Dow Jones futures were little changed Wednesday night, along with S&P 500 futures and Nasdaq futures. Treasury yields and crude oil prices rose sharply. The stock market rally on Wednesday added to its rebound with recovery plays, chipmakers and most EV makers powering higher, but trading volume declined yet again. Bitcoin rebounded.
Texas Instruments (TXN), Discover Financial (DFS) and Tenet Healthcare (THC) reported earnings late after all three closed in buy range. Discover stock rose slightly overnight while TXN and Tenet retreated.
In Wednesday’s solid market rally, Square stock broke past a cup-with-handle base buy point on Wednesday, perhaps helped by Bitcoin. Floor & Decor (FND) moved past its own cup-with-handle pattern. Morgan Stanley (MS) cleared a flat base after rebounding from its 50-day line on Tuesday, according to MarketSmith analysis.
Li Auto (LI) soared, breaking a downtrend in a handle in a very deep consolidation, offering an aggressive buy point. Nio (NIO) and Xpeng Motors (XPEV) also jumped, but their “handles” are too low in their own deep bases. Tesla stock, meanwhile, edged lower.
Bitcoin Price Rebounds
Bitcoin rose as high as $32,815 on Wednesday, drifting to below $32,000 in late afternoon action. The Bitcoin price rebounded from below $30,000 on Tuesday, essentially at 2021 lows. Tesla CEO Elon Musk, Square (SQ) and Twitter (TWTR) CEO Jack Dorsey and ARK Invest’s Cathie Wood spoke about Bitcoin and cryptocurrencies at the Bitcoin event “The B Word.”
Musk said he personally owns Bitcoin, Ethereum and, of course, Dogecoin. He added that Tesla (TSLA) and SpaceX own Bitcoin. Musk, who has made positive and negative comments about Bitcoin, says “on balance I support Bitcoin.” He joked about how his tweets, memes and other winks have boosted cryptocurrencies, but said he doesn’t use those times to sell. “I might pump but I don’t dump.”
Texas Instruments earnings beat while the chipmaker guided roughly in line for the current Q3. TXN stock slid 4% in extended trade. Shares climbed 3.45% on Wednesday to 194.24, back above a 192.13 cup-with-handle buy point. But the relative strength line for TXN stock has lagged somewhat.
Discover Financial earnings easily beat views as loans increased. The credit-card operator also announced a DFS stock buyback of $2.4 billion and raised its quarterly dividend by 14% to 50 cents a share. Discover Financial stock edged higher late. DFS stock popped 3.5% on Wednesday to 125.55, just reclaiming a 125.48 buy point.
Tenet Healthcare earnings unexpectedly rose but the hospital operator guided low. THC stock fell 4.5% overnight, but off its worst levels. Shares rose 2.45% on Wednesday to 72.25, hitting a 17-year high and clearing a 70.85 buy point from a flat base. That’s after gapping above its 50-day line Tuesday following blowout results from HCA Healthcare (HCA).
Morgan Stanley stock and Floor & Decor were highlighted in Wednesday’s Stock Market Today video embedded in this article.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures climbed 0.1%. Nasdaq 100 futures were flat.
Coronavirus cases worldwide reached 192.71 million. Covid-19 deaths topped 4.14 million.
Coronavirus cases in the U.S. have hit 35.11 million, with deaths above 625,000.
Dr. Anthony Fauci told CNBC after the close that vaccinated Americans might want to consider wearing masks indoors due to the Delta variant. Los Angeles County has already reimposed an indoor mask mandate. Vaccines provide good protection against serious illness or death from the Delta variant.
Stock Market Rally
The stock market rally continued a solid advance from Monday’s lows. The Dow Jones Industrial Average rose 0.8% in Wednesday’s stock market trading. So did the S&P 500 index. The Nasdaq composite climbed 0.9%. The Russell 2000 added 1.75% after Tuesday’s 3.1% bounce.
After Covid fears over the Delta variant pushed investors out of recovery plays, those sectors came back in favor. Crude oil prices jumped 4.6% to 70.30 a barrel as U.S. stockpiles rose for the first time in nine weeks. Crude oil has now recouped most of Monday’s 7.5% plunge. The 10-year Treasury yield rose 7 basis points to 1.28%, after tumbling intraday Tuesday to 1.13%.
