Dow Jones futures were little changed Monday morning, along with S&P 500 futures and Nasdaq futures, with U.S. markets closed. Crude oil prices rose as a divided OPEC+ postponed talks with no production deal.
The stock market rally showed solid gains in the major indexes last week, fueled by strong gains by the five trillion-dollar tech giants: Apple stock, Microsoft (MSFT), Amazon.com (AMZN), Facebook (FB) and Google parent Alphabet (GOOGL).
Apple (AAPL) broke out past a buy point late last week. Google stock moved higher in its buy zone, while Amazon flashed at least an early entry. Microsoft stock moved out of its buy zone while Facebook stock looks extended. All FB stock did last week was hit a record high and a $1 trillion valuation for the first time. —
But many growth stocks had nasty sell-offs or reversals. On the plus side, some growth stocks had more-gentle pauses, forging new buy points. Still, while the stock market rally is in a confirmed uptrend, investors need to follow their buy and sell rules.
OPEC+ Talks Postponed
OPEC+ talks were postponed Monday, after informal discussions failed to make progress, with no date set after failing to reach an agreement on Thursday-Friday. Most of the oil ministers back a plan to gradually increase output starting in August, but the United Arab Emirates wants a better deal for itself.
A modest production hike likely would only partially offset rising demand, as the global economy ramps up.
If there’s no deal to hike production, crude prices could soar. On the other hand, if OPEC+, which includes OPEC and Russia, fractures, members could ramp up production.
U.S. crude oil prices rose slightly to below $76 a barrel Monday, holding near three-year highs.
China Expands Crackdown On Didi, Recent U.S. IPOs
China over the weekend ordered app stores to remove Didi Chuxing, just days after Didi Global (DIDI) held one of the biggest U.S. IPOs years. The cybersecurity regulator said Didi violated restrictions on the collection and usage of personal information, but didn’t offer any specifics. That came just two days after announcing a probe and ordering Didi to suspend new user sign ups.
The Didi IPO raised $4.4 billion in its IPO on June 29, pricing shares at $14 each, at the high end of its expected range. Didi stock popped to 18.01 in Wednesday’s debut, but closed at 14.14. Shares surged 16% on Thursday, but then sank 5.3% on the cybersecurity probe.
Meanwhile, China has expanded its probe to two other Chinese companies that recently listed in the U.S.: Logistics platform Full Truck Alliance (YMM) and jobs-search app Kanzhun (BZ). Beijing has ordered both to halt new user registrations as well.
China could be trying to discourage Chinese companies from opting for U.S. IPOs, as opposed to Shanghai or Hong Kong. But regardless of the intent, China’s surprise crackdown on three companies within days or weeks of going public will make U.S. investors wary of future New York listings of Chinese companies.
Chinese internet giant Tencent (TCEHY) has notable stakes in Didi, Full Truck Alliance and Kanzhun.
Tencent, which trades over the counter in the U.S. fell solidly in Hong Kong on Monday. So did Alibaba (BABA).
Dow Jones Futures Today
Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures edged higher and Nasdaq 100 futures fell 0.15%.
U.S. stock exchanges are closed Monday, July 5, in observance of the Fourth of July holiday. But Dow Jones futures are trading normally on Monday, along with stock markets around the world.
Coronavirus cases worldwide reached 184.70 million. Covid-19 deaths topped 3.99 million.
Coronavirus cases in the U.S. have hit 34.59 million, with deaths above 621,000.
Stock Market Rally
The stock market rally had a solid week, capped Friday by a jobs report showing strong hiring was also not sparking inflation concerns.
The Dow Jones Industrial Average rose 1% in last week’s stock market trading. The S&P 500 index climbed 1.7% and the Nasdaq composite 1.9%. The small-cap Russell 2000 retreated 1.35% on smaller financials and some sharp growth-stock losses.
Apple stock and Microsoft, the only two members of the $2 trillion club, are in the Dow Jones, S&P 500 and Nasdaq composite. FANG stocks Facebook, Google and Amazon are all in the S&P and Nasdaq.
The 10-year Treasury yield tumbled 11 basis points to 1.43%, the lowest since March. Crude oil futures hit fresh three-year highs.
Growth stocks generally powered higher, despite some big individual losers.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 2.1% last week with a few high-profile growth names such as Digital Turbine (APPS) selling off hard. The Innovator IBD Breakout Opportunities ETF (BOUT) added 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.7%. Microsoft stock is a major IGV component. The VanEck Vectors Semiconductor ETF (SMH) jumped 2.6%.
