Dow Jones futures were little changed Monday morning, while S&P 500 futures and Nasdaq futures fell modestly. Treasury Secretary Janet Yellen said Fed rate hikes would be a “plus,” echoing previous comments earlier this year. Meanwhile, Tesla (TSLA) CEO Elon Musk said the Model S Plaid+ has been cancelled, saying the soon-to-launch Plaid is “just so good.”
The stock market rally had a dramatic turnaround Friday, with the S&P 500 closing at a record high while the Nasdaq rebounded bullishly back above its 50-day line.
Notably, all five boast multiple quarters of accelerating earnings and sales growth. Superior fundamentals are a great foundation for winning stocks.
Tesla Model S Plaid+ Scrapped
On Sunday, Musk tweeted that the Tesla Model S Plaid+ has been “cancelled.” He said, “No need, as Plaid is just so good.”
Tesla Model S Plaid+ deliveries had been set for mid-2022, pushed back from late 2021. The EV maker had recently stopped taking orders on the Plaid+.
The Model S Plaid+ was supposed to use the upcoming 4680 battery cells. Tesla has promised big improvements with the 4680 batteries, but mass production may not occur until well into 2022.
If 4680 battery issues are the reason for scrapping the Model S Plaid+, that’s not a good sign for the Tesla Cybertruck and Semi. Musk also has said 4680 cells will be used in some Model Y crossovers.
Tesla is holding a long-awaited Model S Plaid delivery event on June 10, after months of no Model S deliveries during an extended makeover.
Meanwhile, JPMorgan analysts said wait times for Tesla buyers in China, from purchase to license plate delivery, have fallen in Q2 from two to three months to about a month.
Tesla stock dipped 1% early Monday.
Shares tumbled below the 200-day moving average again on Thursday, following a report that Tesla’s China orders nearly halved in May vs. April. Tesla stock rebounded on Friday, closing, just below the 200-day and the 600 price level. For the week, TSLA stock fell 4.2%.
Apple WWDC Event
Meanwhile, Apple kicks off its annual Worldwide Developers conference on Monday. Apple (AAPL) is expected to announce improved messaging features in its operating system updates. The tech titan also could beef up privacy features further, stepping up its feud with Facebook (FB), which generates the vast majority of its revenue from digital advertising.
Apple stock reclaimed its 200-day line on Friday, rising 1.9% to 125.89. It has a new flat base with a 137.17 buy point. But the relative strength line for Apple stock is at 10-month lows, reflecting its long underperformance vs. the S&P 500.
Still, Apple stock is the world’s most valuable company, with a $2.1 trillion market cap. If the Dow Jones, S&P 500 and Nasdaq component does start moving, the stock market rally will get a noticeable boost.
Apple earnings and revenue growth have accelerated for the past two quarters.
AMC Entertainment (AMC), GameStop (GME), Bed Bath & Beyond (BBBY), BlackBerry (BB), Workhorse Group (WKHS) and other meme stocks had big to massive gains again last week, grabbing a lot of attention. AMC stock shot up 83% and somehow managed to close in the lower half of its weekly range. So did BB stock and WKHS stock.
Even with declines on Thursday and Friday, AMC stock is 55% above its 10-day moving average.
AMC stock fell sharply late Friday.
TD Ameritrade imposed some restrictions Friday on trading AMC stock.
Meanwhile, BBBY stock leapt 62% on Wednesday, yet finished the week up just 13%.
GameStop climbed 12% last week. GameStop earnings are due Wednesday, with investors looking forward to what a revamped management team has to say about a possible digital-focused future.
With the stock market rally showing some momentum, including growth names, perhaps investor attention will return to more-traditional risky assets.
Yellen Backs Spending, Fed Rate Hikes
Treasury Secretary Yellen on Sunday again made the case for President Biden’s proposals for a further $4 trillion in spending. Yellen, a former Federal Reserve chief, said if that led to slightly higher Fed interest rates that would be a good thing.
“If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,” Yellen said in a Bloomberg News interview.
Yellen said in early May that interest rates may “have to rise somewhat to make sure our economy doesn’t overheat,” though she quickly qualified those remarks.
The Fed has signaled it won’t raise rates before 2023, but could start discussing tapering asset purchases soon, though the actual taper isn’t likely to start until year-end. The next Fed meeting is June 15-16.
G-7 Agrees On 15% Minimum Corporate Tax Rate
The Group of Seven nations on Saturday agreed to a global minimum corporate tax rate of 15%, aimed at making it easier to tax tech giants and other multinationals. A Group of 20 accord could come later.
The Biden administration has pushed for the global tax minimum as it looks to raise the federal corporate income rate to 28% from 21% to help finance big new spending plans. Along with state levies, that would push U.S. corporate tax rates to the highest in the rich world.
The 15% accord may mean that European digital taxes will be dropped, which would be good news for U.S. tech giants such as Apple, Facebook, Google and Amazon.com (AMZN).
Dow Jones Futures Today
Dow Jones futures were roughly flat vs. fair value. S&P 500 futures sank 0.2% and Nasdaq 100 futures fell 0.5%.
The 10-year Treasury yield rose a couple basis points to 1.58%, after falling significantly on Friday.
U.S. crude futures fell slightly after briefly touching $70 a barrel overnight. Copper futures retreated 1%.
Coronavirus cases worldwide reached 174.08 million. Covid-19 deaths topped 3.74 million.
Coronavirus cases in the U.S. have hit 34.21 million, with deaths above 612,000.
Stock Market Rally
The stock market rally had some twists and turns, but ultimately had a decent week.
