Dow Jones futures fell modestly Monday morning, along with S&P 500 futures and Nasdaq futures, while crude oil prices tumbled amid weak Chinese economic data. China Tesla rival Li Auto sank on weak revenue and guidance.
The stock market rally had another strong week, moving up to a major test. A market pause wouldn't be a surprise, and could be healthy, after strong price gains in generally light volume over the past several weeks. Investors should be cautious about adding more exposure.
Diversified oil giant Exxon Mobil has been setting up near possible entries, as energy stocks took the lead once again. Costco Wholesale has a cup-with-handle base, though several key rivals are reporting this coming week. UnitedHealth has traded tightly within a buy zone, creating another entry. Apple is moving close a breakout as AAPL stock is outperforming other megacaps. Microsoft is closing in on its 200-day line, which could offer a chance to start a position.
China EV startup Li Auto reported earnings before Monday's open, with guidance falling well short. LI stock had been among the better EV stocks, outperforming giants BYD and Tesla, but it has fallen below its 50-day line. BYD stock is below its 50-day line while Tesla is just below its 200-day.
UNH stock is on IBD Leaderboard and was Friday's IBD Stock Of The Day. MSFT stock is an IBD Long-Term Leader.
The video embedded in this article discussed the weekly market action in depth, while also analyzing Exxon Mobil, UnitedHealth and Apple stock.
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Dow Jones Futures Today
Dow Jones futures fell 0.6% vs. fair value. S&P 500 futures lost 0.6% and Nasdaq 100 futures declined 0.5%.
China unexpectedly cut some key interest rates amid continued weak economic data. Overnight, China's July retail sales rose 2.7% vs. a year earlier, well below views for 5%. Industrial production climbed 3.8%, below targets for 4.6%. China's jobless rate for 16-24 year olds hit a record 19.9%. Crude steel output fell 6.4%.
Crude oil futures fell 5%. Natural gas prices sank 2%. Copper prices skidded 3%.
The 10-year Treasury yield fell 3 basis points to 2.82%.
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 closed at weekly highs despite some reversals during the week.
The Dow Jones Industrial Average rose 2.9% in last week's stock market trading. The S&P 500 index popped 3.25%. The Nasdaq composite ran up 3.1%. The small-cap Russell 2000 leapt 4.9%.
The 10-year Treasury yield rose 1 basis point to 2.85%, but with some big moves during the week.
U.S. crude oil futures rose 3.5% to $92.09 a barrel last week, despite Friday's pullback. Gasoline futures leapt 6.7%. Natural gas prices jumped 8.7% for the week.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF gained 2.3% last week, while the Innovator IBD Breakout Opportunities ETF rallied 3.1%. The iShares Expanded Tech-Software Sector ETF advanced 3%, with MSFT the top IGV holding. The VanEck Vectors Semiconductor ETF edged up 0.7%, rebounding from steep losses following the Nvidia and Micron warnings.
SPDR S&P Metals & Mining ETF jumped 8.3% last week. The Global X U.S. Infrastructure Development ETF popped 4.6%. U.S. Global Jets ETF ascended 3.5%. SPDR S&P Homebuilders ETF rallied 4%, its eighth straight weekly gain. The Energy Select SPDR ETF jumped 7.4%, with XOM stock a huge weight in XLE. The Financial Select SPDR ETF bounced 5.4%. The Health Care Select Sector SPDR Fund climbed 1.65%, with UNH stock a huge holding.
Reflecting more-speculative story stocks, ARK Innovation ETF climbed 3.25% last week and ARK Genomics ETF 3.8%. Tesla stock is a major holding across Ark Invest's ETFs. Cathie Wood's Ark also owns some BYD stock.
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Stocks Near Buy Points
XOM stock rallied 6.3% to 93.99 last week, moving back above the 50-day line. Shares of the energy giant are closing on a trendline from the early June peak. The official buy point is 105.67, but that would be significantly above the 50-day line. Volume was light last week and has not been great over the past month as Exxon stock rebounded. Earnings growth continues to boom.
With oil and natgas prices declining early Monday, XOM stock fell modestly.
COST stock edged down 0.6% last week to 537.21. Shares are drifting lower in a handle with a 552.81 buy point, according to MarketSmith analysis.
Keep in mind that smaller rival BJ's Wholesale reports this coming Thursday. Walmart, which owns the Sam's Club warehouse chain, is due out Tuesday morning, with Target reporting Wednesday.
UNH stock rose 1.6% to 543.70. The health insurer giant is still in range of a 518.80 cup-with-handle buy point, while still below the April 14 high. UnitedHealth stock didn't quite forge a three-weeks-tight pattern, just exceeding the weekly move limit. But investors could still use 545.84 as an alternate buy point.
