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Dow Jones futures and S&P 500 futures edged down Thursday night, while Nasdaq futures were flat, with Walt Disney and Cisco Systems topping after-hours profits. office.
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After home games and tech rotated to start the week and then again off to the “real economy” names, the stock rally has shifted out of equities in general.
In today’s environment, one large sector appears to be a relative safe haven: Chinese stocks listed in the United States.
Coronavirus is no longer an important factor for Chinese e-commerce and other internets such as Pinduoduo (PDD), JD.com (JD) and Tencent (TCEHY) – but not Ali Baba (BABA). Chinese VE stocks such as Nio (NIO), Xpeng (XPEV) and Li Auto (LI) become vertical even as Tesla stock meets resistance at its 50 day line. Futu Holdings (FUTU) and GDS Holdings (GDS), which has profits next week with Nio stock and JD.com, is also doing well.
Li Auto stock and smaller Chinese e-commerce play on Friday morning Vipshop (VIPS) report income.
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Cisco, Disney revenue
Late Thursday Dow Jones Stocks Disney (DIS) and Cisco Systems (CSCO) announced its profits, as well as the chip machine giant Materials applied (AMAT) and fashion e-commerce platform Farfetch (FTCH). New IPOs Palantir (PLTR) and Unity software (U) also declared income.
Disney stock jumped to a lower than expected loss and Disney + hitting 73.7 million subscribers. Cisco shares jumped on better-than-expected results and advice, a positive sign for the company’s IT spending. Applied Materials earnings and sales exceeded, sending AMAT stock slightly higher into a buy zone. The searing Farfetch stock surged on booming growth. Unity Software declined slightly despite strong growth and forecasts. Palantir stock cleared initial after-hour losses and turned higher
But one of the biggest after-hours movers was Li Auto Stock, extending its already huge gains Thursday ahead of its own earnings report.
Current headlines in coronavirus news – Covid vaccines on the way as new cases hit record highs – make it difficult to choose which stocks and sectors will lead. The near-term future looks bleak for “real economy” businesses as coronavirus cases and lockdowns cool the global economy. But home games face an uncertain future after coronavirus vaccinations end the pandemic.
Tesla, JD.com, Pinduoduo, and Palantir are all on IBD Leaderboard. Alibaba stock is a long-term leader of IBD. The stock of Alibaba, Futu and Applied Materials is located on IBD 50.
Dow Jones Futures today
Dow Jones futures fell 0.3% from fair value, although shares of Disney and Cisco gave a boost. S&P 500 futures fell 0.2%. Nasdaq 100 futures were pretty much flat.
Keep in mind that overnight action on Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular trading session.
Join the IBD experts as they analyze the exploitable stocks during the stock market rally on IBD Live.
Coronavirus news
Coronavirus cases around the world have reached 53.07 million. Covid-19 deaths have exceeded 1.29 million.
Coronavirus cases in the United States have reached 10.87 million, with deaths exceeding 248,000.
Covid cases in the United States topped 100,000 for a ninth straight day Thursday, already a new daily record above 160,000. Coronavirus cases in California now total more than one million, joining Texas.
Coronavirus cases are likely to continue to rise in the coming weeks, as temperatures drop and Thanksgiving and other holidays approach. This will overload hospitals in many areas.
So far, cities and states are not reimposing radical partial lockdowns like many European countries. But there are steps in this direction. New York closes restaurants, bars and gyms at 10 p.m.
In the meantime, in the coming weeks Modern (ARNM) will likely provide interim efficacy for its coronavirus vaccine candidate, while Pfizer (PFE) and its partner BioNTech (BNTX) could file for emergency FDA approval for its coronavirus vaccine. A few more could reach the FDA in the coming months, with mass vaccinations taking off in early 2021.
Stock exchange rally
Snapshot of the US Stock Market Today |
||||
|---|---|---|---|---|
| Index | symbol | Price | Loss of profit | % Change |
| Dow Jones | (0DJIA) | 29,078.59 | -319.04 | -1.09 |
| S&P 500 | (0S and P5) | 3537.00 | -35.66 | -1.00 |
| Nasdaq | (0NDQC) | 11,709.59 | -76.84 | -0.65 |
| Russell 2000 | (Etc.) | 169.96 | -2.67 | -1.55 |
| IBD 50 | (FFTY) | 37.36 | -0.21 | -0.56 |
Last Modified: 4:08 PM ET 11/12/2020 |
||||
The stock rally suffered a big sell off Thursday. The Dow Jones Industrial Average fell 1.1% in Thursday’s stock trading. The S&P 500 index lost 1%. The Nasdaq composite reversed the morning’s gains to close at 0.65%.
