Dow Jones futures rose slightly Friday morning, along with S&P 500 futures and Nasdaq futures. AstraZeneca (AZN) said it would likely need to conduct another study for its coronavirus vaccine. The Bitcoin price retreated after hitting a two-year high earlier this week. U.S. traffic safety regulators will probe Tesla (TSLA) suspension issues, following a China-ordered recall of Model S and Model X vehicles.
But a key gauge suggests investors are getting too bullish.
Dow Jones giant Salesforce.com (CRM) reportedly is in talks to buy Slack (WORK), a work-from-home play. The deal would bring CRM stock into greater competition with fellow Dow giant Microsoft (MSFT), while perhaps spurring other cloud-related M&A.
Dow Jones Futures Today
Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures climbed 0.2%. Nasdaq 100 futures advanced 0.4%. Futures were flat to lower for much of Thursday following the AstraZeneca coronavirus vaccine news.
France has told Big Tech companies like Amazon (AMZN) and Facebook (FB) to pay its digital service tax as planned in December. France had delayed the tax amid global negotiations on tax rules and as President Donald Trump threatened a lot of retaliatory tariffs. What will he do now? What would President-elect Joe Biden do?
Britain is set to impose tougher competition rules in 2021 to prevent Google (GOOGL) and Facebook from pushing out smaller firms and disadvantage consumers.
However, shares of U.S. tech giants did not seem to be affected.
On Friday, U.S. stock market markets will close at 1 p.m. ET.
Tesla Suspension Probe
The U.S. National Highway Traffic Safety Administration on Friday said it’s begun an investigation into 114,761 Tesla vehicles over front suspension safety issues. The NHTSA said the preliminary evaluation will cover 2015-2017 Model S and 2016-2017 Model X vehicles following complaints alleging failure of the front suspension fore links.
Earlier this year, Tesla recalled tens of thousands of Model S and Model X vehicles in China over suspension issues. But the company said there was no defect, blaming Chinese drivers for any problems.
However, complaints of Tesla’s “whoppy wheel” has been known for years.
Earlier this week, Tesla recalled a small number of Model X and Model Y vehicles for various defects.
Tesla stock fell less than 1% in premarket trading. Nio stock and Xpeng lost 1% while Li Auto fell 3%. All four stocks have seen huge gains in recent weeks.
Bitcoin prices are trading at around $16,900, according to Coinbase, up from Thursday morning’s lows. That comes after a massive rally in recent weeks to a two-year high above $19,300 earlier this week. Ethereum and several other cryptocurrencies also retreated.
The proposed Facebook Libra digital currency could launch in limited form early next year, the Financial Times reported. Libra would be backed entirely by the U.S. dollar.
Coronavirus cases worldwide reached 61.44 million. Covid-19 deaths topped 1.44 million.
Coronavirus cases in the U.S. have hit 13.24 million since the epidemic’s start, with deaths above 268,000. Deaths topped 2,300 on Wednesday, the most since early May.
AstraZeneca Coronavirus Vaccine Studay
AstraZeneca is likely to conduct another global study of its coronavirus vaccine, CEO Pascal Soriot said Thursday. That comes after results from its first study raised some concerns. Initial readings from the first late-stage trials showed an average efficacy of 70%. However, among those who mistakenly got a lower dosage by mistake in the first of two shots, the efficacy was 90%. That’s less than the Moderna (MRNA) and Pfizer-BioNTech coronavirus vaccines, both around 95%, but the AstraZeneca vaccine is much cheaper and easier to store.
Soriot still expects the U.K. and European Union to OK the AstraZeneca vaccine by year-end. FDA approval could take longer, as the U.S. arm of the initial late-stage trial is ongoing.
Stock Market Rally
The stock market rally finished mixed Wednesday, but growth took the reins.
The Dow Jones Industrial Average fell 0.6% in Wednesday’s stock market trading, with CRM stock a notable drag. The S&P 500 index dipped 0.2%, just below all-time high levels. The Nasdaq composite rose 0.5%, hitting an all-time high intraday.
