Futures In Focus As Coronavirus Fears Test Market Rally; What To Do – Investor’s Business Daily
Dow Jones futures rose modestly vs. fair value Sunday night, along with S&P 500 futures and Nasdaq futures, after the stock market rally retreated last week with new U.S. coronavirus cases soaring to record highs.
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Covid-19 milestones continued this weekend, from global coronavirus cases topping 10 million and worldwide deaths hitting 500,000 to Florida infections skyrocketing yet again.
The coronavirus stock market rally remains in a confirmed uptrend, with true leaders such as Apple (AAPL), Microsoft (MSFT) and Amazon.com (AMZN) holding up.
Dexcom (DXCM), Fortinet (FTNT) and Chipotle Mexican Grill (CMG) all have brand-new bases. Meanwhile, it’s a big week for Tesla (TSLA) and Tesla stock.
The coronavirus stock market rally could be starting a new, slower phase after the tremendous run from March lows, but it could also be the start of a pullback or more as soaring Covid-19 cases raise concerns about the economic recovery.
Leading stocks continue to lead. Apple stock, Microsoft stock and Amazon stock all rose last week. Fellow megacap Facebook (FB) and Google parent Alphabet (GOOGL), a little late to the coronavirus stock market rally, suffered big losses, plunging Friday. AAPL stock, MSFT stock and AMZN stock have been leaders in the coronavirus stock market rally, but also in recent years. Facebook stock and Google stock, though enjoying periods of outperformance, have generally moved in sync with the broader market for years.
Likewise, Nvidia (NVDA) suffered little chart damage last week, while Inphi (IPHI) gained ground. AMD (AMD) was a big winner in 2019, but never broke out in the coronavirus stock market rally. AMD tumbled last week, losing sight of its 50-day line.
Stock Market Update: The Raging Bull Battle
Meanwhile, Tesla stock lost ground last week, but after strong gains in the prior week. Tesla (TSLA) production and delivery figures for the second quarter are due in the coming days.
Apple stock, Microsoft stock, Amazon stock, Nvidia stock, Chipotle stock, Dexcom stock, Fortinet stock and Tesla stock are all on IBD Leaderboard, Facebook stock also is on Leaderboard, though it was cut to a quarter position on Friday. Inphi stock is on SwingTrader.
MSFT stock and FTNT stock are on IBD Long-Term Leaders.
Dow Jones Futures Today
Dow Jones futures rose 0.45% vs. fair value. S&P 500 futures climbed 0.5% and Nasdaq futures advanced 0.2%. Today, fair value is +0.26% for DJIA futures, meaning that “flat” Dow Jones futures would indicate a 0.26% gain for the blue chip index at Monday’s open.
With regular trading showing more volatility, DJIA futures also have made bigger moves in recent days.
The FAA has given the OK for Boeing 737 Max certification flights as soon as Monday, a key step in getting the grounded jet back in service. That could give a lift to Boeing (BA), a Dow Jones component.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus News
Coronavirus cases worldwide have topped 10.23 million. Covid-19 deaths are at 504,000.
Coronavirus cases in the U.S. have reached 2.63 million, with deaths above 128,000. New Covid-19 cases hit a record 47,341 on Friday, eclipsing Thursday’s peak of just over 40,000. Confirmed infections topped 40,000 yet again on Saturday and Sunday.
Continued increases in testing are one factor, though positive tests have jumped in many hot spots.
Covid-19 infections are skyrocketing in Florida, with 9,585 new cases on Saturday vs. 8,942 on Friday, 4,049 a week earlier and a mere 667 on June 1. Florida added 8,530 cases on Sunday. Texas, Arizona, California and several other states are showing record new cases in recent days.
Florida and Texas have reimposed some coronavirus restrictions. Washington state, which had the first known coronavirus cluster in the U.S., is halting further reopening as cases pick up again. California Gov. Gavin Newsom on Sunday ordered bars to close in seven counties, including Los Angeles County. There are also signs that residents are stepping up social distancing in newly hard-hit states.
So far coronavirus deaths in the U.S. have not trended higher. That could reflect a lower age of people with Covid-19 now that in April and May. Hospitals may have better treatment procedures. And there’s probably a lag between confirmed cases and deaths.
Meanwhile, India has topped 500,000 Covid-19 cases. The world’s most populous nation has reported record daily cases for several days. South Africa has quietly become a hot spot after sub-Saharan Africa had seen relatively few coronavirus cases.
