August 13, 2022

Dow Jones futures rise as key economic signal rebounds; Tesla Competitors in Buy Zones

Dow Jones futures were slightly higher Thursday morning, along with S&P 500 futures and Nasdaq futures. The Treasury yield curve is becoming more inverted. But copper futures rose, a positive economic signal as China eyes new infrastructure spending.




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The stock market rally ended Wednesday’s up-and-down session modestly higher as hawkish Fed minutes held few surprises. Treasury yields rose again, still flashing recession warnings. Crude oil prices fell again, but only marginally.

Microsoft shares and Google is the parent letters (Google) retraces their 50-day moving average. Amazon.com (AMZN) and Apple (AAPL) moved above their 10-week lines. Microsoft (MSFT) and Google stock IBD long-term leaders.

Tesla Competitors BYD (BYDDF) and Li Auto (LI) are in procurement zones. BYD shares edged higher into buy territory, while Li Auto moved back into range. Tesla shares fell.

GME Stock Split

After Wednesday, the original meme stocked up Stop the game (GME) announced plans for a 4-to-1 stock split. GME shares were up 7% at 117.30 in early Thursday trading, down 2.4%.

Stock splits are back in favor. Amazon stock split 20-to-1 in early June. Google stock will split 10-for-1 on July 15, Tesla has proposed a 3-for-1 split. But those tech titans have high stock prices or make it difficult to trade AMZN stock options. Not so with GME stock.

In other news, Merck (MRK) is closing in on a $40 billion deal for cancer biotech Seegan (SGEN), according to The Wall Street Journal. The two companies have been in talks for weeks, raising SGEN shares. The Seagan rose solidly in the open while the Merc fell slightly.

Dow Jones Futures Today

Dow Jones futures rose 0.4% vs. fair value. S&P 500 futures rose 0.3% and Nasdaq 100 futures rose 0.4%.

Crude oil prices increased by 1%.

Copper futures rose nearly 4%. Copper, the industry’s main metal, has raised fears of a recession with its sharp decline in recent months. Hard-hit mining and metals stocks rallied on Friday.

A catalyst for copper today? China is considering selling up to $220 billion in bonds for local governments to fund infrastructure spending, Bloomberg reported.

The 10-year Treasury yield rose 4 basis points to 2.94%. The 2-year yield is up 5 basis points to 3.01%, meaning the yield curve is inverting slightly.

British Prime Minister Boris Johnson announced his resignation on Thursday, following key departures from his government and growing calls for him to step down from within his Conservative Party.

At 8:15 a.m. ET, ADP will release its June estimate of private sector hiring. At 8:30 a.m. ET, the Labor Department releases its weekly jobless claims report. They come ahead of Friday’s June jobs report.

Remember that it is an overnight operation Dow futures The next routine elsewhere doesn’t necessarily translate into actual trading stock market session.


Join IBD experts as they examine stocks that could be in for a stock market rally on IBD Live


Fed minutes, economic data

Fed minutes of the June 14-15 policy meeting revealed that policymakers called for a “restrictive policy” and “more restrictions” for fear that inflation could be “entrenched.”

According to the minutes of the Fed meeting, policymakers saw an increase of 50 or 75 basis points in late July. But Fed Chairman Jerome Powell already said after the meeting.

More generally, the Fed minutes offered no real surprises and underscored a major shift in economic conditions over the past three weeks.

The Fed minutes slightly strengthened market expectations for a rate hike of 75 basis points later this month, up from 50 basis points in September. December still marks the end of Fed rate hikes.

Earlier on Wednesday, the Labor Department’s JOLTS survey showed job openings fell to 11.254 million in May from an upwardly revised 11.68 million in April. This was slightly higher than expected, but the biggest monthly drop since August 2020.

The June ISM non-manufacturing index saw a two-year low but topped and still pointed to solid growth. The jobs sub-index fell to 47.4 from 50.2, below the break-even 50 level.

Stock market rally

The stock market rallied between slim gains or losses for much of Wednesday’s trading. Major indices gained steam after the 2pm ET release of Fed meeting minutes, but pared gains in the final minutes.

The Dow Jones industrial average rose 0.2% on Wednesday Stock market trading. The S&P 500 index rose 0.4%. The Nasdaq composite advanced 0.35%. The small-cap Russell 2000 fell 0.8%.

Shares of Microsoft and Google rose more than 1% above their 50-day moving averages. Amazon stock rose 0.7%, reaching a 50-day line and above its 10-week line. Apple stock fell below its 50-day low, but Wednesday’s 1% gain pushed the iPhone company above its 10-week line.

