Dow Jones futures tilted higher Friday morning, along with S&P 500 futures and Nasdaq futures, erasing overnight losses with the November jobs report due. More states reported some omicron Covid cases while DocuSign tanked on weak guidance.
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The major indexes got a much-needed bounce Thursday, reclaiming key levels and shrugging off early Apple stock weakness and an FTC lawsuit vs. Nvidia. But the stock market rally remains under pressure.
D.R. Horton (DHI) and some other homebuilders flashed buy signals but generally there were few quality stocks offering attractive entries.
Meanwhile Tesla (TSLA) pulled back modestly on a bad day for EV makers. Lucid (LCID) and Rivian (RIVN) fell solidly. China-based Nio (NIO), Xpeng (XPEV), and Li Auto stock tumbled, with XPEV stock and Li Auto (LI) falling well below recent buy points intraday. The SEC said Thursday it’s moving forward on a law that requires foreign companies to open up their books to U.S. review or face delisting.
China EV giant BYD Co. (BYDDF) released booming November sales figures, dwarfing the sales of Nio, Xpeng and Li Auto. Unlike Nio stock, Li Auto and Xpeng, BYD trades over the counter in the U.S.
FTC Sues To Block Nvidia-ARM Deal
The Federal Trade Commission said Thursday afternoon that it will sue to block the $40 billion Nvidia (NVDA) takeover of U.K.-based ARM Holdings. Nvidia stock took the FTC-ARM news in stride, rising 2.2%. ARM designs wireless chips for Apple (AAPL) and many of Nvidia’s rivals.
Investors may have seen a high chance that regulators around the world would object to the biggest-ever chip deal.
DocuSign Dives, Marvell Rallies
After the close, Marvell Technology (MRVL), a chipmaker that’s been holding up well, reported earnings. So did Ulta Beauty (ULTA) and two former software leaders, Asana (ASAN) and DocuSign (DOCU). MRVL stock surged overnight, signaling a new high, while ULTA stock moved toward possible buy points. But ASAN stock and DocuSign tumbled in extended trade on weak guidance. Asana lost more than 10% while DOCU stock dived more than 30%.
Tesla and Nvidia stock are on IBD Leaderboard. Tesla stock, Nvidia and D.R. Horton are on the IBD 50. D.R. Horton also was Thursday’s IBD Stock Of The Day.
The video embedded in this article discussed Thursday’s market action and analyzed DHI stock, XPEV stock and Airbnb (ABNB).
Jobs Report
The Labor Department will release the November jobs report at 8:30 a.m. ET. Economists expect to see nonfarm payrolls up by 543,000 with the jobless rate edging down to 4.5%. It’s unclear if economists or investors want a “strong” or “weak” jobs report.
The most important job report data point may be labor force participation. If Americans stream back into the work force, that could ease labor shortages that are limiting economic growth while pushing up inflation via higher wages. The labor force participation rate is expected to tick up to 61.7% of all Americans age 16 and up.
Concerns about lasting inflation are a big reason why Fed chief Jerome Powell and other policymakers are signaling they could step up the pace of the bond taper, perhaps as soon as the Dec. 14-15 meeting.
The jobs report, based on mid-month surveys, won’t show any impact of the omicron Covid variant.
Even if omicron turns out to be no big deal from a health perspective, if it deters people from re-entering the labor force, it could have a meaningful impact on the economy.
In a best-case scenario, the omicron variant has little impact while workers flood into the labor force.
Dow Jones Futures Today
Dow Jones futures were 0.1% above fair value. S&P 500 futures rose slightly and Nasdaq 100 futures climbed 0.1%. All erased modest overnight lows.
Futures turned lower Thursday evening after New York reported five omicron Covid variant cases. Hawaii reported an omicron case Thursday night, saying it was the result of “community spread,” with the infected person not a recent traveler.
Minnesota reported an omicron case earlier Thursday after the CDC reported the first U.S. case, in California, on Wednesday.