Meanwhile, other sectors were mixed.
SPDR S&P Metals & Mining ETF (XME) edged up 0.9% and Global X U.S. Infrastructure Development ETF (PAVE) 0.15%, after both had big rebounds in the prior week. U.S. Global Jets ETF (JETS) slumped 2.2%, as Delta coronavirus fears and restrictions slam travel names. SPDR S&P Homebuilders ETF (XHB) rose 2.4%, continuing to rebound after several weeks of weakness. The Energy Select SPDR ETF (XLE) fell 1.2% amid profit-taking, and the Financial Select SPDR ETF (XLF) was just about break-even.
Google Stock Moves Higher In Buy Zone
Google stock rose 2.2% last week to 2,505.15, hitting a new high. On Friday, shares rose 2.3%, clearing a lot of recent action just above and below the 2,431.48 flat-base buy point. Volume was below average for the week while Friday’s was a little less so.
The relative strength line for Google stock is just below a record high. That reflects the internet giant’s outperformance vs. the S&P 500 index.
Apple Stock Breaks Out
Apple stock cleared a 137.17 cup-base buy point this week, jumping 5.15% for the week to 139.96. Volume was anemic, though Friday’s trade was almost average. The RS for AAPL stock is improving, near consolidation highs, but well off all-time levels.
Amazon Stock Offers Early Entry
Amazon stock rose 3.2% last week to 3,510.98. That’s just below a 3,524.96 cup-with-handle buy point, according to MarketSmith analysis. But investors could have bought AMZN stock as it broke a mini-downtrend in the handle on Friday.
The RS line for AMZN stock recently hit consolidation highs, though it’s still off all-time levels.
Microsoft Stock Powers Out Of Buy Zone
Microsoft stock advanced 4.8% last week to 277.65, moving out of a 5% buy zone. Shares cleared the 263.29 buy point on June 22. It was a shallow cup, part of a base-on-base pattern.
The latest breakout pushed Microsoft stock above a $2 trillion market cap, now at $2.09 trillion. That’s second only to Apple stock, at $2.34 trillion.
The RS line for MSFT stock is now at a 10-month high. Could this Long-Term Leader be ready for another run?
Facebook Stock Tops $1 Trillion
Facebook stock popped 3.9% last week to 354.70, thanks to a 4.2% jump on Monday to record highs. Facebook won two antitrust suits on Monday, pushing FB stock above a $1 trillion valuation.
Market Rally Analysis
The S&P 500 and Nasdaq composite are at record highs, while the Dow Jones is on the cusp of doing so. The small-cap Russell 2000 retreated.
The Nasdaq composite is 5.5% above its 50-day line, while the Nasdaq 100 is 6.4% above that key level. When the Nasdaq is 6% or more above its 50-day, the odds of a pullback rise, with the risks that any such retreat will be larger. However, the Nasdaq is arguably in the early stages of a new uptrend, when getting extended is less of a concern. Also, recent history has shown that the Nasdaq can become significantly more extended for a lengthy time before succumbing to a notable pullback.
Megacap and big-cap tech stocks fueled the major indexes last week. That’s masked some weakness in the Nasdaq and NYSE advance-decline line, signaling a lack of breadth in the recent move. Further, the fierce selling or reversals in a number of growth stocks, including APPS stock, UP Fintech (TIGR) and Star Bulk Carriers (SBLK), was a little troubling.
But beyond Apple, Google or Amazon, there are still a lot of actionable stocks or quality names setting up.
Some growth names had more gradual pauses and are forming handles, such as Shopify (SHOP) and Zscaler (ZS). Several apparel retailers are hovering at buy points, including L Brands (LB) and American Eagle Outfitters (AEO). Housing-related stocks are starting to shape up, with Tempur-Sealy (TPX) breaking out last week.
What To Do Now
Don’t get too concentrated in a particular stock or sector. If you do have a big position, be careful with any adds. Make sure to use proper buy points and keep your overall cost basis low. For new positions, definitely don’t buy extended, especially in highfliers.
On this long Fourth of July weekend, take time to celebrate with family and friends, and enjoy the fireworks. But the price of liberty, and financial independence, is eternal vigilance.
The stock market rally is offering opportunities and setups, but investors have to be disciplined. That means running screens to build up your watchlists, buying stocks at the right time and then staying alert to your holdings and overall market. Most of all, follow your sell rules.
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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