Dow Jones rose slightly Monday morning, while S&P 500 and Nasdaq futures fell modestly. Crude oil prices jumped on a surprise OPEC+ output cut. Tesla deliveries and merger activity were in focus.
The stock market rally showed strong action this past week, as bank fears ebbed. The major indexes reclaimed key levels as many leading stocks flashed buy signals or set up.
Investors should be putting cash to work, gradually building up exposure. But don't buy extended stocks or get too concentrated in a particular sector.
The video embedded in this article reviewed the market action in depth and analyzed Aehr Test Systems, ServiceNow and TSLA stock.
Tesla reported first-quarter delivery and production figures Sunday, with sales hitting a record thanks to hefty price cuts but falling short of views. China EV rivals BYD, Nio, XPeng and Li Auto have already reported reported March and first-quarter sales.
Tesla stock broke past a buy point Friday, but is just below the 200-day moving average. LI stock ended the week just below a buy point. BYD stock has rebounded to near an aggressive entry. XPeng and Nio stock are also trending higher but have work to do.
Early Monday, Tesla fell modestly, signaling a move to around its buy point. Nio, Li Auto and XPEV stock rose slightly. BYD was not active.
Meanwhile, General Motors, Chrysler-parent Stellantis and several other automakers will release first-quarter U.S. sales on Monday. Ford Motor will be out on Tuesday. STLA stock is setting up near a buy point while GM and most other traditional automakers need repair work.
M&A Monday
Endeavor Group, parent of Ultimate Fighting Championship, will merge with World Wrestling Entertainment, in a $21 billion deal. Vince McMahon's WWE has been looking to sell itself for months, buoying shares. WWE stock tumbled in premarket trade while EDR fell modestly.
Life Storage agreed to a takeover deal from rival Extra Space Storage. LSI holders will get 0.8950 of EXR share per share they own, worth $145.82 at Friday's close. Life Storage had previously rejected a $129-a-share bid from Public Storage. LSI stock rose slightly. EXR stock fell solidly.
Canadian miner Teck Resources rose after rejecting an unsolicited takeover bid from global giant Glencore for some $23 billion, plus assumed debt. Teck has previously announced plans to spin off its coal assets.
OPEC+ Output Cut
On Sunday, OPEC+ announced an unexpected crude oil production cut of about 1.15 million barrels a day starting in May. The group, which includes OPEC and major allies such as Russia, had previously stated that it would hold supply steady. Saudi Arabia will cut output by 500,000 barrels per day. Kuwait, the United Arab Emirates, Iraq, Algeria and Kuwait are among members that will also cut. Russia said its already-planned March-June cut will now last through 2023.
If oil prices rise significantly and stay elevated, that could complicate the inflation picture while slowing economic growth.
The White House signaled its displeasure with the OPEC+ move.
Dow Jones Futures Today
Dow Jones futures were 0.3% above fair value. S&P 500 futures dipped 0.2% and Nasdaq 100 futures fell 0.7%. TSLA stock is a notable S&P 500 and Nasdaq component.
Crude oil futures rose 6% to above $80 a barrel on the OPEC+ production cut. Oil stocks were rallying.
The 10-year Treasury yield rose 1 basis point to 3.5%.
The Caixin China manufacturing index fell 1.6 points in March to a break-even 50. The official manufacturing index, released Friday dipped 0.7 point to 51.9.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally started this past week sluggishly, but took a decisively bullish turn starting Wednesday, closing near weekly highs.
The Dow Jones Industrial Average ran up 3.2% in last week's stock market trading. The S&P 500 index leapt 3.5%. The Nasdaq composite jumped 3.4%. The small-cap Russell 2000 popped 3.9%.
The 10-year Treasury yield rose 11 basis points to 3.49%, but pulled back Friday.
U.S. crude oil futures surged 9.25% to $76.67 a barrel last week, but still fell 5.7% for the quarter.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF rose 3.4% last week. The iShares Expanded Tech-Software Sector ETF charged up 4.7%. The VanEck Vectors Semiconductor ETF gained 3.4%.
