Dow Jones futures were trading little changed early Monday, reversing from sharp overnight losses along with S&P 500 futures and Nasdaq futures, as Russia's foreign minister made some positive signals on the Ukraine crisis. The major indexes last week reversed lower from key resistance to undercut key support, raising fresh concerns about the stock market rally.
A hot inflation report and fears of an imminent Russia invasion of Ukraine spurred the stock market sell-off late in the week.
The S&P 500 and Nasdaq futures suggest those indexes will open well below their Jan. 28 follow-through days, after briefly doing so on Friday. A close below that FTD low would be a bearish sign for the market rally.
Russia News
Early Monday, Russia Foreign Minister Sergey Lavrov said while Nato responses on the Ukraine crisis are not satisfactory, he noted that the U.S. response was somewhat "constructive." He proposed to Russian President Vladimir Putin that talks continue, with Putin saying "all right" in response.
On Saturday, President Joe Biden warned Putin of "swift and severe costs" for invading Ukraine in a phone call. Both countries pulled diplomatic staff out of Ukraine.
Russia is conducting wargames with Belarus through Feb. 20. A Ukraine invasion possibly could follow, though it's still possible Putin demobilizes.
Russia/Ukraine news is likely to be in focus for stock, bond and energy markets in the coming days.
This is not a good time to be adding exposure.
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Stocks To Watch
Still, Apple stock, Regeneron, UnitedHealth, Google parent Alphabet and Oneok are stocks near buy points that boast growth at a reasonable price.
REGN stock has a P-E ratio of just 8. Apple, UNH stock, Google and Oneok have P-E ratios in the 20s, roughly in line with the S&P 500 index.
Low Times For High Growth
For investors used to trading highly valued growth stocks, the new year has been painful. A rising rate environment pressures highly valued stocks, especially those that are unprofitable or have triple-digit price-to-earnings ratios. Dutch Bros, with a P-E ratio above 200, caught the eye of seemingly every growth investor a week ago, but BROS stock reversed sharply lower last week. Tesla has held up better than a lot of these names, but it's been struggling in 2022. Datadog bounced back last week on earnings, but was that a one-time pop or will DDOG stock make further progress?
Advanced Micro Devices, while no longer exceptionally valued, still plunged 10% on Friday, leading a sell-off in chips and techs generally. After nearly hitting its 50-day line on Wednesday, AMD stock finished the week just above its 200-day line. It's more than wiped out its Feb. 2 pop on earnings.
Tesla's China sales and exports for January were solid, released as part of industry data on Chinese EV and overall auto sales.
Other News
Meanwhile, Cisco Systems recently made a $20 billion-plus offer for data analytics and security software firm Splunk, The Wall Street Journal reported late Friday. The two companies are not currently in talks, the WSJ said, but SPLK stock popped 8% early Monday.
Canada on Sunday cleared the last trucker protest demonstrators from Ambassador Bridge, the busiest bridge between the U.S. and Canada. Ford, General Motors and Stellantis all closed auto plants late last week, citing supply-chain issues related to various bridge closures.
Tesla stock is on IBD Leaderboard. Google stock is on IBD Long-Term Leaders. BROS stock is on the IBD 50.
The video embedded in this article takes a look at the market rally's highs and lows during the week and analyzes AMD stock, Regeneron and Oneok.
Dow Jones Futures Today
Dow Jones futures were slightly vs. fair value after being down solidly overnight. S&P 500 futures and Nasdaq 100 futures edged lower. Futures have been volatile in past hour on the Russian foreign minister's comments, with the major indexes indicated slightly higher or lower.
The 10-year Treasury yield were little changed at 1.96%. Crude oil futures fell nearly 1% after being up nearly 2% overnight. Natural gas prices rose solidly.
St. Louis Fed President James Bullard is due to appear on CNBC at 8:30 a.m. ET. Bullard's hawkish post-CPI comments last week, in which he signaled support for a 50-basis-point hike at the March meeting, helped fueled the stock and bond price sell-off.
