Dow Jones futures rose overnight, along with the S&P 500 and Nasdaq futures. Tesla (TSLA) is holding a Cyber Rodeo at its Austin plant on Thursday night, and deliveries of the Model Y are expected to begin.
The stock market rally tested key support levels on Thursday morning as Treasury yields continued to rise amid ongoing hawk statements by the Federal Reserve. But major indexes jumped, closing a little higher.
Investors should pay attention to sectors that work, but be wary of new purchases in general. Exxon Mobile (XOM), Lockheed Martin (LMT), Horizon Therapeutics (HZNP), General dollar (DG) and O’Reilly’s car (ORLY) – these are five stocks in the leading sectors that are at or near the points of purchase.
Tesla shares are in the IBD leaderboard. Shares of Tesla and HZNP are at IBD 50. Shares of XOM are at Big Cap 20, on a list dominated by energy and commodity games, right now. ORLY shares were IBD day action on Thursday.
Dow Jones Futures today
Dow Jones futures were up 0.1% from fair value. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.2%.
US oil prices rose 1%.
Remember that night stocks in Dow futures and elsewhere don’t necessarily turn into real trading in the next regular stock market session.
Join IBD experts as they analyze current stock market rallies on IBD Live
Stock Market Rally
The stock market rally sold out in the morning but then bounced back for slight gains.
In the stock market on Thursday, the Dow Jones Industrial Average rose 0.25%. The S&P 500 rose 0.4%. The Nasdaq composite grew less than 0.1%. Russell 2000’s small capitalization fell 0.4%.
US oil prices fell 0.2% to $ 96.03 a barrel. Natural gas prices have jumped to their maximum close since December 2008.
Yields on 10-year Treasury bonds rose four basis points to 2.65%, a new three-year high and slightly widening the yield curve.
Fed President St. Louis James Bullard, one of the most hawkish politicians, said the Fed’s rate, which is currently 0.25% -0.5%, should be at 3.5% to fight high inflation. The Federal Reserve is likely to raise rates by 50 basis points at each of the next three policy meetings, with the decline in balance sheets to begin after the event in early May.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.6% and the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.9%. The IShares Expanded Tech-Software Sector ETF (IGV) was up 0.45%. The VanEck Vectors Semiconductor ETF (SMH) closed just above breakeven.
The SPDR S&P Metals & Mining ETF (XME) rose 2.2% and the Global X US Infrastructure Development ETF (PAVE) rose. The US Global Jets ETF (JETS) was down 1.4%. The SPDR S&P Homebuilders (XHB) ETF fell 0.5%. The Energy Select SPDR ETF (XLE) rose 1.1%, with XOM being a major component of the stock. The Financial Select SPDR ETF (XLF) was down 0.1%. Select Sector SPDR Fund (XLV) received 1.9%
Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) fell 1.2% and the ARK Genomics ETF (ARKG) fell 0.7%. Tesla shares are holding № 1 in ETFs Ark Invest.
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Exxon shares rose 1.7% to 85.05, continuing to consolidate around its 21-day line and just above the 10-week line. Investors could buy XOM shares here or if they exceed the March 25 high of 85.49. The oil company should have a proper base after the end of next week.
Several other energy reserves, including Exxon counterparts, are supported Chevron (CVX) and Shell (SHEL) as well as a coal producer Resources Arch (ARCH) and the North Shore Global Uranium ETF (URNM).
Shares of Lockheed rose 2.4% to 465.51, clearing a short-term high as it runs on short-term consolidation. But LMT shares are 4.9% above the 21-day line and 10.1% above the 50-day line. The shares may form a new base by the end of next week. A longer pause will allow the main average to catch up.
Shares of Lockheed erupted in late February, when Russia’s invasion of Ukraine began. Within days, stocks rose as investors relied on higher defense spending in the short and long term, especially in Europe and especially on armaments.
Northrop Gruman (NIGHT), General Dynamics (GD) and Raytheon Technologies (RTX) is also consolidating, and shares of RTX already boast a flat base.
Shares of Horizon rose 3.2% to 112.39, breaking above the buying point of 110.13 during the consolidation that began in late October. That 110 zone was a short-term resistance late last year.
Several biotech and drug stocks are demonstrating strength. Vertex Pharmaceuticals (VRTX), Regeneron (REGN) and Eli Lily (LLY) is now extended yet Pfizer (PFE) flashes possible entry into the trend line. In a broader sense, health care is doing well: health insurers are reaching new highs, and device manufacturers are creating the right side of bases.