SPDR S&P Metals & Mining ETF rebounded 5.75% last week. The Global X U.S. Infrastructure Development ETF rallied 4.9%. U.S. Global Jets ETF ascended 7.75%. SPDR S&P Homebuilders ETF gained 3.9%. The Energy Select SPDR ETF popped 6.3% and the Health Care Select Sector SPDR Fund climbed 1.7%.
The Financial Select SPDR ETF bounced 3.8%. The SPDR S&P Regional Banking ETF edged up 0.8%.
Reflecting more-speculative story stocks, ARK Innovation ETF bounced 6.9% last week and ARK Genomics ETF 5%. TSLA stock is a major component across Ark Invest's ETFs. Cathie Wood's Ark Invest also owns some BYD stock.
Five Best Chinese Stocks To Watch Now
Tesla Deliveries
Tesla deliveries for the first quarter came in at a record 422,875, up 36% vs. a year earlier and 4% above Q4's 405,278. Big Tesla price cuts worldwide and new U.S. tax credits fueled demand.
Wall Street had expected deliveries of 431,000, according to FactSet. Some other forecasts were lower. Tesla sales have fallen short of views for several quarters.
Deliveries included 412,180 Model 3 and Y vehicles. Tesla sold 10,695 Model S and X luxury vehicles, down sharply from Q4's 17,147.
Tesla produced 440,808 vehicles, with output exceeding deliveries for a fourth straight quarter. Model S and X output was at 19,437.
On Friday, the IRS laid out some guidelines on battery mineral and components sourcing to qualify for the full $7,500 EV credit. It's still not clear which vehicles may be affected. The entry-level Model 3, which has used China-made LFP batteries, will likely see a reduced credit. But for the next few weeks, buyers can still get the full credit.
Following Q1 deliveries, investors will turn to Tesla earnings on April 19 to see how price cuts affected EPS and profit margins. Will the EV giant need further price cuts to keep demand high going forward?
Shares jumped nearly 9% to 207.46 last week, including a 6.2% pop on Friday. That pushed TSLA stock above a 200.76 cup-with-handle buy point, according to MarketSmith analysis. However, shares are now closing in on their 200-day moving average, which could serve as resistance.
Tesla stock fell 3% before Monday's open to just above the buy point.
Tesla Vs. BYD: EV Giants Vie For Crown, But Which Is The Better Buy?
BYD Sales
BYD sold 207,080 all-electric BEVs and plug-in hybrids in March, including 10,398 from its upscale Denza brand. That was up 97.5% vs. a year earlier and 7.5% vs. February's 191,664. Aside from 991 commercial vehicles, BYD sold 102,670 passenger BEVs and passenger 103,419 PHEVs.
First-quarter sales were 552,076, up 93% vs. a year earlier but down 19% from Q4's record 683,440.
Some of that reflects some Covid impact at the start of the year as well as Lunar New Year celebrations in late January. But there's no question that Tesla price cuts, and cuts by other EV makers, have taken a toll on BYD, especially on vehicles such as the Han and Seal. Tesla slashed its entry-level Model 3 price by about $7,280 over late October and early January, with several other EV makers including XPeng announcing major cuts as well.
BYD has offered more limited discounts.
Export sales hit 38,725 in the first quarter, providing an escape valve from a brutal home market.
Last week, BYD reported booming 2022 profit, with Q4 net income up more than 1,100% vs. a year earlier.
BYD stock jumped 9.8% in the latest week to 29.40, building the right side of a new base with a 34.04 buy point. Shares reclaimed their 50-day line and finished just below their 200-day line. A decisive move above the 200-day could offer an early entry.
BYD stock, which trades over the counter in the U.S., was not active in premarket trade.
