Dow Jones futures fell Sunday night, along with S&P 500 futures and Nasdaq futures. It’s a pivotal week for the stock market rally. New coronavirus cases are soaring. Vice President’s chief of staff and several aides have tested positive for Covid-19 with just over a week to Election Day. Hopes for a pre-election stimulus deal are fading. It’s the heart of earnings season, with Apple stock, and Microsoft (MSFT) among those reporting.
The market rally suffered further losses last week, but the major indexes and leading stocks found support and pared losses.
Wall Street is heading into the peak week of earnings. Along with Apple (AAPL), Amazon.com (AMZN) and Microsoft stock, Facebook (FB), Google (GOOGL), AMD (AMD), Shopify (SHOP), Twilio (TWLO), ServiceNow (NOW) among the hundreds of companies reporting. It’s the last full week before the presidential election. New coronavirus cases are breaking records in the U.S. and Europe, but Covid vaccine news could come any day. And stimulus deal hopes and doubts remain.
All of this is taking place with the Dow Jones, S&P 500 and Nasdaq at key levels. The major indexes and many leaders, such as Microsoft stock, Salesforce.com (CRM), Adobe (ADBE) and Tesla (TSLA), could offer buying opportunities with a good day or two. But one or two bad sessions could trigger serious concerns about the stock market rally.
Tesla, Microsoft, Adobe and Salesforce stock are all on IBD Leaderboard.
Microsoft, Salesforce and Adobe stock also are on the IBD Long-Term Leaders list. Unlike Apple and Amazon stock, which are not Long-Term Leaders, these three software giants are all holding above their 10-week moving averages. The 10-week line is a good place to buy Long-Term Leaders, but investors should wait to see a little more strength in these stocks, as well as the market rally. Microsoft earnings also loom.
Meanwhile, Tesla stock also has found support near its 10-week line, with buy points or sell signals not far away. It’s hard to believe it, but the Tesla news cycle might quiet down for a time.
Dow Jones Futures Today
Dow Jones futures fell 0.4% vs. fair value. S&P 500 futures retreated 0.5% and Nasdaq 100 futures sank 0.4%.
Along with the surge in coronavirus cases, stalled stimulus deal talks also could influence Dow Jones futures. House Speaker Nancy Pelosi on Sunday blamed President Trump for the lack of a stimulus deal. Treasury Secretary Steven Mnuchin, who has been stimulus deal talks with Pelosi, said the White House has offered compromises but the Speaker is “dug in.”
The House is already out while the Senate will leave town on Monday, after the likely confirmation of Amy Coney Barrett to the Supreme Court. While Congress could be called back to vote on a stimulus deal, that seems unlikely with election campaigns in the final stretch.
Sen. John Thune, the No. 2 GOP senator, said Sunday that he hopes a stimulus deal can be passed after the election.
Meanwhile, German software giant SAP (SAP) on Sunday cut its full-year revenue and operating profit forecasts, saying the coronavirus pandemic will hurt demand “at least” through mid-2021.
Coronavirus cases worldwide reached 43.32 million, according to Worldometers. Daily coronavirus cases worldwide are approaching half a million. Covid-19 deaths topped 1.15 million.
Coronavirus cases in the U.S. have hit 8.88 million, with deaths above 230,000. Vice President Pence’s chief of staff Marc Short and political adviser Marty Obst have tested positive for the coronavirus. NBC News reported at two more Pence aides have tested positive for the coronavirus, while ABC News said a total of five people in the vice president’s “orbit” have tested positive.
Pence, who has tested negative again, has decided not to quarantine and will continue campaigning.
The U.S. added 81,210 new coronavirus cases on Friday, a new daily record, followed by 79,449 on Saturday. That’s partly due to increased testing from earlier in the year, but positive test results are rising sharply as well. Coronavirus restrictions have eased from earlier in the year, but the biggest factor may be Americans weary of following social distancing and mask rules.
Several European countries have been hitting daily records, with Spain and France now with more than one million Covid-19 cases in total. Much of Europe has reimposed tougher coronavirus restrictions, but not much in U.S. cities and states so far.
If coronavirus restrictions are reimposed, that could stall a relatively solid economic recovery. That would likely add pressure for a new stimulus deal.
Coronavirus death rates remain relatively low, reflecting better treatments and procedures and the lag between infection and fatalities. Hospitalizations for the coronavirus have risen sharply, however.
Coronavirus Vaccine News Soon?
Meanwhile, Pfizer (PFE) and partner BioNTech (BNTX) could release interim effectiveness data on their coronavirus vaccine candidate from final-stage trials any day, with a possible FDA approval request by late November. Moderna (MRNA) could follow a few weeks later.
In a best-case scenario, millions of coronavirus vaccine doses will be out before year-end, targeting those most at risk. But it would still take many months to vaccinate most Americans.