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Shares of Dollar General rose 1.1% to 241.69, reaching a record high and rising in the buying zone. On Wednesday, DG shares jumped 4.2% to 239, clearing a buying point of 232.87, according to MarketSmith analysis. The line of relative strength, the blue line on the chart, is at a maximum in 52 weeks.
Several discounters work well, as investors rely on consumers who skimp on pennies by focusing their spending on low-cost products. Dollar tree (DLTR) and Costco Wholesale (COST), which erupted a few weeks ago, is now slightly extended. Walmart (WMT) is technically in the purchase zone, but seems to have expanded with a safer early entry. Target (TGT) starts to bounce.
Shares of O’Reilly rose 3.7% to 726.83, breaking to a new high. Investors could use 705.10 as an alternative entry or handle, although the previous point of buying the 687.33 cup with handle was still technically valid.
The line of relative strength is near the new high on the daily chart and at record levels on the weekly chart.
Because new cars are few and expensive, and consumers want to cut costs amid high inflation, many drivers keep used cars longer and perform more at home. O’Reilly’s opponent AutoZone (AZO) broke out of the double bottom on Thursday.
Tesla Austin “Cyber Radio”
CEO Elon Musk is scheduled to appear at 10pm east at the Tesla plant in Austin, dubbed the Cyber Rodeo. Tesla is expected to officially begin shipping the Model Y from the factory. This follows from the initial deliveries from the plant in Berlin last month. The two new plants will significantly expand Tesla’s capacity, but are expected to slowly boost production.
In the longer term Austin will produce other vehicles, particularly Cybertruck. Earlier this year, Musk said he plans to complete development of Cybertruck this year, and production “hopefully” will begin next year.
Meanwhile, the Shanghai Tesla plant has been closed since March 28, and the city is closed due to rising Covid cases. It is possible that in the near future Tesla will be able to resume production in Shanghai, and workers will remain in place.
Tesla Austin’s “Cyber Rodeo” will be too late for expanded trading, so investors will weigh in on Friday morning.
On Thursday, Tesla shares rose 1.1% to 1,057.26, rolling up with the market. Shares are still on the rollback after reaching the trend line earlier this week. The giant EV can form a handle in the deep base of the cup. Retreating just below the 21-day line and level 1000 can be helpful to get rid of some weak holders. The longer handle will also allow the 50-day moving average to catch up somewhat.
With highly rated growth stocks as interest rates rise, Tesla shares stand out as an exception. Can it withstand or rise higher in this environment?
Tesla’s earnings are due to be released on April 20th.
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Market Rally Analysis
The stock market rally staged a much-needed reversal upward, finding support at key levels on Thursday.
The market rally moved to an “upward trend under pressure” on Wednesday as major indexes fell below their 21-day moving averages. On Thursday morning, they weakened even more, and the Nasdaq Composite and Dow Jones blew up their 50-day line.
But in the afternoon the bulls fought back. Nasdaq and Dow Jones have once again climbed above the 50-day line. However, while the Dow resumed its 21-day day, the Nasdaq reached resistance at that level. The S&P 500 returned its 200-day and 21-day lines.
The Nasdaq returning above its 21-day line would be a good sign for a market rally.
So width would be better. On the NYSE and Nasdaq the number of losers outweighed the winners. The new lows far exceeded the new highs on Thursday. The low-cap Russell 2000 and S&P MidCap 400 indexes bounced off Thursday’s lows, but closed slightly lower. On Wednesday, both fell below their 50-day lines.
Growth stocks are still damaged. Meanwhile, there is growing concern that inflation – and raising the Fed’s rate to fight inflation – will generally be a burden on consumer discretionary spending.
In some areas it is still good. In addition to goods, medicine, defense contractors and discounters, investors can find REITs and insurance companies that hold up well.
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What to do now
The fact that major indexes found support on Thursday does not mean they will continue to do so. The rally market is under pressure. Investors need to wait for more power before adding risk widely. There are now several settings, while the growth sector is facing a number of headwinds.
New purchases, if any, should be small and limited stocks in strong sectors. Do not be exposed to a particular sector, even if it works.
Stay busy. If the market rally breaks much lower, investors will want to get out of more positions, even completely switching to cash. On the other hand, in a few good days the market rally will look much better, while a number of stocks are likely to flash buy signals.
In the latter case, investors want to be willing to act. So drop the wide network and keep working on your watch lists.
Read the Big Picture every day to stay in sync with market direction and leading stocks and sectors.
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