China EV Startup Deliveries
Li Auto reported March deliveries of 20,823 hybrid SUVs, up 89% vs. a year earlier. That's up 25% vs. 16,620 in February. Q1 sales totaled 52,584, at the lower end of its late February forecast of 52,000-55,000. March sales include the new L7, a five-seat electric SUV.
Nio delivered 10,378 vehicles in March, up 3.9% vs. a year earlier but down nearly 15% vs. February's 12,157. That included 3,203 SUVs and 7,175 sedans. Q1 deliveries totaled 31,041, just above the low end of its target for 31,000-33,000 vehicles.
XPeng deliveries came in at 7,002, plunging nearly 55% vs. a year earlier but up 16.5% vs. February's 6,010. P7 sedan sales grew 32% vs. February to 3,010, but didn't give a breakdown between the P7 and refreshed version, the P7i. Q1 deliveries were 18,230 vehicles, at the lower end of its guidance for 18,000-19,000.
LI stock has a double-bottom base with a 25.46 buy point that's just above the 200-day line. Shares climbed 6.7% to 24.95, last week, but dipped 1.5% Friday as Li Auto hit resistance at the buy point and 200-day.
Li Auto was slightly higher early Monday, just below the buy point.
XPEV stock leapt 15.5% last week and Nio stock nearly 16%. Both are above their 50-day lines but below their 200-day lines.
Early Monday, Nio tilted higher while XPeng rose modestly.
China EV makers are set to unveil or release a slew of new models at the Shanghai Auto Show starting April 18. BYD and its premium Denza line in particular will showcase a number of new EVs. New models could spur new sales, but could also put further pressure on existing EVs.
Market Rally Analysis
After showing resilience in the prior week, the major indexes made strong gains this past week. The Nasdaq and S&P 500 staged follow-through days on Wednesday, confirming the stock market rally.
The Nasdaq powered above 12,000 and is closing in on the Feb. 2 high. The Nasdaq 100 has vaulted to its best levels since late August.
The S&P 500, which reclaimed its 50-day line on Wednesday's FTD, continued to advance through Friday. The Dow Jones reclaimed its 200-day line during the week and moved above its 50-day line on Friday. The Russell 2000, which as recently as March 24 was hitting five-month lows, has reclaimed the 21-day line as bank stocks at least stabilized.
The bank crisis appears to be waning. Fed rates are likely to peak well below what markets thought a month ago. That's a bullish combination, especially for growth stocks.
While megacaps such as Apple, Microsoft, Meta Platforms, Nvidia and Tesla stock accounted for a massive share of the Nasdaq and S&P 500 gains in the first quarter, market breadth did improve somewhat in the past week. So has market leadership.
Chip stocks continue to shine, with leaders extending breakouts and other names setting up or clearing buy points, with AEHR stock an unfortunate exception Friday.
But software is also coming up, with cybersecurity and a variety of business software plays flashing buy signals, including NOW stock.
A few payment stocks and networks also are impressing, such as Shift4 and Juniper Networks. Meritage Homes and several other builders are acting well, along with some related plays.
Several footwear stocks are stepping up, such as On Holding and Crocs, as well as select retailers from Ulta Beauty to Walmart. Some China internet and EV plays are around buy points, including Baidu, NetEase, BYD and LI stock.
Many other stocks and sectors are moving into position.
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What To Do Now
The stock market rally is in a confirmed uptrend. A growing number of stocks are flashing buy signals. A major risk factor, banks, appears to be receding.
Investors need to take advantage of the current environment. But build exposure up gradually, letting the market draw you in. It's not yet clear if this is the start of an extended market rally or just a short-lived advance. It's also possible that the major indexes will pause or pull back briefly.
Don't buy extended stocks. And while investors could fill their portfolios with, say, only quality chip stocks, it's not wise to get too concentrated in particular sectors.
Rework your watchlists. Focus in on stocks in or near buy zones, but keep an eye on other names that are setting up. If this rally has legs, many of those will be actionable soon.
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