Dow Jones futures rose solidly Friday morning, along with S&P 500 futures and Nasdaq futures, with a China interest-rate cut helping. The stock market rally had a volatile session Thursday, with the major indexes rebounding off lows and briefly turning higher before sinking back into the red. The Dow Jones undercut its recent lows, but the S&P 500 and Nasdaq composite have not.
Offshore oil driller Valaris and lithium producers Livent and Albemarle are stocks setting up near possible entries.
Meanwhile, China EV and battery giant BYD reclaimed a key level in Thursday's trade. BYD, which by some measures is now the world's EV sales leader, is launching a new model that will directly take on Tesla for the first time. Tesla stock edged lower Thursday.
Applied Materials, Palo Alto Networks and Ross Stores reported after Thursday's market close. Palo Alto earnings beat fiscal Q3 views, with the cybersecurity firm guiding higher. Applied Materials missed on EPS and sales, while also giving weak guidance for the current quarter, citing supply-chain issues. Ross Stores missed across the board and gave weak targets for the current quarter. PANW stock jumped more than 10%, lifting other cybersecurity plays. AMAT stock lost a fraction. Ross crashed more than 20%. All closed Thursday well off highs.
Deere reported better-than-expected Q1 earnings Friday morning, while raising full-year profit guidance. But revenue missed some views. Deere stock fell solidly before the open. A month ago DE stock was at record highs, with many farm-related stocks and groups doing well. But shares have tumbled below their 50-day and 200-day lines.
Valaris was Thursday's IBD Stock Of The Day. The video embedded in this article discussed the overall market rally and analyzed VAL stock, Livent and World Wrestling Entertainment.
Dow Jones Futures Today
Dow Jones futures rose 0.8% vs. fair value. S&P 500 futures climbed 1.05%. Nasdaq 100 futures jumped 1.4%.
China's central bank cut the 5-year benchmark loan prime rate by 15 basis points to 4.45%, more than expected, in an effort to boost the economy reeling from ongoing Covid lockdowns. The 1-year LPR was kept at 3.7%, vs. views for a dip to 3.65%.
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
The stock market rally sold off at Thursday's open, rebounded higher, but closed modestly lower after an up-and-down session.
The Dow Jones Industrial Average fell 0.8% in Thursday's stock market trading. The S&P 500 index sank 0.6%. The Nasdaq composite retreated 0.3%. The small-cap Russell 2000 edged up 0.1%
U.S. crude oil prices rose 2.7% to $109.89 a barrel.
The 10-year Treasury yield fell 3 basis points to 2.86%, well off session lows.
Among the best ETFs, the Innovator IBD 50 ETF dipped 0.2%, while the Innovator IBD Breakout Opportunities ETF retreated 0.8. The iShares Expanded Tech-Software Sector ETF climbed 1.8%, with PANW stock a key IGV component. The VanEck Vectors Semiconductor ETF closed just above break-even. AMAT stock is a significant SMH holding.
SPDR S&P Metals & Mining ETF rose 1.6% and the Global X U.S. Infrastructure Development ETF edged down 0.2%. U.S. Global Jets ETF tilted fractionally higher. SPDR S&P Homebuilders ETF climbed 0.75%. The Energy Select SPDR ETF sank 0.4% and the Financial Select SPDR ETF gave up 0.7%. The Health Care Select Sector SPDR Fund edged up 0.2%
Reflecting more-speculative story stocks, ARK Innovation ETF rallied 4.5% and ARK Genomics ETF 3.8%. Tesla stock is the No. 1 holding across ARK Invest's ETFs, but as of Thursday is no longer the top holding in ARKK. ARK also owns some BYD stock, a longtime holding of Warren Buffett's Berkshire Hathaway.
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Valaris Stock
Valaris stock fell 1.1% to 56.50. Shares have formed an ascending base with a 61.80 buy point, according to MarketSmith analysis, holding support at the 50-day line along the way. An ascending base is especially powerful in weak markets, as a stock continues to move higher. The relative strength line has been steadily rising into new high territory.
Valaris is not profitable but that is expected to change this year. The offshore oil driller won key contracts with Saudi Aramco earlier this year.
Lithium Stocks: Livent And Albemarle
LTHM stock jumped 5.85% to 28.76, hitting 29.59 intraday. Livent is in a 41%-deep cup base with a 33.14 buy point. Investors could use 29.68 as an early entry. That's just above the May 5 short-term high, not long after it reported a 950% EPS gain and raised guidance. The RS line for LTHM stock is already at a record high.
