Stocks opened flat, then climbed into solid gains Tuesday, as the leading benchmarks rebounded from a crucial level of technical support. China stocks were an early source of strength after NYSE officials reversed a delisting announcement. Meanwhile, IBD 50 stock Futu Holdings scored a big breakout, while Boeing and Chevron competed for the lead on the Dow Jones today.
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Markets were tentative at the open, after the U.K. on Monday imposed a six-week coronavirus lockdown and investors braced for Senate election results in Georgia. But the Nasdaq quickly bounced 0.7% higher, with the Dow industrials up 0.3% and the S&P 500 showing a 0.5%.
On the Nasdaq, China-based e-commerce leader JD.com (JD) rallied 5.8%, narrowing the gap to a 92.87 buy point in a nine-week cup base, according tp IBD MarketSmith. Chipmaker Micron Technology (MU) also ran high on the Nasdaq 100 and S&P 500 with an early 4.4% advance, ahead of its fiscal first-quarter report on Thursday. Citi upgraded the stock to buy, from sell, with a 100 price target. Deutsche Bank and RBC Capital raised their price targets on the stock.
Oil stocks dominated the top of the S&P 500, holding nine of the top 10 early advances on the stock market today, as oil prices rose sharply.
Small caps outperformed in early action, as the Russell 200 gained 1.1% and the Vanguard Russell 2000 Index Fund ETF (VTWO) jumped 1.2%. Kratos Defense and Security Solutions (KTOS) vaulted 6.8%. Building materials supplier Bluelinx HoldingsBXC jumped 7.5%.
Tuesday’s early action showed the Russell 2000, the Nasdaq, the S&P 500 and the Dow Jones Industrial Average, all executing bullish rebounds, after ending Monday in a test of support at its 21-day exponential moving average.
China-based Futu Holdings (FUTU) led the IBD 50 lists, nailing a breakaway gap breakout at the starting bell. On the IBD Leaderboard roster, Pinduoduo (PDD) was the early leader, and Taiwan Semiconductor (TSM) rose within a buy range.
Dow Jones Today, Oil Prices, Boeing Deliveries
Early action showed most of the 30 industrials trading flat on the Dow Jones today. Boeing (BA) jumped 2.4%, after a Credit Suisse note said the company was set to deliver at least 20 of its 737 Max jets in January, based on aircraft registrations. Boeing delivered around two dozen of the jets in December, according to Credit Suisse, to airlines including American, United and Southwest.
Chevron (CVX) climbed 2.1%. Brokerage Truist raised Chevron’s price target to 97, from 90, on Monday, 15% above the session’s closing price. West Texas Intermediate oil soared almost 4% higher early Tuesday, above $49 a barrel. A Monday virtual meeting of the Organization of Petroleum Exporting Countries gridlocked over February production quota negotiations. Discussions are set to continue on Tuesday.
Apple slipped 0.6% to the bottom of the Dow. Apple stock could be forming a possible handle on its 17-week cup base, after narrowly topping the 138.08 buy point on Dec. 29.
JPMorgan (JPM) trimmed its early decline to 0.3%. Bloomberg reported the bank was in discussions for a possible wealth management joint venture in China with commercial banking entity China Merchants Bank. JPMorgan also announced Monday, along with Amazon.com (AMZN) and Berkshire Hathaway (BRKA), that the companies were dissolving their effort at a joint healthcare initiative.
NYSE Rethinks China Telecom Delisting
The New York Stock Exchange triggered a rally in China, after deciding not to delist three of China’s largest telecom names from the NYSE. In November, the Trump administration added the companies — China Unicom Hong Kong, China Mobile and China Telecom — to a list declared off-limits to U.S. investors. The administration alleged the companies supply and support China’s military, intelligence and security services. There are currently 35 companies so listed.
The reversal of the NYSE decision helped send the Shanghai Composite up 0.7% and Hong Kong’s Hang Seng index 0.6% higher on Tuesday, despite Monday’s heavy market losses in the U.S. The CSI 300 index rallied 1.9%, snapping past a June 2015 high and into new record territory.
In U.S. premarket trade Tuesday, China Unicom Hong Kong (CHU) soared 21%, China Mobile (CHL) scrambled 13% higher and China Telecom (CHA) climbed 7.5%. The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) rose 2.4%.
