Dow Jones futures and S&P 500 futures rose slightly Monday night, while Nasdaq futures were flat, with SolarEdge among the big movers overnight. The stock market rally erased early gains Monday as crude oil prices and Treasury yields fell sharply on signs of slowing economic growth.
However, Square (SQ), Applied Materials (AMAT) and DXC Technology (DXC) broke out, at least intraday. Tesla (TSLA) cleared an early buy point as China EV rivals Nio (NIO), Li Auto (LI) and Xpeng Motors (XPEV) rose on July sales, and BYD Co. (BYDDF) gapped past its own buy point.
After the close, solar power products maker SolarEdge Technologies (SEDG), chip-equipment maker Ultra Clean Holdings (UCTT), automotive and wireless chip maker NXP Semiconductors (NXPI), shipping firm Danaos (DAC) and marketing software maker ZoomInfo Technologies (ZI) all reported better-than-expected earnings.
All five stocks had closed in or near buy areas.
SEDG stock shot up higher hours, signaling the retaking of its 200-day line and breaking a downward-sloping trend line. ZI stock, which closed just above a buy point, gapped up to near the top of its consolidation. NXPI stock was flat after briefly breaking out during Monday’s session before slashing gains.
DAC stock fell slightly overnight. In Monday’s session, Dacanos closed just above its 50-day line and right on a short trend line. UCTT stock, which briefly broke a trend line intraday Monday before fading, fell modestly overnight, despite a beat-and-raise report.
Chinese e-commerce giant Alibaba (BABA) reports early Tuesday. BABA stock, which hit a 16-month low last week, is nowhere near a buying opportunity. But Alibaba earnings, guidance and commentary will be noteworthy as investors try to get a grasp of the Chinese government’s crackdown vs. internet giants, ride-hailing firms, for-profit schools and U.S.-listed Chinese companies generally.
In Hong Kong trading, Tencent (TCEHY) and NetEase (NTES) tumbled as state media criticized online gaming as “spiritual opium” for adolescents. China has cracked down on online gaming firms previously.
DXC stock, Tesla and Square are on IBD Leaderboard. Tesla stock and Square are on SwingTrader. SQ stock was Monday’s IBD Stock Of The Day. UCTT stock was Monday’s IBD 50 Stocks To Watch selection.
The video embedded in this article analyzed Clear Secure (YOU), Square and AMAT stock.
Dow Jones Futures Today
Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures climbed 0.1%. Nasdaq 100 futures were little changed.
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 faded to mixed as sharp drops in energy prices and Treasury yields took a toll on energy and financial stocks, weighing on the Dow Jones, S&P 500 and Russell 2000.
The Dow Jones Industrial Average fell 0.3% in Monday’s stock market trading. The S&P 500 index dipped 0.2%. The Nasdaq composite rose less than 0.1%. The small-cap Russell 2000 lost 0.5% after hitting resistance at its 50-day line for a third straight day.
Two Chinese manufacturing indexes showed factory growth slowed more than expected in July. ISM’s U.S. manufacturing index showed an unexpected dip, though it still signaled strong expansion. The ISM’s prices paid index retreated from extreme levels as raw material cost increases slowed somewhat.
Crude oil prices fell 3.6%, to $71.26 a barrel. The 10-year Treasury yield lost 6.5 basis points to 1.17%, the lowest close since February.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) sank 0.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) closed just above breakeven. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.7%, with AMAT stock a notable holding.
SPDR S&P Metals & Mining ETF (XME) retreated 2.1% after last week’s 7% spike. Global X U.S. Infrastructure Development ETF (PAVE) fell 1%. U.S. Global Jets ETF (JETS) sank 0.9%. SPDR S&P Homebuilders ETF (XHB) dipped 0.1%. The Energy Select SPDR ETF (XLE) gave up 0.75%. The Financial Select SPDR ETF (XLF) finished just above breakeven. The S&P Regional Bank ETF (KRE), more exposed to interest rates, lost 1%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rose 1% and ARK Genomics ETF (ARKG) edged up 0.1%. Tesla stock is the No. 1 holding across ARK Invest’s ETFs. SQ stock is a top-five holding.