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 sold off hard to end last week, with the major indexes breaking below key levels.
The Dow Jones Industrial Average fell 1% in last week's stock market trading. The S&P 500 index sank 1.8%. The Nasdaq composite retreated 2.2%. All had been solidly higher as of Wednesday.
The small-cap Russell 2000 climbed 1.4%, despite skidding late in the week.
The 10-year Treasury yield rose 2.5 basis points last week to 1.955%. But that's after hitting a 30-month high of 2.06% intraday Friday.
U.S. crude oil prices rose 3.6% on Friday to $93.10 barrel, the highest since 2014. The U.K. urged citizens to leave Ukraine on fears of a Russia invasion. U.S. National Security Advisor Jake Sullivan believes Russia could take offensive military action as soon as this coming week.
5 Stocks Near Buy Points With Strong RS Lines
ETFs
Among the best ETFs, the Innovator IBD 50 ETF dipped 0.4% last week, while the Innovator IBD Breakout Opportunities ETF climbed 2.35%. The iShares Expanded Tech-Software Sector ETF declined 1.35%. The VanEck Vectors Semiconductor ETF sank 2.7%, including a 5.1% tumble on Friday. AMD stock is a big SMH holding.
The SPDR S&P Metals & Mining ETF spiked 9.35% last week. The Global X U.S. Infrastructure Development ETF edged up 0.4%. U.S. Global Jets popped 5.5% amid a broader travel rally. SPDR S&P Homebuilders sank 1.2%. The Energy Select SPDR ETF advanced 2.1% while the Financial Select SPDR ETF lost 1 cent for the week. The Health Care Select Sector SPDR Fund fell 1.5%, with UNH stock the ETF's top holding.
Reflecting stocks with more speculative stories, ARK Innovation ETF lost 1.2% last week and ARK Genomics edged up 0.5%. Tesla stock remains the No. 1 holding across ARK Invest's ETFs.
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GARP Stocks Near Buy Points
Apple, Google, UnitedHealth, Oneok and REGN stock all offer growth at a reasonable price, with the stocks setting up near buy points.
Apple stock fell 2.2% to 168.64 last week, undercutting its 50-day moving average in a low-volume decline Friday. But the relative strength line only fell slightly from record highs. The RS line, the blue line in the charts provided, tracks a stock's performance vs. the S&P 500 index.
AAPL stock now has a proper base. On a weekly chart, Apple stock has a handle, giving it a 176.75 buy point.
Google stock slumped 6.3% last week, tumbling below its 50-day line and then its 200-day line. Like AMD stock, it has now more than wiped out the Feb. 2 earnings gap-up, in which GOOGL stock briefly broke out and hit a record high of 3030.93. Investors can still use that buy point. But they could buy Google stock as a Long-Term Leader if it rebounds from the 200-day line and reclaims its 50-day line. The RS line for GOOGL stock is close to its recent all-time highs.
UnitedHealth stock fell 1% to 478.13 last week, just above its 50-day line. UNH stock has a shallow cup base with a 509.33 buy point on a daily chart. On a weekly chart, the health insurance giant has a handle, giving it a 501.03 buy point. The RS line is at a record high with shares still in the base, giving UnitedHealth stock a blue dot on a weekly chart.
Oneok stock rose 2.6% last week to 64.51. Shares are moving toward a 66.88 buy point, but OKE stock is in range from a 63.65 early entry. The RS line is already at a 20-month high for the natural-gas play.
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REGN stock rose 2.5% to 638.41, reclaiming its 50-day and 10-week lines in strong volume Friday on positive trial data for the biotech giant. The move offered an early entry, with 635.10 as a specific buy point. The official buy point for Regeneron stock is 673.96.