Apple stock advanced 4.1% to 172.12 last week. It was the sixth straight weekly gain, but all have come on light volume. On the upside, the relative strength line has hit several new highs, reflecting AAPL stock's outperformance vs. the S&P 500. Apple stock is moving toward a 179.71 double-bottom buy point. Technically, shares are just below a trendline entry. Ideally, AAPL stock would forge a handle.
MSFT stock climbed 3.2% to 291.91, but unlike Apple is still below its 200-day moving average. A big move above the 200-day line could offer a chance to enter MSFT stock as a Long-Term Leader. The RS line is not far from 2022 high, even with MSFT stock is significantly below its late November record high of 349.67.
Li Auto Earnings
Li Auto lost a net 4-cents a share in Q2. The automaker lost 2 cents adjusted vs. a 1-cent loss a year earlier. Revenue shot up 73% to $1.3 billion, below views for $1.4 billion.
The EV startup sees Q3 revenue at $1.34 billion to $1.43 billion, far below consensus at $2.15 billion.
Li Auto had been profitable for the prior three quarters, but Covid shutdowns took their toll on production and deliveries in Q2. Li Auto currently has just one model, the Li One hybrid SUV.
But it's begun sales of the premium L9 hybrid SUV, with deliveries set to start later this month. Preorders have been strong, with Li Auto previously predicting L9 deliveries of 10,000 or more in September.
But Li Auto now expects to deliver 27,000-29,000 vehicles overall in Q3. That would be up 7.5%-15.5% vs. a year earlier, but also far below estimates. Li delivered 28,687 vehicles in a Covid-hit Q2, while the L9 was expected to provide a big boost to overall sales in late Q3 and beyond.
There are some local media reports that Li Auto will soon unveil an L8 hybrid SUV, a scaled-down L9, which could replace the Li One.
Li Auto sank 6% before the open. LI stock fell 3.4% to 32.49 last week, creating more space vs. its 50-day line and extending a downtrend that began in late June, That followed a huge run from early May. Shares did close in the upper half of its weekly range. Li Auto stock would have a new base with a 41.59 buy point, if it starts building the right side. A strong move above the rising 50-day could offer an early entry, but it's rather steep.
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Tesla And BYD Stock
Tesla stock bounced 4.1% to 900.09 last week. That's coming back above its 200-day moving average, reclaiming its 40-week line on Friday. Breaking above its 200-day line and the Aug. 4 high of 940.82 would offer an aggressive entry for TSLA stock. The official buy point is 1,208.10.
BYD stock dipped 0.2% last week to 36.69, trading tightly but below the 50-day line. The China EV and battery giant has a base with a 43.71 buy point. A decisive move above the 50-day would offer an early entry.
BYD is supplying Blade batteries to Tesla Berlin, according to some reports. Blade-powered Model Ys should start rolling off the production line in a few weeks. Meanwhile, BYD will begin deliveries of the Seal sedan, a much-cheaper rival to the Model 3, in the next few weeks. BYD also begin Atto 3 deliveries in Australia in a few days, entering a new market as part of a huge international expansion.
Market Rally Analysis
The stock market rally had a couple of unsightly intraday reversals, on Monday and Thursday, but ultimately had solid gains on the major indexes.
The Dow Jones, S&P 500 and Russell 2000 have decisively cleared their early June highs, joining the Nasdaq. The Russell 2000 is just above its 200-day line, with the S&P 500 and Dow Jones close behind. The Nasdaq has a little more work to get to that long-term level as it gets to the 13,000 level.
Getting above the 200-day line would be evidence that the current uptrend is more than a substantial bear market rally. A pause or pullback wouldn't be a surprise after a strong advance for the major indexes, largely on lackluster volume. Friday's bounce came on very light volume.
A pause or modest pullback over several days or a few weeks could be constructive, but the market is going to do what it's going to do.
Energy stocks continue to look strong, but will rise or fall with underlying oil and natural gas prices. And those prices are down Monday morning.
A wide range of medicals are doing well. Chipmakers, lithium plays, some steel plays, transports and more are showing positive action.
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What To Do Now
As Scott Bennett of Invest with Rules told IBD Live on Friday, investors don't need to put on the brakes, but they may want to ease off the gas.
Be cautious about adding exposure in the very short term, with the market rally perhaps stretched and facing yet another key resistance area. Taking partial profits is still a sound strategy, and a way to keep exposure from ramping up from new buys.
Still, some quality stocks continue to flash buy signals or set up. Investors should be taking part in this market, and looking for new opportunities. So keep building those watchlists.
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