Dow Jones futures rose modestly Monday morning, along with S&P 500 futures and Nasdaq futures. Hong Kong's Hang Seng index plunged overnight following a China government shakeup and the delayed release of Q3 GDP and key economic data.
Tesla cut Model 3 and Model Y prices in China. Apple and Microsoft lead peak earnings week.
The stock market rally had strong gains last week, signaling a change in character. The 10-year Treasury yield spiked to fresh 14-year highs during the week. But yields, especially the two-year rate, tumbled Friday on a Wall Street Journal report stoking hopes for slower Fed rate hikes soon.
The major indexes, up solidly throughout a volatile week, ran sharply higher Friday. The S&P 500 and Nasdaq cleared key short-term resistance, joining the Dow Jones.
But with some positive market signals, investors should be looking for potential winners in the next bull market. Snowflake, Shift4Payments and DoubleVerify are fast-growing tech firms that came public in the past two years. Lithium giant Albemarle and Shockwave also are booming, with their stocks trying to make their way back to a key level within bases.
Meanwhile, Apple stock, Microsoft, Google parent Alphabet, Amazon.com, and Meta Platforms all report this week, along with Boeing, Merck, Vertex Pharmaceuticals and hundreds of other companies.
Aside from Vertex and MRK stock, both near buy points, all of the names listed above are well off highs. Still the earnings reports could be a catalyst for big market gains, sharp losses or more whipsaw action.
Vertex and DV stock are on IBD Leaderboard as well as the IBD 50 list. Albemarle and SWAV stock are on the Leaderboard watchlist. VRTX stock is on the IBD Big Cap 20. Microsoft and Google stock are on IBD Long-Term Leaders. Shift4Payments was Friday's IBD Stock Of The Day.
Tesla Cuts China Prices
Tesla cut Model 3 and Model Y prices in China overnight by as much as 9%. The move wasn't a surprise after wait times plunged to essentially zero, while overall global deliveries fell short in the third quarter. Notably, the Model Y SR price was cut to just below the 300,00 yuan limit for subsidies. The subsidies are set to expire on Dec. 31.
Tesla stock fell more than 2% before the open.
Dow Jones Futures Today
Dow Jones futures rose 0.5% vs. fair value. S&P 500 futures advanced 0.4% and Nasdaq 100 futures climbed 0.15%.
Futures, volatile once again, were down slightly early Monday after China trading and economic data kicked in. Futures were sharply higher Sunday evening.
China reported third-quarter GDP rose 3.9% vs. a year earlier, up from 0.4% in Q2 and topping views of 3.3%. September retail sales grew 2.5% vs. a year earlier, down from August's 5.4% gain and below forecasts for 3.1%. Industrial production grew 6.3%, up from 4.2% in August and topping the consensus for 4.8%. The economic reports had been delayed for several days, raising further doubts about their validity.
The release came after Chinese President Xi Jinping secured a third five-year term over the weekend and installed more loyalists in top positions. That reinforces expectations of a U.S.-China economic decoupling.
Hong Kong's Hang Seng index plunged 6.4% Monday following the leadership changes and the economic data. U.S.-listed internet and EV stocks sold off.
The 10-year Treasury yield fell 1 basis point to 4.2%, off Monday's premarket lows.
Crude oil futures sank 2% on weak China demand. Natural gas, which has been plunging in recent weeks, fell 1%.
The dollar rose vs. the Japanese yen. On Friday, the yen jumped from long-term lows, presumably due to Bank of Japan intervention.
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 attempt jumped to start the week, pared gains then rebounded again on Friday.
The Dow Jones Industrial Average jumped 4.9% in last week's stock market trading. The S&P 500 index popped 4.75%. The Nasdaq composite rallied 5.2%. The small-cap Russell 2000 gained 3.6%.
Apple stock, Microsoft, Google and Amazon all retook their 21-day moving averages Friday.
Meta stock is near bear market lows, falling Friday as Snap plunged on its disappointing Q3 report.
Friday's market bounce came on a Wall Street Journal report that Fed officials are thinking about slower rate hikes after a likely fourth straight 75-basis-point move at the November meeting. Some Fed policymakers on Friday and the past week have also started to lay the groundwork for smaller rate increases.
Markets are now slightly tilting toward a 50-basis-point Fed rate hike in December vs. Thursday's 75% odds for yet-another three-quarter-point increase.
Clearly, there is a slew of economic data between now and the Dec. 14 Fed meeting.
The 10-year Treasury yield surged 20 basis points to 4.21%, the 12th straight weekly gain. But the benchmark Treasury yield fell back from Friday's intraday high of 4.33%, a 14-year peak, to finish the session down 2 basis points.
The two-year Treasury yield, more closely tied to Fed policy, hit a 15-year high of 4.64% on Friday but reversed sharply lower to end the day at 4.48%, down 1 basis point for the week.
With Treasury yields backing off weekly highs and the Bank of Japan apparently intervening to prop up the yen, the U.S. dollar fell solidly for the week, mostly on Friday.
