Dow Jones futures rose slightly Sunday evening, along with S&P 500 futures and Nasdaq futures, with earnings, economic data and a Fed taper in focus. The stock market rally had strong gains last week, with the Dow Jones, S&P 500 and Nasdaq composite all hitting record highs.
EW stock and Google are buyable now and have just gotten earnings out of the way.
XPEV stock is hovering just below a buy point, with Xpeng releasing October sales early next week, with earnings likely a week or two after that. Xpeng rivals Nio (NIO) and Li Auto (LI) also will report October deliveries on Monday or Tuesday, with earnings in mid-November. Li Auto stock is near a buy point as well.
The video embedded in this article analyzed the market rally and took a look at Google, Edwards Lifesciences and Xpeng stock.
Fed Taper Decision
After many months of inching toward a Fed taper decision, policymakers are expected to end this week’s two-day meeting Wednesday by agreeing to scale back asset purchases. The actual policy would kick in at year-end. The $120 billion in monthly purchases — $80 billion in monthly Treasury purchases and $40 billion in government-backed mortgage securities — would be cut back to zero by mid-2022. After that, Fed rate hikes could be on the table.
While a stock market “taper tantrum” is always possible, this Fed decision certainly won’t be a surprise. With inflation expected to stay hot for some time, investors may welcome a shift away from easy monetary policies.
Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures advanced 0.3% and Nasdaq 100 futures climbed 0.3%.
The 10-year Treasury yield rose 2 basis points to 1.575%. Crude oil futures fell slightly.
China’s official manufacturing index fell 0.4 point to 49.2 in October, weaker than expected and again below the break-even 50 level. Electricity shortages and rising costs are taking their toll on factories. A new wave of coronavirus restrictions could take their toll on the broad economy in November.
House Democrats are signaling they’ll hold votes on the bipartisan infrastructure bill as well as the partisan reconciliation tax-and-spending package. The reconciliation bill’s size — perhaps $1.75 trillion in spending over 10 years — remains in flux, as well as what programs will be included.
The White House said Saturday that the U.S. and the European Union have reached a deal on steel and aluminum tariffs. In 2018, President Trump imposed tariffs on European steel and aluminum, spurring retaliatory tariffs on a range of U.S. goods. The steel tariffs were set to double as of Dec. 1. Under the tentative agreement, Europe would be able to ship a limited amount of steel duty free to the U.S. The deal also includes measures of carbon intensity in steel production, would could offer new avenues for tariffs on Chinese steel.
Coronavirus cases worldwide reached 247.44 million. Covid-19 deaths topped 5.01 million.
Coronavirus cases in the U.S. have hit 46.82 million, with deaths above 766,000.
Daily new cases in the U.S. continue to trend lower. Meanwhile, new coronavirus cases worldwide have start to trend higher, with many European nations seeing a surge in cases. But deaths are not rising sharply, reflecting vaccinations.
The FDA on Friday authorized the Pfizer (PFE) and BioNTech (BNTX) vaccine for children aged 5-11, paving the way for vaccinating millions of elementary-school kids heading into winter. The CDC will weigh in on Tuesday.
Meanwhile, Moderna (MRNA) said Sunday that the FDA has informed the biotech that the agency may not finish assessing whether to provide emergency use authorization for its vaccine for those aged 12-17 until January.
Stock Market Rally Last Week
The stock market rally finished with decent to strong gains despite some midweek wobbles. The Dow Jones Industrial Average rose 0.4% in last week’s stock market trading. The S&P 500 index climbed 1.3%. The Nasdaq composite jumped 2.7%. The small-cap Russell 2000 edged up 0.3%.
The 10-year Treasury yield pulled back substantially last week, down 10 basis points to 1.56%. The two-year Treasury yield, more closely tied to Fed decisions, continued to rise last week, but did pull back several basis points from intraday Wednesday.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rallied 1.9% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 0.9%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 1.35%. The VanEck Vectors Semiconductor ETF (SMH) popped 2.4%.
