. All have relative strength lines at or near highs, a bullish sign. The RS line, the blue line in the charts provided, tracks a stock's performance vs. the S&P 500 index.
NOC stock and Albemarle are on IBD Leaderboard. ZIM stock is on the IBD 50. The video embedded in this article discussed the market rally action this week and analyzed Northrop, DLTR stock and ALB stock.
Dow Jones Futures Today
Dow Jones futures rose 0.85% vs. fair value. S&P 500 futures advanced 1.15% and Nasdaq 100 futures jumped 1.6%.
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
Stock Market Rally
The stock market rally retreated modestly for the week, though with some big daily moves in the major indexes.
The Dow Jones Industrial Average fell nearly 1% in last week's stock market trading. The S&P 500 index gave up 1.2%. The Nasdaq composite slumped 1%. The small-cap Russell 2000 edged down 0.2%.
The 10-year Treasury yield leapt 21 basis points to 2.96%, rebounding toward 3% amid generally strong economic data and hawkish Fed comments. That follows three weeks of significant declines in the 10-year yield.
U.S. crude oil futures rose 3.3% to $118.17 a barrel last week. Gasoline futures shot up 8.7%.
Among the best ETFs, the Innovator IBD 50 ETF rose 1.2% last week, while the Innovator IBD Breakout Opportunities ETF gave up about 1%. The iShares Expanded Tech-Software Sector ETF climbed 0.7%. The VanEck Vectors Semiconductor ETF sank 1.5%.
SPDR S&P Metals & Mining ETF retreated 2.2% last week. The Global X U.S. Infrastructure Development ETF dipped 0.2%. U.S. Global Jets ETF descended 4.6%. SPDR S&P Homebuilders ETF retreated 1%. The Energy Select SPDR ETF gained 1.1% and the Financial Select SPDR ETF dropped 2%. The Health Care Select Sector SPDR Fund skidded 3.1%
Reflecting more-speculative story stocks, ARK Innovation ETF stepped back nearly 5% last week and ARK Genomics ETF 3.7%. Tesla stock remains the No. 1 holding across Ark Invest's ETFs.
Five Best Chinese Stocks To Watch Now
Apple WWDC
At the Apple WWDC event from June 6-10, the Dow Jones tech titan will show off changes to its various devices' operating systems: iOS, iPadOS, macOS, watchOS and tvOS. Media reports speculate that Apple could reveal a deal to carry NFL football games, such as NFL Sunday Ticket package. Apple TV+ announced a deal to carry Major League Baseball games on March 8. Increasing sports content is a way to attract and keep streaming subscribers, but it won't come cheap.
Apple stock fell 2.85% for the week to 145.38, including Friday's 3.9% to drop below the 21-day line. AAPL stock is far from any buy point and is well below the 50-day and 200-day lines.
Shares rose 1% Monday morning.
Tesla 'Super Bad' Sell-Off
Tesla stock slumped 7.4% to 703.55 last week, tumbling 9.2% on Friday to sink back below its 21-day line.
Shares rose 3% early Monday amid the broad market bounce and strong gains among many EV stocks.
CEO Elon Musk reportedly announced a hiring freeze and wants to cut 10% of Tesla salaried jobs due to what he called a "super bad feeling" about the economy. Those comments were in a Thursday email to Tesla executives, Reuters reported on Friday.
Musk's email comments raised questions. Major job cuts would suggest weaker demand, though Musk apparently said hourly production workers will increase. But current Tesla demand seems strong, especially with auto industry production still constrained. The EV giant has just added two new factories and forecasts 50% growth for years to come.
On Saturday, Musk tweeted that total employment will rise over the next 12 months, but salaried positions will be "flattish."
Meanwhile, the National Highway Transportation Safety Administration said Friday it's received 758 reports of "phantom braking" — in some 2021 and 2022 Model 3 and Y vehicles. The NHTSA, on May 4, requested information from Tesla by June 20.