U.S. crude oil futures edged up 0.5% to $85.05 a barrel last week. But natural gas prices plunged 23%.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF popped 5.6% last week, while the Innovator IBD Breakout Opportunities ETF was up 4.2%. The iShares Expanded Tech-Software Sector ETF ran nearly 7% higher, with MSFT stock a huge IGV component. The VanEck Vectors Semiconductor ETF shot up 7.6%.
SPDR S&P Metals & Mining ETF leapt 9% last week. The Global X U.S. Infrastructure Development ETF gained 4.8%. U.S. Global Jets ETF ascended 5.35%. SPDR S&P Homebuilders ETF eked out a 0.5% gain. The Energy Select SPDR ETF jumped 8.3% and the Financial Select SPDR ETF climbed 3.8%. The Health Care Select Sector SPDR Fund rose 2.1%
Reflecting more-speculative story stocks, ARK Innovation ETF gained 5.6% last week and ARK Genomics ETF 2%.
Five Best Chinese Stocks To Watch Now
Stocks To Watch
Snowflake came public in September 2020, surging to a record 429 in December 2020. But shares tumbled all the way to 110.27 in June 2022. But SNOW stock has now forged a bottoming base around its 50-day line with a 205.76 buy point. Shares vaulted 16% to 177.10 this past week. A move above the 200-day line could offer an early entry. But SNOW stock could have a lot of overhead resistance.
Snowflake boasts strong revenue growth, but is only now on the cusp of turning consistently profitable, with big gains expected in 2023.
DoubleVerify stock, an April 2021 IPO, has been consolidating for the past several weeks, finding support at the 50-day line. DV stock has a 30.02 buy point. Shares tried to break out on Tuesday and pulled back, but still had a solid week. Earnings are strong and revenue growth robust for the digital advertising play.
FOUR stock is working on its own bottoming base, with a 51.52 buy point, according to MarketSmith analysis. Shift4Payments stock could have an early entry above 48.66, which would mean clearing the 50-day and 200-day lines. The digital payments processor, a June 2020 IPO, is expanding from restaurants into a wide variety of other fields. Earnings growth is strong and expected to remain so through 2023.
ALB stock rebounded almost 14% last week to 270.01, after plunging nearly 13% in the prior week as some analysts bet on lower lithium prices. Prices for the metal used in EVs have been surging to record highs with supply seen outstripping demand for years to come. Albemarle, no recent IPO, is reaping the benefits from higher-priced contracts while ramping up production over time.
ALB stock now has a new base with a 308.34 buy point. A decisive move above the 50-day line could offer an early entry.
SWAV stock jumped 9% last week to 276.70. It's still below the 50-day line, which has served as resistance recently. Shockwave stock has a 315 buy point. But a strong move above the 50-day would also break a trendline, providing an early entry. One caveat: Volume has been light on recent up days and weeks.
But Shockwave earnings are surging amid triple-digit revenue growth.
The relative strength line is holding near all-time high levels, despite SWAV stock's retreat from late August highs.
S&P 500 Giant Leads 5 Stocks Showing Strength
Market Rally Analysis
The stock market rally continues to be volatile but showed positive action. The major indexes were higher from Monday's open, and remained comfortably positive throughout the week even when Treasury yields kept rising.
Friday's WSJ report suggests that Fed officials may finally be getting ready to downshift aggressive tightening.
The Dow Jones closed the week comfortably above its 21-day moving average, with the S&P 500, Russell 2000 and even the Nasdaq composite above that short-term level on Friday.
NYSE volume was up all session vs. Thursday, with options expirations pushing Nasdaq volume higher at the close.
The market rally may have legs, but that doesn't mean it's off to the races. This could be another bear market rally. The Dow Jones is just below its 50-day moving average — and above its 10-week line — with the other indexes not too far behind. Above the 50-day line looms the 200-day average and the mid-August highs.
Oil stocks are doing well, thanks to a recent uptrend in crude prices and expectations for further gains over the winter. Natural gas producers are struggling as natgas futures plunge.
Some biotech, drug, and health services firms continue to show strength, including Merck, Vertex, Cardinal Health, Humana and more.
Few growth stocks have broken out, but many are still setting up, such as ALB stock and Shockwave.
Time The Market With IBD's ETF Market Strategy
What To Do Now
Keeping your emotions in check while remaining flexible is a key part of investing. The market rally is showing some strength, so you can't remain locked into a bearish mindset. But you don't want to get too excited and rush back in with big bets.
Investors can take some small positions in stocks or broad-market ETFs. If those work, and the market rally keeps building momentum, you can slowly add to your positions. But if the market tumbles yet again, quickly step back.
So make sure your watchlists are up to date over the weekend. Have a select list of actionable or potentially actionable stocks in the coming days. But also keep a broader list of stocks showing relative strength.
Remember that earnings season could roil the overall market and sectors, not just individual stocks. Apple earnings could swing a wide range of iPhone chipmakers and suppliers. Microsoft, Google, Meta Platforms and Amazon could raise hopes or doubts for cloud computing, IT spending, e-commerce and online advertising.
Microsoft and Google stock report Tuesday night, with Boeing and Meta due Wednesday. Merck, Vertex, Amazon and Apple stock are on Thursday.
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