Coronavirus Stock Market Survival Guide
Coronavirus Stock Market Rally
The coronavirus stock market rally had a bad week, punctuated by heavy selling on Wednesday and Friday.
The Dow Jones Industrial Average fell 3.3% in last week’s stock market trading, with nearly all of that on Friday. The DJIA, losing sight of its 200-day moving average, is approaching its 50-day line. The S&P 500 index retreated 2.9%, closing below its 200-day. The Nasdaq composite sank 1.9%, closing below its 21-day line for the first time in months.
Apple stock fell Friday, but actually rose 1.1% for the week. Microsoft stock edged up 0.6%. Both AAPL stock and MSFT stock are Dow Jones, S&P 500 and Nasdaq components. Amazon stock, the third member of the trillion-dollar club, ticked up 0.7%. All three also hit record highs during the week. Not surprisingly, the relative strength lines for Apple stock, Microsoft stock and Amazon stock are all at highs, reflecting the trio’s outperformance in the coronavirus market rally.
Meanwhile, Facebook stock plunged 9.5% last week, giving up nearly all its gains from its May 19 breakout and closing below its 50-day and 10-week lines. Much of that reflects a growing boycott by major advertisers over Facebook’s content policies. More advertisers announced a halt to advertising on Facebook and other social media over the weekend even after CEO Mark Zuckerberg announced policy changes on Friday.
Google stock lost 4.4% — 5.45% on Friday — to knife below its buy point and its 50-day line.
Overall, growth stocks fared relatively well. Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slid 1.3% last week after a 6.4% spike in the prior week.
The iShares Expanded Tech-Software Sector ETF (IGV) rose 0.3% as many software makers are either coronavirus plays or Covid friendly. Microsoft stock is a major IGV holding.
The VanEck Vectors Semiconductor ETF (SMH) retreated 2.1%. Nvidia stock fell 1.15% last week. Inphi stock rallied 3%, with a bullish rebound from the 10-week line. Meanwhile, AMD stock plunged 7.6%.
Tesla Deliveries Loom
Tesla stock fell 4.1% last week to 959.74, but on Friday didn’t even undercut Thursday’s low, when shares rebounded from their 21-day line. TSLA stock is acting well, with its RS line just below all-time highs. But Tesla stock is extended from an 869.92 buy point and needs more time to set up a new entry.
Tesla will likely release second-quarter deliveries late next week. Estimates are converging around 85,000 electric vehicles. Strong figures will bolster hopes that Tesla can deliver a surprise second-quarter profit.
The third quarter should be better for Tesla, with no interruptions for the Fremont plant and continued output gains at the Shanghai factory. On the other hand, Tesla will have no excuses if demand wavers. Will Tesla Model Y demand wane after the initial burst, especially amid widespread reports of poor build quality? Will Tesla market share continue to wane in Europe? Will China demand for Tesla vehicles stay strong as subsidies fall and competition picks up?
On Sunday, Chinese electric vehicle maker Xpeng began deliveries of its P7 sedan in China. On paper, the Xpeng P7 offers a lot of car for less money than the Tesla Model 3. The Byd Han sedan launches in July. Along with existing Nio (NIO) electric SUVs, they will do
What’s Next For The Coronavirus Stock Market Rally
The coronavirus stock market rally has broken below the steep channel lines it followed from late March into June. The rally’s ascent was unsustainable, so a slower advance would be normal and healthy. The stock market rally could simply resume its rise at a slower pace, but last week could be the start of a pullback or sideways action. There’s always the risk that the stock market trend could downshift more seriously, given the coronavirus resurgence and the looming election.
In his must-read weekend Stock Market Update, Mike Webster noted that last week’s sell-off resembled the Feb. 21 top – but also the May 1 blip.
“This is a reminder that a single candle gives you an expectation of a direction. But not the magnitude of the direction.”
What To Do Now
Don’t try to guess where the stock market is going. Pay attention to what the market is doing now. Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Analyze your stocks and your portfolio. If you have some stocks showing weakness, it may be time to take some profits or cut losses. Are you overextended on margin? You might want to lock in some gains so further stock market losses won’t force more desperate selling.
Selling some stocks provides protection and flexibility. You can always buy those stocks back if they improve. You can also buy something else if and when the market improves. Dexcom stock, Fortinet stock and Chipotle stock all have new bases. If the stock market rally moves sideways for a few weeks, many more leading stocks will set up again, including Inphi stock, Tesla stock or even megacaps Apple, Microsoft and Amazon.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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