Five Best Chinese Stocks To Buy And Watch Now
On Sunday, Square agreed to acquire AfterPay, an Aussie fintech specializing in the fast-growing “buy now, pay later” consumer financing field. The digital payments leader also reported blowout earnings, though revenue came in light.
SQ stock fell as much as 5% in the premarket on the $29 billion deal, but pared losses by the open and quickly skyrocketed. Square stock leapt 10% to 272.38 in massive volume, racing past a new handle buy point of 267.87.
Applied Materials stock
AMAT stock rose as high as 145.25, clearing a 142.89 buy point in a base going back to early April. But shares slashed gains, ending up 1.5% to 142.01. That’s just above a downward-sloping trend line though.
Applied Materials stock had a setup day on Friday, rebounding slightly from its 50-day line.
Applied Materials earnings are due Aug. 19.
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DXC stock jumped 6.6% to 42.61, rebounding from its 50-day line to clear a 41.85 flat-base buy point in heavy volume, according to MarketSmith analysis. The relative strength line hit a record high on the breakout, making DXC Technology a “blue dot” stock. The only downside? DXC earnings are due on Wednesday, giving little time to build a cushion.
Tesla stock rallied 3.3% to 709.67, clearing a 700.10 early entry. Shares backed off intraday highs of 726.94, but so did the whole market. Tesla stock has rallied 9.7% over the last three sessions, all in above-average volume. Late last week TSLA stock rebounded from its 200-day line and broke a downtrend, offering an aggressive entry. The RS line for Tesla stock, though still off its January peak, is at least above a short-term high.
Meanwhile, China EV makers Li Auto, Xpeng Motors and Nio all reported July sales that more than doubled vs. a year earlier. However, Nio reported a slight decline vs. June.
Still, Nio stock rose 2.6%. Li Auto stock faded badly to end up 0.9%. XPEV stock leapt 7.1%.
BYD Co., a profitable maker of EV, hybrid and gas-powered cars as well as electric buses and batteries, will report July sales soon. But BYDDF stock jumped 7.1% to 33, breaking past a 31.40 buy point from a very deep cup-with-handle base. It’s now just beyond the buy zone, which ends at 32.97, and BYD is now 20% above its 50-day line. A better time to buy BYDDF stock may have been Thursday, as it broke a trend line in its deep handle.
Tesla doesn’t break out monthly China sales, but industry figures for Tesla should come in the next two weeks. However, with Tesla Shanghai exporting both the Model 3 and Model Y to Europe, it’s hard to get a good gauge on local demand except on a quarterly basis.
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Market Rally Analysis
The stock market rally gave up modest morning gains. But given the sharp drop in oil prices and the 10-year Treasury yield, that’s not too bad.
Leading stocks held up relatively well, at least among tech-related names.
In addition to breakouts such as Square and early entries such as Tesla stock, some leading stocks found bullish support, including CrowdStrike (CRWD) and Shopify (SHOP).
Steelmakers retreated on a down day for commodity plays, but steel stocks have been huge winners over the past couple of weeks.
What To Do Now
If the weaker U.S. and China manufacturing indexes are merely a downshift or pause in a rapid global economy — with supply-chain and labor shortages providing an extended drag on many sectors — then stocks should be able to continue to advance. But if economic growth cools significantly from here, it would weigh on equities, and not just real economy names.
So pay attention to economic data and upcoming reports such as Friday’s jobs figures. But, as with earnings, the economic news doesn’t matter, it’s the reaction to the news.
In the meantime, this is a trust but verify market. It’s a confirmed stock market rally, but it’s got some flaws and is not rushing ahead. By all means, take advantage of the buying opportunities in this market. But keep a close eye on your holdings, leading stocks overall and the broader market. If conditions change, bend with the market — don’t let the market break you.
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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