Regeneron earnings skyrocketed in 2021, fueled by a Covid antibody treatment. But Covid cases are waning, while the antibody treatment isn't effective vs. the omicron variant. Analysts expect Regeneron earnings to fall 39% this year, but that will still be above pre-2021 levels. The RS line for REGN stock has struggled since 2015, but on Friday hit its highest level since late 2020.
Tesla China Sales
Tesla sold 59,845 Shanghai-made vehicles in January, up 286.5% vs. a year earlier. Some 40,499 EVs were exported, mostly to Europe, while 19,346 were sold locally. Tesla exports the bulk of its Shanghai-made vehicles in the first half of a quarter, then focuses on local sales.
A 30% EV subsidy cut on Jan. 1 weighed on China EV sales overall.
The Tesla Berlin plant will eventually take care of much of European demand, at least for the Model Y. But the site, supposed to open by the end of 2021, hasn't yet and may not for at least several weeks. Even when the Berlin and Austin plants finally open, production may ramp up slowly.
While Tesla stock is holding up better than most highly valued stocks, it's not doing particularly well.
Shares were little changed early Monday.
Tesla stock fell 6.9% to 860 last week, hitting resistance near its 21-day moving average. Shares are in a double-bottom base with a 1,208.10 buy point but are trading well below the declining 50-day line.
TSLA stock found support around its 200-day line in late January. A decisive move below the 200-day line and the Jan. 28 low of 792.01 would be a negative signal.
BROS Stock
Dutch Bros stock, after pausing for a few days, surged on Monday, Feb. 7, but then reversed lower that day. After tumbling 7.6% on Friday, BROS stock lost 10.3% for the week, approaching its 50-day line again.
DDOG Stock
Datadog stock shot up 12% on Thursday on strong earnings and guidance, vaulting above its 50-day line. The relative strength line was right at a record high. DDOG now has a base with a 199.78 buy point. It could try to form a handle now. On Friday, shares fell 4.1% to 167.40. But is that the start of a bullish handle or the start of an ugly retreat?
Market Rally Analysis
The stock market rally looked strong through midweek but then had an ugly finish, raising serious doubts about the confirmed uptrend. As of Wednesday, the S&P 500 and Nasdaq composite were coming right up to short-term resistance, while the Dow Jones had actually retaken its 50-day line. Some more stocks were setting up.
But then the CPI inflation report came in hot Thursday sending Treasury yields soaring as investors priced in even more aggressive tightening. The major indexes sold off Thursday. On Friday, Russia invasion fears for Ukraine triggered heavy selling again, except in crude oil and bond prices.
The S&P 500 and Nasdaq undercut the low of their recent range, with the S&P 500 also knifing below its 200-day line. Worse, both indexes undercut the low of their Jan. 31 follow-through days intraday. They managed to close above their FTD lows, but only by a whisker.
Closing below the lows of the FTD is a very bad sign for a stock market rally. A market rally remains in force as long as it's above its recent bottom, in this case the Jan. 24 intraday lows. But the odds are very high that a rally will fail if it closes below the FTD lows.
A Russia invasion of Ukraine, which could at any time, could roil markets in the coming days, adding a host of geopolitical, energy and supply-chain concerns.
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What To Do Now
With the market rally reeling, it's not a good environment for buying stocks. Energy, fertilizer and oceangoing shippers are among the few pockets of strength, but even there investors should be cautious.
Until the S&P 500 and Nasdaq move decisively above their Feb. 2 highs, investors largely put new buys on hold. The focus now should be on reducing exposure, especially for losing stocks.
Still, as the past two sessions showed, the market environment could change quickly. If the market rebounds in the coming week, perhaps as bond yields or Ukraine tensions ease, then investors will need to adapt. Being flexible is especially important in the current situation.
You always want to be ready to act. So rework your watchlists and stay engaged.
Meanwhile, the Dow Jones fell back below its 50-day line on Thursday and its 200-day line on Friday. The Russell 2000 fell back on Thursday and Friday but did close up for the week, a positive sign for market breadth.
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