Separately, the NHTSA will release automated-driving crash data this month, The Wall Street Journal reported Friday. The NHTSA is probing a number of Tesla crashes involving Autopilot.
Tesla Vs. BYD: China EV Maker Rallies Toward Highs, Seizes Tesla's Crown
Stocks Near Buy Points
Northrop stock popped 3.35% to 478.37 on Friday, just clearing a 477.36 cup-with-handle buy point. NOC stock tested its 50-day line on Thursday and had essentially formed a handle within a largish handle. Northrop stock is still just 4.8% above its 50-day line.
Dollar Tree stock fell 3.1% this past week to 159.88, but held above its 50-day moving average. Shares settled down after a massive plunge-and-revival. DLTR stock first crashed on weak earnings and guidance from Walmart and Target, but then rebounded on Dollar Tree's own earnings a week later. On a weekly chart, Dollar Tree stock has formed a handle, giving it a 166.45 cup-with-handle buy point. On a daily chart, the handle needs one more day to form, so by that measure Dollar Tree has a 177.29 cup-base buy point.
FLNG stock shot up 7.6% last week to 29.74, rebounding bullishly from the 50-day line, offering an early entry. The official consolidation buy point is 32.88, according to MarketSmith analysis. Ideally, the LNG play would pause for a few days, even forming a handle, letting the 50-day line gain some more ground.
ALB stock had a wild week. After soaring nearly 15% in the prior week, blasting above an early entry around 248, the lithium giant tumbled as low as 232.75 on June 1, though it found support at the 21-day line. Albemarle stock finished the week down 7.4% to 250.76, above that early entry. On a weekly chart, ALB stock now has a handle buy point of 273.78. That will show up on a daily chart after Monday. But a longer pause would let the 50-day line — still below the 200-day — catch up. Albemarle stock skyrocketed 35% in May, thanks to two big upward revisions to full-year earnings targets amid soaring lithium prices.
ZIM stock fell 6.4% on May 31, but rebounded to close the week down just 0.5% to 67.70. Technically, ZIM stock now has a handle on a weekly chart, giving it a 68.63 buy point. That handle could develop after Monday's close, but aside from the May 31 tumble there wasn't much of a shakeout. Also, ZIM stock is 11.9% above its 50-day line.
Clamor For Lithium Batteries Charges Up This Stock
Market Rally Analysis
The stock market rally paused last week, with the major indexes retreating modestly, mostly on Friday's losses. The major indexes held their 21-day moving averages and the bulk of their gains from the prior week.
Was the week constructive for the market rally or ominous? It depends on what comes next. A pullback wasn't a big surprise after strong gains. It's allowed some handles to form. But was this a temporary pause before the major indexes rebound or the start of a retreat back to lows? Pushing above this week's highs would also be just one step. The 50-day moving average looms for the major indexes, with several other key hurdles after that.
Fed officials made it clear that they won't stop tightening aggressively until they see inflation sharply lower and labor markets easing substantially. But that process will be painful for the economy. The fact that the stock market sold off Friday on Musk reportedly wanting big Tesla job cuts and the May jobs report showing strong hiring shows how investors aren't quite sure what's "good news" right now.
Energy remains strong, with shale plays, refiners, integrated giants, coal producers and LNG plays such as FLNG stock all still thriving. Solar stocks also are coming up again. Shippers such as ZIM stock, lithium plays like Albemarle, a few retailers such as Dollar Tree and various building-related companies are looking interesting as well.
Time The Market With IBD's ETF Market Strategy
What To Do Now
Investors might have added or cut exposure in the past week, based on the action of the major indexes and their own positions. In any case, exposure should still be modest.
In the long run, there will be huge opportunities for investors. Perhaps we're at the start of a big bull run. Or this could be a short-lived bounce within an extended bear market. Keep most of your powder dry so you can take advantage when the tide clearly turns.
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