Dow Jones futures fell slightly Monday morning, along with S&P 500 futures and Nasdaq futures. Tesla and CEO Elon Musk's Twitter bid are in focus.
The stock market rally suffered further losses last week, with the Nasdaq leading declines as Treasury yields continue to soar. What's your game plan for the coming week? Be cautious about new buys, focusing on leading sectors. Earnings season adds further uncertainty.
Tesla headlines a big week of results, with the EV giant reportedly moving toward reopening its Shanghai factory. Meanwhile, Tesla CEO Elon Musk's bid for Twitter took another twist Friday as the social media firm enacted a "poison pill" provision to thwart him. Tesla stock is working on a cup-with-handle buy point, but the chart is messy with earnings just one of the many risks in focus.
Expedia, Cheniere Energy, Merck, Edwards Lifesciences and Check Point Software are five stocks near buy points from relatively strong areas of the market.
LNG stock and Tesla are on IBD Leaderboard. Tesla stock also is on the IBD 50. Check Point was the IBD Stock Of The Day.
The video embedded in the article discusses the week's market action and analyzes EXPE stock, Cheniere Energy and Check Point Software.
Dow Jones Futures Today
Dow Jones futures were 0.1% below fair value. S&P 500 futures sank 0.3%. Nasdaq 100 futures retreated 0.5%.
The 10-year Treasury yield rose 1 basis point to 2.84%.
U.S. stock markets were closed on April 15 for Good Friday. Exchanges in Europe, Australia and Hong Kong, also closed Friday, will remain shut on Monday.
China reported Q1 GDP rose 4.8% vs. a year earlier, better than expected. March industrial production also topped views. But retail sales fell more than expected as unemployment in major cities climbed to 6%. Economic activity is plunging in April due to the widespread lockdowns.
The People's Bank of China on Friday cut banks' minimum reserve requirement by 25 basis points starting April 25 to bolster the economy. But it kept its one-year medium-term loan rate steady at 2.85%, surprising most economists.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally had some big daily and intraday moves in a short week, but the overall trend remains bearish. The Dow Jones Industrial Average sank 0.8% in last week's stock market trading. The S&P 500 index slumped 2.1%. The Nasdaq composite lost 2.6%. The small-cap Russell 2000 eked out a 0.5% gain.
The 10-year Treasury yield rallied 12 basis points to 2.83%, hitting the highest level since late 2018.
U.S. crude oil futures shot up nearly 9% to $106.95 a barrel last week. The European Union is drawing up plans to ban Russian crude oil, the New York Times reported Thursday, a painful economic step that Germany in particular had resisted. The EU reportedly won't formally discuss a Russia crude ban until the final round of French presidential voting on April 24. If the EU does go ahead, crude prices could spike higher. The EU is even more reliant on Russian natural gas.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF dipped 0.2% last week, while the Innovator IBD Breakout Opportunities ETF rose 0.8% The iShares Expanded Tech-Software Sector ETF sank 2.1%. The VanEck Vectors Semiconductor ETF skidded 3.5%, threatening to undercut 2022 lows.
Reflecting more-speculative story stocks, ARK Innovation ETF and ARK Genomics ETF both fell 2.7% last week. Tesla stock remains the No. 1 holding across Ark Invest's holdings.
SPDR S&P Metals & Mining ETF soared 7.3% last week to a fresh high. The Global X U.S. Infrastructure Development ETF advanced 1.4%. U.S. Global Jets ETF ascended 8%. SPDR S&P Homebuilders ETF closed just below break-even. The Energy Select SPDR ETF edged up 0.4% and the Financial Select SPDR ETF retreated 2.6%. The Health Care Select Sector SPDR Fund lost 2.9%, but from all-time highs.
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Tesla Stock
Tesla stock fell nearly 4% last week to 985, after losing more than 5% in the prior week. The handle has some depth , presumably shaking out some weak holders after TSLA stock's powerful late March run. But the chart is deep and messy. A longer handle, with tighter action, would let the major averages continue to catch up.
Tesla stock rose a fraction early Monday.
Tesla earnings are due on Wednesday night. Investors can expect strong year-over-year growth, but will probably be looking ahead. They'll be looking for fresh clues about the Tesla Cybertruck, Semi and other further products. But they may not get it.
The Shanghai plant, shut down due to Covid restrictions since March 28, reportedly will start to reopen on Monday, though the company itself has offered no confirmation. Some staff have entered a "closed-loop" system, living on site. It's unclear when actual production will resume, with some indications that it will be a few days. Output, when it starts, will be low initially. A return to full production could take weeks. Suppliers and logistical challenges are also factors.
Tesla will suffer a big drop in second-quarter production, even with the Berlin and Austin plants slowly ramping up. It's unclear if the Shanghai shutdown has had or will have an impact on production at Tesla Berlin, which gets batteries and some other parts from China.
Musk-Twitter News
Meanwhile, Tesla CEO Elon Musk's informal $43 billion, $54.20-a-share bid for Twitter also is a potential headwind. If Musk does buy Twitter, he may sell another chunk of TSLA stock to pay for it.