The Dow Jones Industrial Average rose 0.7% in last week’s stock market trading. The S&P 500 index climbed 0.6% and the Nasdaq composite 0.5%. The Russell 2000 advanced 0.85%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) popped 1.65%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.5%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.5%. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.9%.
SPDR S&P Metals & Mining ETF (XME) advanced 0.4% and Global X U.S. Infrastructure Development ETF (PAVE) rose 0.6%. U.S. Global Jets ETF (JETS) slumped 1.7% and the SPDR S&P Homebuilders ETF (XHB) retreated 1.9%. The Energy Select Sector SPDR ETF (XLE) shot up 6.8% as crude prices jumped.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) slid 2.3% and ARK Genomics ETF (ARKG) fell 1.8%. Both ARKK and ARKG are below their 50-day and 200-day moving averages. Tesla stock is the No. 1 holding across ARK Invest’s ETFs.
Google stock rose solidly Friday, clearing the June 2 high of 2,393.64 + 10 cents for an early entry before closing just below that level, at 2,393.57. Investors could still treat GOOGL stock as actionable here. The FANG stock has a flat base now with a 2,431.48 official buy point.
The only downside to Friday’s move was the light volume. But volume was higher than in the prior two sessions, both with mild Google stock declines.
The relative strength line for GOOGL stock is right at record highs. It’s held up very well.
On the fundamentals side, Google earnings and sales growth have accelerated for three straight quarters, to 99% and 34%, respectively, in Q1.
Google was Friday’s IBD Stock Of The Day.
DocuSign stock surged Friday in massive volume, the heaviest in six months. It broke a trend line and moved above the 50-day and 200-day lines. Investors could view that as an extremely early entry, a place to start a pilot position.
But it’s close to a traditional breakout. DOCU has been consolidating since early September, but investors could view it as a double-bottom base starting in February, with a 236.21 buy point. The middle of the W is above the midpoint of the base. The base is 35% deep, but that’s far less than a lot of other fallen leaders.
The RS line is a long, long way from old highs, reflecting an extended stretch of underperformance for DocuSign vs. the S&P 500 index. Investors might want to see the RS line get above its late April peak, around the middle of that W.
DocuSign just reported earnings growth of 267%, picking up for a second straight quarter. Revenue growth has accelerated for five quarters in a row, with a 58% jump in Q1.
Dell stock is just below a 103.90 flat-base buy point, according to MarketSmith. The RS line is already at a new high on a weekly chart, giving it a blue dot.
Dell rebounded from its 50-day line on May 28 following earnings, then broke a short downtrend on June 1, offering an early entry.
Dell earnings grew 59% and revenue 12% in the latest quarter, both accelerating for three straight periods.
Broadcom has reclaimed its 50-day moving average and is close to a 489.73 double-bottom buy point.
The RS line for AVGO stock has been lagging somewhat for three months, but it hasn’t been plunging.
Broadcom earnings growth has picked up for four straight quarters, and it reported a 29% EPS gain late Thursday. Revenue growth has slowly picked up for five quarters, to 15%.
InMode now has a narrow, V-shape cup-with-handle base with an 87.10 buy point. Late in the week, INMD stock rebounded from its 50-day line, closing at 85.16.
The RS line has pulled back during its consolidation, but after a long run. Look to see if the RS line can clear the handle high on an INMD stock breakout.
InMode earnings and sales growth have accelerated for the past three quarters, hitting 130% and 62%, respectively, in the latest three-month period.
With people venturing outdoors without masks, InMode’s noninvasive cosmetic procedures are likely to be in high demand.
Market Rally Analysis
What a difference a day makes!
On Thursday, the S&P 500 and Dow tested their 21-day lines though they finished well above those levels. On Friday, the S&P 500 came within a whisker of a closing high, with an all-time best just above that.
The Nasdaq showed even more dramatic action. On Thursday, the tech-heavy index finished below its 50-day line. On Friday, it rebounded to short-term highs.
The jobs report buoyed the stock market rally on Friday. Hiring is picking up, but not so fast that the Federal Reserve will be a hurry to talk about tapering bond purchases. The 10-year Treasury yield fell several basis points Friday, continuing a multi-week decline, especially good news for the Nasdaq and growth stocks.
The Dow, S&P 500 and Russell 2000 have risen for two weeks, with the Nasdaq up for the past three weeks. All have been finishing high in their weekly ranges.
One note of caution: Friday’s volume was very light, coming on the heels of Thursday’s Nasdaq distribution day.
Investors should look for more institutional support in the coming days. Also, can the Dow and S&P 500 get to fresh intraday highs and the Nasdaq clear its June 1 peak — and hold above those levels? That should be an easy task — all the more reason for the stock market rally to take that next step.
What To Do Now
With the stock market rally trending higher over the past few weeks, investors could add to their exposure, including some tech names.
Run through your screens this weekend to update your watchlists, which may have some turnover. The major indexes consolidating over the last several weeks, finding key support, is a strong backdrop for leading stocks forming new bases.
But don’t too excited. Don’t ramp up exposure rapidly, especially by pouring heavily into tech growth stocks.
While Friday’s action and the past couple of weeks was encouraging, it wouldn’t be a shock to see the stock market rally retreat or move sideways in a choppy fashion. Meanwhile, the market could easily shift away from techs again, especially if Treasury yields rebound.
So maintain some diversity in your leadership.
Most of all, follow your rules. Be selective in the stocks you buy and when you buy them. Don’t let losses get away from you. Disciplined investing can pay off. Reckless trading will not.
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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