SPDR S&P Metals & Mining ETF (XME) slumped 2%, though several steelmakers showed positive action. Global X U.S. Infrastructure Development ETF (PAVE) rose 0.9%. U.S. Global Jets ETF (JETS) descended 1.7%. SPDR S&P Homebuilders ETF (XHB) edged up 0.5%. The Energy Select SPDR ETF (XLE) and the Financial Select SPDR ETF (XLF) both lost 0.9%
EW stock rebounded from its 50-day line and broke a trend line on Friday, rising 2.8% to 119.82 in higher volume. That offered an early entry in its flat base. Edwards Lifesciences had so-so results and guidance late Wednesday, partly due to the latest Covid wave. EW stock fell early Thursday to 110, acting as a nice shakeout before closing higher. Edwards Lifesciences stock has an official buy point of 123.37, according to MarketSmith analysis.
Google stock surged Wednesday on strong earnings, running up 7.6% last week to 2960,92, just above the 2925.17 flat-base buy point. It’s also not far above some early entries from Wednesday.
Google stock is closing in on a $2 trillion valuation, finishing Friday at $1.965 trillion.
Xpeng stock surged Monday on a big day for EV maker, closing just above a 48.08 buy point from a bottoming base. Shares pulled back to 46.63, still up 8.1% for the week. That XPEV stock entry is still valid, though investors could use Tuesday’s intraday high or the downtrend of this quasi-handle as alternate entries. Aggressive investors could have bought Xpeng stock as it broke a trend line and rebounded from its 50-day line in mid-October, just as the market rally became a confirmed uptrend.
October EV deliveries this coming week could be a catalyst for XPEV stock as well as Li Auto and Nio.
Li Auto stock also is near a buy point and could be forming a handle. Nio has more work to do.
China EV giant BYD Co. (BYDDF) will likely release October sales later next week. BYD stock tumbled late last week after reporting declining EPS, despite booming EV sales. Shares are technically back in a buy zone, finding support at their 21-day line.
Overall China EV sales, including for Tesla, will probably come a week after that. Tesla China production in the first half of the quarter largely goes to exports, primarily to Europe. Tesla stock surged last week on a big Hertz rental car deal. TSLA stock now boasts a $1 trillion market cap.
Market Rally Analysis
The stock market rally had another strong performance in Halloween week, with a few tricks but more treats. Tuesday and Wednesday’s reversals to session lows were worrisome as the Nasdaq briefly hit resistance at record highs, with some breakouts failing. But for the broader market rally, it turned out to be PG-rated jump scares vs. a full-on slasher fest.
While some breakouts those days struggled or failed, it wasn’t a big deal for investors who bought earlier in the rally. And the market quickly powered higher again on Thursday, with the Nasdaq punching to all-time levels. Techs shrugged off weak Apple (AAPL) and Amazon (AMZN) results on Friday.
New highs are outpacing new losers considerably.
The major indexes have run up for four straight weeks, with leading stocks breaking out early and often. The strong advance could continue. But it wouldn’t be a surprise to see the market rally take a break at these levels. That could be a positive, providing an opportunity for leading stocks to provide new buying opportunities, either from moving averages or forming handles or shelves after running up the right side of bases.
Earnings season will remain active, with casinos, fertilizer makers, shale operators and several solar plays on tap this week. Investors also will get major economic data, including the September jobs report on Friday.
Most of all, the Federal Reserve will hold its latest policy meeting on Nov. 2-3, with announcement of a bond taper expected at 2 p.m. ET on Wednesday. Massive monetary stimulus has helped keep interest rates low and stock prices high, so the gradual cooling of new asset buys could be a headwind. But perhaps the Fed taper has already been priced in.
What To Do Now
More than two weeks after the stock market rally had its follow-through day, investors should have built up substantial exposure, depending on your risk tolerance and your success rate. You can still make some incremental buys, sometimes offset by trimming winners or cutting losers.
So keep working on your watchlists, looking for emerging setups. Also keep an eye out for sectors that may have been out of favor but are now setting up. Steel stocks have done that over the past week or so. Medical products firms, including Dexcom (DXCM), InMode (INMD) and EW stock, showed some spark late last week.
Stay disciplined. The gains of the past few weeks could disappear in just a few days, especially if you’re far more invested on Nov. 1 than you were on, say, Oct. 15.
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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