Among techs, chips did well while software nudged higher after outperforming in recent weeks.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 2.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) tacked on 0.8%. The VanEck Vectors Semiconductor ETF (SMH) rallied 2.9%, fueled by ASML (ASML) and Nvidia (NVDA).
SPDR S&P Metals & Mining ETF (XME) popped 3.7% and Global X U.S. Infrastructure Development ETF (PAVE) gained 1.5%. U.S. Global Jets ETF (JETS) ascended 3.1%, continuing to rebound after a long side. SPDR S&P Homebuilders ETF (XHB) was up 1.6%. The Energy Select SPDR ETF (XLE) gained 3.5%. The Financial Select SPDR ETF (XLF), which includes Morgan Stanley, rose 1.7%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) climbed 1.6% and ARK Genomics ETF (ARKG) 1.5%, both rising for a fourth straight session. Tesla stock is the No. 1 holding across ARK Invest’s ETFs. SQ stock is also a major ARK holding.
Square stock popped 4.2% to 257.25, eclipsing a 254.88 cup-with-handle buy point. Volume was just above average for a second-straight session, but those were the best days in a month. The RS stock has been lagging since February, as SQ stock has underperformed the S&P 500 over that time. But at least the RS line, the blue line in the charts provided, is above the handle high.
Morgan Stanley Stock
Morgan Stanley stock rose 3.6% to 95.68, above 94.37 flat-base buy point. A day earlier, MS stock bounced back above its 50-day line. Volume was above average for both days, but below the levels in the prior several sessions.
Floor & Decor Stock
FND stock rose 3.4% to 113.37, above a 109.95 buy point. Investors could have bought Tuesday as Floor & Decor stock broke the handle’s downtrend. Both gains came on strong volume. The RS line for FND stock is lagging, but well above handle high.
Li Auto Stock
Li Auto stock jumped 8.7% to 33.41, breaking a downtrend in handle and offering an early entry. But even the “official” 36.76 handle buy point is highly aggressive given that the consolidation is 66.5% deep. Bases that are more than 40% deep are less likely to work. Ideally, Li stock would turn its handle into a short base within the much-larger consolidation.
Li Auto’s China EV rivals also rallied. Nio stock popped 5.9% while Xpeng stock leapt 7.6%, both breaking short lines as well. But unlike Li Auto stock, these “handles” are well below the midpoint of the base.
Finally, Tesla stock dipped 0.8% to 655.29, but held above key moving averages and is up x% for the week. TSLA stock has an aggressive entry at 700.10, just above its July 2 short-term high, or perhaps slightly lower from a trend line. But the RS line for Tesla stock is not far above its 2021 lows set in May.
Tesla earnings are on tap late Monday.
Market Rally Analysis
The stock market rally continued to rebound from Monday’s intraday lows. The major indexes are all close to record highs again while the small-cap Russell 2000 is nearing its 50-day line.
More leading stocks broke out, flashed buy signs or extended big moves.
Recovery plays, including commodity, financial and travel stocks, led gain on Wednesday. All had been hit in recent days or weeks due due to Covid fears from the fast-spreading Delta variant, which helped trigger big sell-offs in crude oil and Treasury yields. Covid plays, notably software, which held up well during the recent Covid concerns, still advanced Wednesday. Chip stocks also got weaker.
All that points to renewed market breadth, after weeks of a narrowing market rally.
Volume declined significantly on Tuesday and Wednesday. That’s not fatal, but it’s a reason to want to see more signs of strength, and institutional support, in the coming days. Big funds could be wary of backing the market rally with earnings season hitting full force over the next two weeks.
What To Do Now
The stock market rally has been improving since Monday’s lows, with a number of solid buying opportunities that are generally working. Investors can continue to selectively add exposure. But don’t get reckless. Keep a level head, be prepared and stay alert.
As the initial negative reaction to Tenet results showed, earnings season is fraught with peril. With Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Facebook (FB), Google parent Alphabet (GOOGL) as well as Tesla stock reporting next week, earnings reactions could move markets, not just individual stocks or groups.
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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