Coronavirus Vaccine
The U.K. announced on Monday a lockdown set to last at least six weeks, as a new Covid-19 variant has driven new coronavirus cases to more than 50,000 per day over the past six days. The U.K. began using AstraZeneca (AZN) coronavirus vaccinations on Monday, a few weeks after being the first country to offer Pfizer (PFE) vaccine jabs.
In the U.S., the Centers for Disease Control reported on Tuesday more than 15.4 million doses of vaccine had so far been distributed in the U.S. It said that 4.563 million doses had been administered, about 30% of the amount distributed.
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The Federal Pharmacy Partnership for Long-Term Care Program had distributed more than 2.5 million doses and administered 365,294 injections — 14.4% of the distributed amount. The partnership is a joint effort between the government and pharmacies, including those of Walgreens Boots Alliance (WBA) and CVS Health (CVS), to inoculate residents of senior centers and long-term care facilities.
Among vaccine stocks, Germany-based BioNTech (BNTX) gained 1.9% in premarket trade. Shares jumped 5.2% on Monday, and are working to stem a steep three-week slide. Moderna (MRNA) — whose stock has recently paralleled that of BioNTech, and which posted a 7% jump on Monday — gained 1.3% in premarket trade.
EV Stocks: Xpeng, Li Auto Retreat
Electric vehicle stocks reversed sharply after posting early premarket gains. On Monday, Tesla (TSLA) had punched to yet another new high and China-based EV names rallied on December sales numbers. In premarket trade Tuesday, Tesla dipped 1%, Nio (NIO) lost 3%. Nio stock is climbing the right side of a possible six-week cup base. Li Auto (LI) slid 1.5% early Tuesday, after soaring nearly 13% on Monday.
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Xpeng (XPEV)retreated 2%, even after a Citi note on Monday said that Xpeng’s partnership with LIDAR maker Livox was “very positive.” The note said that Xpeng’s newest model, set for introduction this year, would roll off the assembly line with LIDAR — Light Detection and Ranging — hardware.
Georgia Senate Race
Tuesday is election day in Georgia, where runoff elections for the state’s two Senate seats will determine the balance of party power in Washington, D.C., for the next two years. Initial expectations were for the Republican incumbents, Kelly Loeffler and David Perdue, to hold their offices with effectively little contest from effectively unknown challengers Jon Ossoff and Rev. Raphael Warnock. But intense focus by the Democratic party on voter registration and campaign support have made the outcome somewhat less certain.
Georgia Runoff Elections Have Big Market Implications
Several segments of the stock market have a vested interest in the balance of federal political power and, therefore, in the election’s outcome. Heavy early and mail-in voting incurred by coronavirus restrictions suggest election results will not be known until later in the week.
Dow Jones Today: UnitedHealth’s Georgia Stake
UnitedHealth Group (UNH) is one example of a stock that rallied immediately following the Nov. 4 election, then settled into a flattish consolidation. A Democrat-controlled Senate could have broad ability and incentive to enact significant healthcare reform. A Republican-controlled Senate would limit such efforts by both Democrats and Republicans. A Republican win of even one Senate seat in Georgia could set up a possible breakout scenario for stocks such as UnitedHealth.
Big tech and social media names like Alphabet (GOOGL), Facebook (FB) and Amazon (AMZN) are also in the camp. One party control on either the Democrat or Republican side is seen as a potential threat for legislative reform. A balance of party power would require all reform efforts to be bipartisan.
There are a number of other market segments out there with similar stakes in the election, including big banks and drugmakers. Many China-based stocks are also broadly in this mix. There are clear chart similarities between stocks like UnitedHealth and the iShares MSCI China ETF (MCHI).
Another segment that could respond to the election results: marijuana stocks. Tilray (TLRY) was the most obvious rally, then pullback after the Nov. 4 election, but Canopy Growth (CGC) and Cronos Group (CRON) showed some similar traits. Fast-moving Pot REIT Innovative Industrial Properties (IIPR) soared almost 29% on Nov. 4 and 5. It flattened for next month before moving higher.
IBD 50: Futu Holdings
IBD 50 wildcard Futu Holdings spiked 17% at the open, scoring a breakaway gap breakout. The base is a six-week cup, a base-on-base pattern, which is generally considered to be a bullish set up.
Also on the IBD 50 list, Taiwan Semiconductor added 2.5% early Tuesday. The stock has climbed in five of six recent sessions, breaking out above a three-weeks-tight buy point at 107.94. Shares remain in a buy range through 113.34. TSM stock is also an IBD Leaderboard listing.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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