The Dow Jones, S&P 500 and Nasdaq composite are all up about 2% so far this week. Despite the generally positive coronavirus vaccine news and soaring Covid cases, this week there has been a broad advance with stay-at-home and “real economy” stocks faring well.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.8% on Wednesday. The iShares Expanded Tech-Software Sector ETF (IGV) gained 1.1%, despite the sizable decline in its component CRM stock and the flat action for Microsoft. The VanEck Vectors Semiconductor ETF (SMH) lost 1 cent, even with AMD stock a notable component. The Renaissance IPO ETF (IPO) rallied 3.7% to a new high.
Bullish Sentiment Excessive?
The latest bulls vs. bears reading showed that 64.6% of investment newsletter writers are bullish. That’s the highest level since January 2018. Bullishness can stay above 60% for several weeks, though the last few times it’s poked above 60 the stock market rally quickly came under pressure.
Psychological gauges such as bulls vs. bears are secondary indicators vs. the primary indicators of the major indexes and leading stocks. Right now the primary indicators signal a solid stock market rally, though some IPOs are starting to look frothy. The psychological indicators could provide an extra reason to take partial profits on stocks that are greatly extended from moving averages. And, if the market starts to show weakness, such gauges can be useful in deciding how much defensive action to take.
Salesforce-Slack Deal Soon?
Salesforce reportedly is in talks to buy collaboration software maker Slack, according to multiple reports. A Salesforce-Slack deal, which could be announced next week, would be among the biggest software takeovers ever. WORK stock spiked 38% to 40.70, giving it a $23 billion valuation.
CRM stock investors were less excited. Salesforce stock fell 5.4% in heavy volume, tumbling below its 50-day moving average. The relative strength line for CRM stock fell to its lowest levels since July. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.
A Salesforce-Slack deal would step up competition with Microsoft, which competes vs. Slack with its Teams software offering. Microsoft stock edged up 1 cent to 213.87. A Slack deal also could spur more software M&A, especially in the cloud or work-from-anywhere fields.
AMD stock rose 1.9% to 86.73. The chipmaker has an early entry of 87.15, with an official double-bottom buy point of 88.82, according to MarketSmith analysis. Investors already could have bought AMD as it rebounded from its 10-week line and broke a downtrend line. It’s still actionable right now, but the 87.15 entry seems to be a resistance area.
AMD has had a trend this year of tiptoeing past various buy points only to slip back, before finally breaking out decisively. Meanwhile, while AMD looks OK, other data-center chipmakers such as Nvidia (NVDA) are looking more sluggish.
Etsy stock jumped 5.4% to 145.09, breaking a downward trend line. It’s also above its old buy point of 141.51. That entry is no longer valid, but it’s something to note. The official buy point is 154.98.
Shopify stock rose 5% to 1,019.52, retaking the 50-day line and breaking a downtrend, both offering early entries. Another early entry is 1,130.10, with the official buy point 1147.01. However, the RS line for Shopify stock has lagged since early July. Also, SHOP stock has reclaimed its 50-day line several times in the past two months, but quickly retreated below that key level.
With Shopify and Etsy stock, the holiday shopping season is huge, but figuring out the winners and losers may not be clear for weeks.
Twilio rallied 4.6% to 305.50 on Wednesday. Shares rebounded from their 10-week line on Nov. 19, then edged past a trend line the next day, both early buy signals. Twilio stock this week found support at that trend line and its 21-day exponential moving average, moving to the high of that mini-consolidation on Wednesday. The official buy point is 341.80.
PayPal stock rose 4.1% to 214.46, extending this week’s strong gains. Shares broke a trend line Monday as they rallied from the 10-week line. On Tuesday, PYPL stock topped a 205.02 alternate entry. Shares hit a record 216.07 intraday before paring gains. That briefly topped the traditional buy point of 215.93 from the not-quite-a-cup base.
PayPal’s rally has come as the stock is seen as a Bitcoin play, with the digital payments leader embracing the cryptocurrency. If the Bitcoin price ends its big run, that could have an impact on PYPL stock.
Meanwhile, several other software makers broke out or flashed new or ongoing buy signals Thursday, including fresh IPO Snowflake (SNOW) and the cybersecurity trio of CrowdStrike (CRWD), Zscaler (ZS) and Okta (OKTA). But they all have earnings next week, along with Salesforce. Buying right ahead of earnings can be highly risky.
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