Dow Jones futures tilted lower early Monday, along with S&P 500 and Nasdaq futures. Congress averted a government shutdown over the weekend, but Treasury yields are rebounding again. Tesla deliveries are due before the open with China EV rivals already releasing results.
A stock market rally attempt is underway, with the major indexes coming off midweek lows. But the rebound has been lackluster at best, especially for the Dow Jones. Friday's retreat from intraday highs raises the possibility that the rally attempt will end up being a short-lived bounce. But much of Friday's weakness reflected shutdown fears.
A follow-through day is needed to confirm the new uptrend. Investors should be cautious about adding exposure until then.
Tesla is expected to report third-quarter production and delivery figures early Monday, with analysts rushing to slash forecasts in recent days. Nio, Li Auto and XPeng posted September and third-quarter sales on Sunday, with EV giant BYD out before Monday's open.
Tesla stock briefly flirted with an aggressive entry on Friday while XPeng arguably did offer an early buy signal. BYD has some work to do while Li Auto and NIO stock need significant repair time.
Meanwhile, Nvidia rose 1% after the European Union said there is no "formal" investigation of AI chips following a French raid last week of its local offices.
NVDA stock is on IBD Leaderboard. Tesla stock is on the IBD 50.
Government Shutdown Averted
The House and the Senate on Saturday easily passed a 45-day continuing resolution to keep the government open, avoiding a shutdown with hours to spare.
The House on Friday rejected a short-term bill that included significant spending cuts, as some 21 GOP hardliners voted no, wanting more. The measure would have been a nonstarter in the Senate.
The government shutdown has been avoided, but Congress could be back in the same place in 45 days.
Dow Jones Futures
Dow Jones futures fell 0.2% vs. fair value, after being up solidly Sunday night. S&P 500 futures lost 0.2%. Nasdaq 100 futures lost a fraction, even with Nvidia stock is giving a lift.
The 10-year Treasury yield rose several basis points to 4.63%.
Crude oil futures rose slightly. Copper futures sank more than 1%.
China manufacturing expanded slowly in September, according to new data. The official manufacturing PMI edged up 0.5 point to 50.2, while the private-sector Caixin index edged down 0.4 point to 50.6. Readings over 50 signal growth. Caixin's service-sector gauge fell 1.6 points to 50.2, a nine-month low.
Hong Kong's Hang Seng was closed Monday, with the Shanghai composite off all week for the Mid-Autumn Festival.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
A stock market rally attempt got started midweek, but the gains have been so-so at best since then.
For the week, the Dow Jones Industrial Average fell 1.2%. The S&P 500 index retreated 0.4% in last week's stock market trading. The Nasdaq composite ended fractionally higher. The small-cap Russell 2000 rose 0.5%.
Friday marked day three of a rally attempt on the S&P 500 and Nasdaq, it but hasn't made much headway. A follow-through day could come as soon as Monday, but these major indexes aren't that far from undercutting recent lows.
The Dow Jones tumbled below its 200-day line on Tuesday, and Friday's effort to retake that level quickly failed. The Dow didn't undercut Wednesday's lows but did finish with its worst close in nearly four months. Technically, the Dow is on day 2 of a rally attempt.
One positive in the past few days has been decent market breadth, but the overall trend has been anemic in the past several weeks.
The 10-year Treasury yield rose 13 basis points to 4.57%. Intraday Thursday, the yield hit 4.69%, the highest since October 2007. The yield surged 75 basis points in the third quarter.
U.S. crude oil futures rose 0.8% to $90.79 a barrel last week, after touching $95 at one point. Crude surged 28.5% for the quarter.
Energy stocks started the week out strong, but gave up much of their gains along with crude prices. Some tech, building and insurance plays look interesting, but need the broader market to cooperate.
At Friday's highs, a number of stocks flashed buy signals, including Tesla, but most of those fizzled along with the market. A few held up, such as Zscaler and PDD Holdings.
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ETFs
Among growth ETFs, the Innovator IBD 50 ETF climbed 1.45% last week. The iShares Expanded Tech-Software Sector ETF edged up 0.2%. The VanEck Vectors Semiconductor ETF bounced 2.1%.
Reflecting more-speculative story stocks, ARK Innovation ETF rebounded 2.2% last week and ARK Genomics ETF edged down 0.2%. Tesla stock is the No. 1 holding for Ark Invest's ETFs. Cathie Wood's Ark also owns some BYD stock.