In addition to the coronavirus headlines, a stimulus deal seems far away, with House Speaker Nancy Pelosi still wanting a big relief plan of $ 2 trillion or more, while Senate Majority Leader Mitch McConnell , is in favor of a much smaller spending bill.
While the travel, banking and energy sectors led Thursday’s losses, growth stocks also retreated.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.6%. The iShares Expanded Tech-Software Sector (IGV) ETF was down 0.2%. The VanEck Vectors Semiconductor ETF (SMH) fell 1.1%. ETF SMH rose overnight on higher inventories of Applied Materials and other chip-based equipment.
One notable exception: the KraneShares CSI China Internet ETF (KWEB) rose 1.7%. Alibaba is the main component of the ETF, but JD.com and the big winner PDD are also key stocks.
With several coronavirus vaccines likely to gain approval in the next two months, there is a case to be made to make the stay at home like Video zoom (ZM), Platoon (PTON), Shopify (SHOP) and even Amazon.com (AMZN) could see weaker growth down the road.
But with coronavirus cases and hospitalizations skyrocketing and European countries on partial lockdowns, it’s hard to feel confident about buying “real economy” names.
A haven of peace in China?
The idea that Chinese stocks are a safe haven in itself may be a warning. Investors have several reasons to be wary of Chinese stocks at all times, although they also offer huge gains.
Accounting issues are always a concern. Regulators can decide to crack down on a business or industry. Draft rules aimed at curbing the monopoly behavior of big internets hit Alibaba, JD and Tencent to start the week, as BABA action continued to struggle. It came a week after regulators suspended the Ant Group’s IPO, with Alibaba holding a third of the shares.
Both JD and Tencent stock – which owns a large stake in JD – are arguably in buy zones, although there are possible issues with both charts. Vipshop shares evolved into a point of purchase before turning a profit. The PDD stock is well extended after its 20% peak in earnings. Alibaba’s stock appears to be damaged.
China EV Equities
Chinese electric car makers face a more welcoming regulatory environment and are all growing rapidly from low levels. But stocks of Nio, Xpeng and Li Auto are moving vertically, well beyond any point of purchase imaginable, with valuations that make Tesla stock appear cheap. Xpeng stock climbed 33% in its very first earnings report. Li Auto climbed 27% and Nio by 12%. All three have reached record highs, heading for another big weekly gain. All three stocks were active overnight, with Li’s shares rising more than 10% ahead of Friday morning’s results. The Nio stock is available next week.
In contrast, Tesla stock fell 1.3%, continuing to find resistance at the 50-day moving average, which flattens out. Stocks are down 4.2% for the week, not terrible for growth stocks. But TSLA stock is slowly declining as Chinese rivals like Li Auto soar.
EV startups face stiffer competition from each other and from Tesla, with Volkswagen (VWAGY) and several other mainstream automakers poised to flood the Chinese market in 2021.
If and when Chinese electric car stocks stagnate or reverse for an extended period, will investors rush to Tesla stock. Or will the electric car giant sell out with its Chinese rivals?
Meanwhile, Hong Kong Futu Holdings brokerage is near a point of purchase while data center operator GDS is right in the buy range. Both report their income next week.
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What to do now
Since the coronavirus stock rally peaked in early September, major indices and major stocks have faced several downtrends and some uptrends, but nothing lasting.
The big and easy money is made during strong stock market rises that last several months. Unstable markets are among the worst for growth investors. On good days, you’ll be tempted to make new purchases, but they might be heading south quickly.
If you have a big winner, like Farfetch or Nio, there’s no need to take action. But you may be selling other stocks because they reduce gains or prolong losses. With fewer attractive setups after recent market action, this should reduce your exposure through attrition.
Read The Big Picture every day to stay in sync with market direction and major stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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