Crude oil prices rose nearly 3% Friday morning.
The November jobs report will surely move Dow Jones futures and Treasury yields shortly before Friday’s open.
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 Thursday
The stock market rally had some early wobbles, at least on the Nasdaq, but picked up steam and closed near session highs.
The Dow Jones Industrial Average jumped 1.8% in Thursday’s stock market trading. The S&P 500 index climbed 1.4%. The Nasdaq composite advanced 0.8%. The small-cap Russell 2000 rose 2.8%.
Apple stock fell as low as 157.80 Thursday morning — well off Wednesday’s intraday peak of 170.30 — on a report that the Dow Jones tech titan warned suppliers that iPhone demand was weakening. But AAPL stock pared losses, closing off just 0.6% to 163.76.
U.S. crude oil futures rose 1.4% to $66.50 a barrel, rebounding from intraday losses as OPEC+ signaled it’ll go ahead with plans to slowly increase production vs. pausing due to the omicron variant impact. But the the cartel is ready to meet ahead of schedule if conditions change. Still, oil prices have plunged since Thanksgiving.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) climbed 1.6%, as did the Innovator IBD Breakout Opportunities ETF (BOUT). The iShares Expanded Tech-Software Sector ETF (IGV) bounced 1.7%. DOCU stock and Asana are IGV holdings. The VanEck Vectors Semiconductor ETF (SMH) edged up 0.3% as key holding Nvidia stock’s rise offset some other chip losses. MRVL stock also is an SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) edged up 0.4% and ARK Genomics ETF (ARKG) 1.5%. Tesla stock remains the top holding across ARK Invest’s ETFs. ARK Invest also holds some BYD stock and has taken a new position in Xpeng.
SPDR S&P Metals & Mining ETF (XME) rebounded 2.3% and Global X U.S. Infrastructure Development ETF (PAVE) just over 3%. U.S. Global Jets ETF (JETS) soared 6.1% in a big day for travel-related stocks. SPDR S&P Homebuilders ETF (XHB) ran up 3.4%, with DHI stock and other builders powering higher. The Energy Select SPDR ETF (XLE) rose 2.9% and the Financial Select SPDR ETF (XLF) 3%.
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D.R. Horton Stock
DHI stock rose 5.1% to 102.78. Shares are now back in buy range after breaking out of a double-bottom base with a 99.75 buy point, according to MarketSmith analysis. Investors could view 104.44 as a handle entry as well.
Toll Brothers (TOL) and Century Communities (CCS) also cleared entries on Thursday, though luxury builder Toll reports next week. Lower interest rates are supporting builders, along with solid job and wage gains.
EV Stocks
Tesla stock lost nearly 1% to 1084.60 on Thursday, closing a fraction below its 21-day line. Shares reversed lower on Wednesday, losing 4.35%. But TSLA stock seems to be several weeks into a possible base. On Thursday, Elon Musk sold more than 934,000 Tesla shares worth just over $1 billion, according to overnight filings.
Rivian stock slid 4.25% to 110.77. It’s working on an IPO base, but is a long way from the 179.57 buy point. Lucid stock, after more than doubling from late October to the Nov. 17 peak, skidded 5.3% to 48.41, but found support near its 21-day. Fisker (FSR) sank nearly 4% to 18.99. FSR stock’s breakout from a 20.71 buy point has now failed.
China EV startups also weakened. Xpeng stock, which broke out on earnings late last month and hit a nine-month high Wednesday morning, tumbled 5.6% to 48.29. Shares closed just above their 48.08 buy point after rebounding near their 50-day moving average. Li Auto stock, another recent breakout that reversed from a nine-month high on Dec. 1, slumped 3.4% to 33.91. It’s now below a 34.93 entry, though it found support at its 21-day line.
Nio stock, the laggard, skidded 5.5%, losing sight of its 200-day line.