SPDR S&P Metals & Mining ETF climbed 1.8% last week. U.S. Global Jets ETF descended 0.8%. SPDR S&P Homebuilders ETF edged up 0.5%. The Energy Select SPDR ETF rose 1.2%. The Industrial Select Sector SPDR Fund dipped 0.4%. The Financial Select SPDR ETF declined 1.5%.
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Tesla Deliveries
The EV giant is expected to report third-quarter production and deliveries before Monday's open. Tesla deliveries are expected to fall from Q2's record 466,140, with analysts belatedly rushing to cut optimistic forecasts in the final days. The new consensus is around 455,000. Production likely fell sharply vs. Q2, as Tesla had temporary shutdowns and generally slowed output. Some of that reflected manufacturing upgrades for the refreshed Model 3 and the upcoming Cybertruck, but it appears Tesla was seeking to pare down swelling inventories.
Tesla bulls are already looking past Q3 deliveries, betting on a strong Q4 recovery and the possible Cybertruck launch.
On Sunday, Tesla launched a slightly updated Model Y in China, with the base and Long Range variants getting a bump in range. The Model Y in China faces a growing number of high-spec crossover rivals, many at lower prices.
Tesla stock rose 2.2% to 250.22 last week. Shares briefly cleared the 50-day line on Friday before paring gains. A decisive move above the 50-day could offer an early entry. TSLA stock has a 278.98 cup-with-handle buy point, according to MarketSmith.
Tesla Vs. BYD: EV Giants Vie For Crown
China EV Deliveries
EV pioneers Li Auto, Nio and XPeng reported September and Q3 deliveries on Sunday.
Li Auto led the way again, delivering 36,060 vehicles in September, the sixth straight monthly record and up 213% vs. a year earlier. Third-quarter deliveries totaled 105,108, above Li's guidance for 100,000-103,000.
XPeng delivered 15,310 EVs in September, its eighth straight month-to-month gain and its second-highest total ever, up 81% vs. a year earlier. The G6 crossover, a Tesla Model Y rival, had 8,132 deliveries, some 53% of the total. Q3 deliveries hit 40,008, right in the middle of its target for 39,000-41,000.
Nio delivered 15,642 vehicles in September, down from 19,329 in August and July's 20,462. It was up 44% from a year earlier. Q3 deliveries totaled 55,432, near the low end of its range for 55,000-57,000.
Li Auto rose 1% early Monday, while XPeng and Nio edged higher.
Li Auto stock plunged 9.2% last week to three-month lows on rumblings that the automaker is offering discounts, finally joining the China EV price war. Nio stock rebounded for a 5.9% weekly gain, but is well below key moving averages. XPEV stock surged 11.7% to 18.36, retaking the 50-day line and crossing a downward-sloping trendline. Investors might wait for a less-aggressive entry, such as 19.96. The official buy point is 23.62.
Meanwhile, BYD sold 287,454 EVs, another record month and up 43% vs. a year earlier. Of the personal vehicles, 151,193 were all-electric BEVs and 134,710 were plug-in hybrids. For the quarter, BYD sold 824,001 vehicles, including 431,603 personal BEVs. That should come very close to Tesla's pace, with BYD likely to seize the BEV crown in Q4.
BYD stock fell 1.7% last week to 30.89, trading between the 50-day and 200-day lines. The official buy point is 36.27, but it could have an early entry with a decisive move above a falling 50-day. Shares are not trading early Monday.
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What To Do Now
Friday's fade shows why investors shouldn't rush to buy stocks at the first uptick. Yes, a market rally attempt is underway, but really hasn't shown evidence that it's anything more than a brief bounce within a correction.
A follow-through day could still come in the next few days. No government shutdown offers hope that the rally can gain momentum, but futures aren't moving much Monday.
So investors should spend the rest of the weekend running screens and getting your watchlists in shape. Focus on stocks with strong relative strength lines.
Remember, not every FTD succeeds. So remain patient. If this ends up being a strong market rally that lasts several weeks or months, you'll have plenty of opportunities to take advantage. If the market correction hits new lows, you'll be glad you're largely on the sidelines.
One way to keep an open mind is to look for possible shorting opportunities, even if you rarely short. That can help you keep perspective as leading stocks move up toward the 50-day line and other key levels.
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