ALB stock climbed 1.3% to 239.08. Albemarle stock is working on a consolidation with a 291.58 buy point. Investors could use 243.28 as an early entry from a too-low handle, though 248 appears to be a key resistance area. The RS line for ALB stock also is at record highs. Albemarle also delivered strong earnings and guidance earlier this week.
Livent and ALB stock rallied Thursday in part on lithium-and-fertilizer play SQM, which rallied 5.6% to 95.23 after delivering blowout 973% EPS growth. SQM stock technically moved to the top of a buy zone above a 90.97 entry, but is now 18% above its 50-day line.
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BYD Goes Up Vs. Tesla
BYD, with its in-house battery and chip operations, has largely shrugged off China's Covid shutdowns that have slammed Tesla and other automakers in China. As a result, BYD sales of EVs and plug-in hybrids will almost certainly pass Tesla's EV-only sales this quarter. Even as Tesla production rebounds, BYD could hold the EV crown as new factories and models come online.
Still, Tesla and BYD models haven't competed directly against each other much. That's about to change.
On Friday, BYD opened the Seal EV sedan for preorders in China. The BYD Seal, which integrates the battery pack and chassis, has roughly the same dimensions as a Model 3. But it boasts longer range and faster acceleration than a made-in-China Model 3 — and is $10,000 cheaper.
The BYD Seal starts at 212,800 RMB ($31,893) vs. 279,900 RMB ($41,950) for a base made-in-China Model 3.
And unlike many Tesla rivals, when BYD launches a new EV, it tends to quickly produce in volume.
A successful Seal launch would not only provide another boost to rapid sales growth, but could burnish BYD's brand as it expands into new markets. It could also be a turning point for the EV industry and Tesla.
Meanwhile, reports that the Chinese government could extend EV subsidies beyond 2022 are good news for EV makers in China generally.
BYD Stock Vs. Tesla Stock
BYD stock rose 4.2% on Thursday to 33.62, reclaiming its 200-day and 40-week lines as part of a strong recent run. The RS line is hitting a new high on a weekly chart. But shares are still some distance from a 41.34 buy point in a 48%-deep cup base.
However, BYD stock boasts a triple-digit PE ratio and is the only notable automaker above its 50-day and 200-day lines. Highly valued lone wolf stocks have been hunted down in recent months.
Meanwhile, Tesla stock edged down 39 cents to 709.42, the lowest close since late 2021. Analysts are only now starting to cut second-quarter delivery targets due to ongoing Tesla Shanghai production woes. Meanwhile, Elon Musk's ongoing Twitter saga has weighed on TSLA stock.
Overnight, Elon Musk denied what he called "wild accusations" of sexual misconduct, suggesting they are political attacks. Business Insider reported Thursday night that a SpaceX flight attendant accused Musk of exposing himself and propositioning her in 2016. SpaceX reportedly paid $250,000 for her silence in 2018.
TSLA stock rose modestly Friday morning.
Market Rally Analysis
After Wednesday's brutal sell-off, the stock market rally looked like it might fail outright Thursday. The Dow Jones did undercut its May 12 low near the open, ending its short-lived rally. The S&P 500 and Nasdaq did not, so the overall stock market rally is ongoing.
But ultimately it was another down day, and the rally remains under pressure. The major indexes closing below the low of Tuesday's follow-through day means that it's highly likely that the rally will fail eventually.
The outperformance in Ark-type stocks Thursday suggests bottom fishing among beaten-down growth names vs. broad market strength. A more-positive interpretation is that the ARKK chart held up relatively well on Wednesday, not undercutting the prior day's lows and holding well above its May 12 lows. The recent downtrend in Treasury yields is good news for highly valued growth stocks. Meanwhile, the inflation, supply chain and recession fears slamming much of the market aren't as big a factor to story stocks.
Oil and gas remains a leading sector. Fertilizer makers and lithium plays such as ALB stock are potentially interesting. Some shipping names are doing well.
Northrop Grumman and Eli Lilly, two leaders in leading groups, fell below their 50-day moving averages on Thursday. The stocks remain in bases with relative strength lines near highs, so are definitely worth watching.
But it's a tough market environment, and investors can't count on leading stocks to hold on, with Apple and Dollar Tree among the many examples.
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What To Do Now
The stock market rally, already under pressure, is highly risky right now. It's prone to big swings up and down as investors swing from fear to greed and back again. But the odds are high that the market rally will fail, as it already has for the Dow industrials.
The market arguably needs more time for stocks to set up. After such a fierce sell-off in April to early May, even stocks with high RS lines generally weren't in position. Some sideways market action could be constructive for leading stocks.
Investors should keep working on watchlists and stay engaged. Market conditions could change dramatically in the coming days. Investors need to be ready.
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