A move by the SEC on a delisting law, which essentially only affects U.S.-listed Chinese stocks, could have helped spur selling in Nio, Xpeng and Li Auto. The SEC announcement comes days after Beijing denied a report that it was gearing up to largely end the structure of most overseas listings of Chinese firms. As a practical matter, it could be years before delistings are an imminent threat.
BYD Sales Keep Soaring
China EV giant BYD reported 91,219 new energy vehicles sold in November, up 241% vs. a year earlier. That includes 46,137 EVs, up 153%, while plug-in hybrids shot up 500% to 43,984. That’s the sixth straight month that BYD has increased EV/hybrid sales by roughly 10,000.
Nio, Xpeng and Li Auto reported strong November deliveries on Dec. 1 but that didn’t help the stocks.
Toyota also reportedly will make a small EV car for the China market, using BYD Blade batteries.
BYD stock was not yet active Friday morning. On Thursday, BYDDF stock dipped 0.6%, still holding near record highs.
BYD stock, which is Hong Kong listed, largely moves during Hong Kong trading. However, the over-the-counter BYDDF stock presumably wouldn’t be affected by delisting concerns. XPEV stock and Li Auto both have a secondary listing in Hong Kong, with Nio soon to join them.
In related news, China ride-hailing giant Didi Global (DIDI) said late Thursday that it will delist from U.S. exchanges and list instead in Hong Kong. Didi came public in late June, but Chinese regulators almost immediately imposed major restrictions on Didi’s operations, part of an overall crackdown on private enterprise, but especially data-centric firms. Didi stock rose early Friday.
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Market Rally Analysis
The stock market rally got a bounce. The Dow Jones rallied back above its 200-day line while the Nasdaq and S&P 500 reclaimed their 50-day lines. The Russell 2000 remains below its 200-day.
A rebound wasn’t a huge a surprise, given the spike in volatility Wednesday.
It’s nice for stocks to go up and close near session highs. But it’s unclear how meaningful Thursday’s action was. After all, the market rebounded Monday following Black Friday’s initial omicron sell-off and volatility surge, but selling quickly resumed. If the major indexes were to fall back through Wednesday’s lows, it would be a very bad sign for the stock market rally.
Market breadth improved Thursday, but has deteriorated over the past few weeks.
There aren’t many good-looking charts right now after the recent whipsaw selling.
Energy and financial stocks bounced back, but are generally damaged. Travel-related stocks were big winners Thursday, but after huge losses in recent weeks.
Wednesday morning’s chip breakouts have largely fizzled, though they aren’t broken per se. Xpeng and Li Auto stock have had a chilly start to December.
Homebuilders and REITs look healthy, but if the market rally turns into a correction they’ll likely come under pressure. Alternatively, if the market rally strengthens and Treasury yields power higher, DHI stock and REITs may lag or even decline.
Software stocks are a mess. While Snowflake (SNOW) rebounded on earnings, many more have extended big sell-offs. DocuSign and ASAN stock are just the latest examples.
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What To Do Now
It’s still a market rally, albeit “under pressure,” and not a market correction, so investors don’t need to see a follow-through day. But the general concept — waiting for clear strength before moving seriously into the market — makes sense in the current environment.
One good day doesn’t signal a fundamental shift from the weakening market trend of the past few weeks. It’s better to wait for some follow up. For investors who waited for the mid-October follow-through to confirm the new market rally, there were still several weeks to take advantage of the solid uptrend.
As a practical matter, few stocks are flashing buy signals right now. And could you trust a morning breakout or buy signal to hold up by the close? On the flip side, you can’t count on stocks finding support, even though Apple stock did on Thursday.
It’s also unclear if some of the groups and sectors holding up the best right now would lead if the market revs highs.
Holding onto some long-term winners with overall modest exposure is a sound strategy for now. But overall, investors should still be thinking defensively.
The goal for active investors isn’t to try to make money in all markets, but to take advantage of rallies and minimize losses in corrections. If you want to be a big winner, be a small loser.
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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