On Friday, Twitter's board enacted a "poison pill" provision to make it difficult for Musk to buy the company. The provision states that if any individual or company buys more than 15% of TWTR stock, other shareholders could buy additional shares at a discount. Musk currently owns 9.1% of TWTR stock.
While Musk's bid is well above where TWTR traded before he disclosed his stake, it's far below Twitter's all-time high of 80.75 set in February 2021.
Musk continues to blast Twitter's board, management and practices via tweets. He's mulling bringing in partners for his Twitter bid, according to multiple reports. That could reduce how many Tesla shares he would need to finance the purchase.
Meanwhile, private equity firm Thoma Bravo reportedly has approached Twitter about a takeover.
TWTR stock rose modestly before Monday's open.
Stocks To Watch
EXPE stock popped 6.5% to 191.55 last week, reclaiming its 50-day line. Expedia stock has a 204.08 cup-with-handle buy point, according to MarketSmith analysis. Investors could use a downward-sloping trendline from the top of the base to find an early entry around 195.
Expedia stock has a triple-digit price-to-earnings ratio. Highly valued P-E stocks haven't done well in recent months. However, with Expedia earnings expected to skyrocket 364% it could be an exception.
Travel stocks surged late last week as Delta Air Lines said on its earnings call that travelers haven't been phased by higher fares. Hilton Worldwide and Marriott International cleared official buy points Thursday, at least intraday, after crossing early entries on Wednesday.
The relative strength line for EXPE stock is well off consolidation highs, a potential concern. The RS lines for Marriott and Hilton are at or near highs. Relative strength lines, the blue lines in the charts provided, track a stock's performance vs. the S&P 500 index.
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LNG Stock
LNG stock retreated 3.2% to 139.53 last week, but rebounded from its 21-day moving average and 10-week line. This is the second or possibly third 10-week line test for Cheniere Energy stock, but investors could use it to start a small position or add a few more shares. LNG stock could be in the process of forming a new base. The RS line is just below highs.
Cheniere Energy is expected to deliver massive profits in 2022 as demand for liquefied natural gas skyrockets around the world, especially Europe. The Russia-Ukraine crisis is spurring further interest, though a Russian gas embargo is not on the table for now.
Merck Stock
Merck stock dipped 0.9% to 86.91 last week, pausing after rising steadily up the right side of a cup base. MRK stock has a 91.50 buy point for now, but could have a handle on a daily chart after Monday, giving it an 89.58 entry. Merck stock does have a handle on a weekly chart, but it's barely perceptible. Ideally, Merck stock would form a longer, slightly deeper handle to shake out weak holders. But the RS line is already at a 52-week high.
EW Stock
Edwards Lifesciences stock sank 3.15% to 120.02 last week. On a daily chart, EW stock has a cup base with a 131.83 buy point. After Monday, it could have a handle with a 125.21 official buy point. That handle is already there on a weekly chart. The RS line for EW stock is already at a record high as well.
Medical device and products makers should see higher demand as electric procedures return with Covid waning.
CHKP Stock
Check Point Software stock lost 4 cents to 142.78 last week, trading relatively tightly over the past few weeks. CHKP stock is in a consolidation that could viewed as a flat or shallow cup-with-handle base. The cup-with-handle buy point is 145.64. A downward-sloping trendline from the March peak would offer a slightly lower entry.
The current base followed a long consolidation, arguably going back to the start of 2021.
Check Point earnings growth is slim. But CHKP stock has a low P-E ratio. Palo Alto Networks, a faster-growing, higher P-E cybersecurity play, is also looking good.
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Market Rally Analysis
The stock market rally continues to grow more divided. The Nasdaq composite fell solidly after tumbling below its 50-day line in the prior week. The S&P 500, now clearly below its 200-day, fell below its 50-day as well.
The broad commodity sector, medicals and defense firms are leading. Insurers and REITs are holding up reasonably well. Travel names are once again coming back, with crude prices off their March peaks and consumers shifting away from goods and willing to pay high fares.
But the Nasdaq has lost more that half of its late March gains. Apple and Tesla are holding up OK, but they don't look especially attractive either. As for other megacaps, Microsoft, Nvidia and Google parent Alphabet are nearing recent lows. Amazon.com and Facebook parent Meta Platforms have been struggling for months.
A rising-rate environment is tough for highly valued growth stocks. TSLA stock stands out, but this market hasn't treated lone wolf growth plays kindly.
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What To Do Now
A bifurcated market rally, with some sectors rising and others falling, is a difficult trading environment. Investors need to keep their exposure light and focused on leading sectors. But don't get too concentrated in a particular area. One upside of travel stocks coming back into play is that the sector is not correlated to the energy/commodity sector.
With commodity plays, you might look for pullbacks to moving averages as chances to start or add to positions.
Depending on your trading style, you may want to take partial profits on stocks that have run up 10% or 15%, to make sure you come away from trades with a gain.
Don't be stubborn. If your stocks aren't working, especially those in lagging sectors, cut your losses and get out. You might think big former growth leaders can't fall any further, but as long as a stock is above zero, it can still decline 100%.
Keep building your watchlists. Buying opportunities can come and go quickly, while market conditions can shift rapidly. So you want to be ready.
Earnings season will start kicking into high gear next week. Know when your holdings — or key rivals, supplies or customers — report results.
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.