U.S. crude oil prices fell 1% to $98.53 a barrel, lower in the morning, but after diving 8.2% on Tuesday. Gasoline futures fell 4% to $3.20 a gallon, down from $4 a gallon a few weeks ago. Pump prices have been falling for the past three weeks and will drop significantly in the next few weeks.

The 10-year Treasury yield rose 10 basis points to 2.9%, after falling 30 basis points in the previous three sessions. The two-year Treasury yield rose 14 basis points to 2.96%. The Treasury yield curve is now slightly inverted, reflecting rising recession risks.

ETFs

in the middle Best ETFsInnovator IBD 50 ETF (FFTY) was flat, while the Innovator IBD Breakout Opportunities ETF (Bot) received 1%. iShares Expanded Technology-Software Sector ETF (IGV) rose 0.1%, with MSFT stock leading the way. VanEck Vectors Semiconductor ETF (SMHUp 0.7%.

SPDR S&P Metals & Mining ETF (XME) fell 0.7% and the Global X US Infrastructure Development ETF (sidewalk) was 0.1% higher. US Global Jets ETF (JETS) decreased by 1.5%. SPDR S&P Homebuilders ETF (XHB0.6% lost. Energy Select SPDR ETF (XLE1.7% and fund choice SPDR ETF (XLFDecreased by 0.25%. Health Care Select Sector SPDR Fund (XLVUp 0.7%.

Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKK) fell 2.25% and the ARK Genomics ETF (ARKG) fell 0.2% after both rose above their 50-day lines on Tuesday. Tesla shares are a major holding across ArcInvest’s ETFs. Cathie Wood’s Ark Invest also owns some BYD shares.


Five Best Chinese Stocks to Watch Now


China EV stocks in buy zones

BYD stock rose 1.1% to 40.55, after briefly testing its 39.81 buy point from a deep cup-with-handle base for the fifth straight intraday session. On Sunday, BYD reported sales of 134,036 EVs and plug-in hybrids in June, up 224% from a year ago. In the second quarter, BYD sales topped Tesla deliveries by more than 100,000 vehicles. Tesla continues to lead all-electric “BEV” sales, although that gap has narrowed significantly over the past year.

Li Auto shares fell 3.5% to 38.60. Intraday, shares fell to 37.10, but closed above a 37.55 buy point from a long, deep base. LI stock is still 39% above its 50-day line. Ideally, the hybrid SUV maker will build a short base here, allowing Li Auto shares to digest its massive gains from early May to late June. Li Auto will begin deliveries of its second premium SUV, the L9, by the end of August.

Tesla shares fell 0.6% to 695.20 on Wednesday, below a 21-day line.

China’s Ministry of Commerce and 16 other departments jointly issued an announcement on July 7 that it supports new energy vehicle (NEV) purchases and will consider extending the NEV purchase tax exemption at the end of last year. This follows similar signals from the high-level meeting on June 22. When it expires.

This will benefit BYD, Li Auto, Tesla and other EV makers in China.


Tesla Vs. BYD: Which EV giant is the best buy?


Market rally analysis

The stock market’s rally added to recovery from Tuesday’s intraday lows, but major indices still appeared to be searching for direction.

The Nasdaq composite moved above its 21-day moving average on Wednesday, but the S&P 500 and Dow Jones hit resistance at that short-term average. All three major indices are now back above the June 24 lows Follow-up days. Last week’s drop below their FTDs put the market rally “under pressure”.

Late June and the 50-day line are above the 21-day lines, with early June highs above it.

While the major indexes rose on Wednesday, the breadth was weak, with losers easily outpacing winners on the Nasdaq and NYSE.

Good news about inflation and federal interest rate hikes, including falling commodity prices and easing labor markets, is bad news for a potential recession. So markets don’t know how to deal with economic data.

The market will be sideways for some time. This will allow for a lot of groundwork and clarity on economics and central bank policy. But even when that happens, there can be spurts and shakeups along the way for individual stocks and the market as a whole.

Medical stocks are now the clear leaders, incl IBD 50 Members Evolent Health (EVH), McKesson (M.C.K), United Health (UNH), Harmony Bioscience (HRMY) and AstraZeneca (AZN)


Time the market with IBD’s ETF Market Strategy


What to do now

The stock market rally is under pressure, with major indices still facing key resistance levels. While many medicals and a few other stocks perform well, they can also be prone to significant shakeups.

So if you’re going to take positions, keep them short and look for early posts. Take at least some profit quickly to make some gains. Don’t hesitate to cut your losses.

According to Big picture Each day should be in sync with the direction of the market and the leading stocks and sectors.

Follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.

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