Both Pfizer and Moderna report earnings this coming week.
Stock Market Rally Last Week
U.S. Stock Market Today Overview
Last Update: 4:04 PM ET 10/23/2020
The stock market rally continued to slide, though the major indexes all found support at their 21-day exponential moving averages.
The Dow Jones Industrial Average fell 0.9% in last week’s stock market trading. The S&P 500 index dipped 0.5%. The Nasdaq composite slid 1.1%, but held its ground after tumbling 1.65% on Monday.
Apple stock fell 3.3%, closing near weekly lows. Amazon sank 2.1%. Microsoft sank 1.6%, but has now risen for the past four sessions. Salesforce retreated 3.1%. Adobe fell back 2.85%, but rallied Friday to get just above its 10-week line. Tesla stock sank 4.3%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) sank 2.7%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 1.3%, with Microsoft, Salesforce and Adobe all major components. The VanEck Vectors Semiconductor ETF (SMH) retreated 1.4%.
Long-Term Leaders Near Buy Points
But you want to see these stocks decisively break short trend lines in their handles, with similar action in the major indexes. But if these stocks are moving decisively higher, the Nasdaq likely will show positive action as well.
In the case of Microsoft, investors should wait until after its Tuesday night earnings.
Especially n a weekly chart, TSLA stock looks fine. It’s been consolidating relatively tightly over the past several weeks and is once again finding support at the 10-week line. It’s also forged a handle with a 466 buy point. Aggressive investors could use 445.33, just above Thursday’s intraday high, as an early entry.
On the other hand, if Tesla decisively breaks below its 10-week line, investors may want to consider paring gains.
Over the last couple of months, there were several expected catalysts for Tesla stock: S&P 500 inclusion, Battery Day, Q3 deliveries and Q3 earnings. S&P inclusion hasn’t happened while the other there events didn’t drive TSLA stock higher. Then again, they haven’t sunk the stock either.
Tesla News About To Get Boring?
No, that’s not a reference to Tesla sister company Boring.
In the next few weeks, the Tesla news cycle may actually quiet down. Sure, there is plenty going on. Tesla is exporting Model 3 cars from its Shanghai plant to Europe, taking over somewhat for the Fremont, Calif., plant.
Tesla could cut the Model 3 prices in the U.S. in the coming weeks, after recently slashing Model 3 prices in China and cutting Model S prices.
No doubt, Elon Musk and Tesla will keep themselves in the public eye. The Full Self Driving beta launch is getting a lot of attention, with Tesla raising the FSD price to $10,000 on Monday even as critics note the Level 2 system’s shortcomings.
But on paper, Tesla has few key “circle that date” events over the last couple of months. The Model Y will soon launch in China, though perhaps not until the start of 2021. Meanwhile, the Ford Mustang Mach E, a Model Y competitor, will launch in the U.S. before year-even. The VW ID.4, another Model Y rival, will start global deliveries around the start of the year.
So all of those events, along with Tesla’s Q4 deliveries, herald a new round of headlines and the beginning of a critical year for the electric car industry.
Stock Market Analysis
Heading into last week, there were reasons to be cautiously optimistic. Sure, the major indexes had pulled back, a little, but that was allowing many tech giants to form handles.
Then on Monday, Oct. 19, the major indexes suffered sharp losses, with growth names harder hit. After a couple of modest days, stocks undercut their 21-day lines in Thursday’s session, with the 50-day line not far past that. Thankfully, the major indexes rebounded for slim gains, followed by Friday’s rally into the close.
Arguably, the stock market rally is a good day or two from looking bullish again. Breaking the short trend lines in the Nasdaq would be a positive sign. Then again, it would only take a day or two for the market rally to look bearish, testing or undercutting 50-day lines.
Game Plan The Market Rally
Analyze your stocks. A lot of mixed action in growth names this week. You might have cut back your exposure but still grade your current holdings. Several of your stocks may have earnings due in the next few days. Do you have enough of a cushion heading into results?
Build up your watch lists. There are a lot of good-looking charts. Many just need one push, whether from individual earnings or broad market strength, to flash clear buying signals. So you want to be ready.
Let The Stock Market Trend Be Your Friend
But while the stock market rally hasn’t done anything seriously wrong over the past two weeks, it hasn’t been a good environment for making money.
Earnings season is usually enough chaos for your portfolio. But this headline-driven stock market rally has so headlines to deal with right now: the presidential election, coronavirus vaccine news, stimulus deal talks. Coronavirus cases are front-and-center once again. All could swing the market one way or the other in the next few weeks.
Don’t get too exposed. Wait for the market to show clear positive direction. That could happen in the next few days or weeks. There will be many breakouts and other buying opportunities if the market takes off again. If market heads lower, new buys are likely to struggle.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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