Dow Jones futures rose modestly Monday night, along with S&P 500 futures and Nasdaq futures. A newly confirmed stock market rally quickly moved to “under pressure,” last week as the major indexes sold off, despite Friday’s afternoon rebound.
Don’t feed the bear market. This is not a good time to be making new buys; investors should have little or no exposure. Instead, prepare for the next bull run.
Northrop Grumman (NOC), McKesson (MCK), Centene (CNC), AstraZeneca (AZN) and Shockwave Medical (SWAV) are all holding up reasonably well. All have relative strength lines at 52-week or consolidation highs.
Tesla (TSLA) reported second-quarter deliveries of 254,695 electric vehicles, slightly below views and down significantly vs. Q1. China EV and battery giant BYD (BYDDF) reported June sales of 134,036 EVs, bringing Q2 sales to 355,021. Those results followed strong June deliveries from Li Auto (LI), Nio (NIO) and Xpeng (XPEV).
BYD stock is worth watching, trading just above a buy point. Tesla stock is close to 2022 lows.
The video embedded in this article reviews BYD stock, AstraZeneca and Privia Health Group (PRVA).
Dow Jones Futures Today
Dow Jones futures rose 0.4% vs. fair value. S&P 500 futures climbed 0.5% and Nasdaq 100 futures rallied 0.7%.
U.S. stock exchanges were closed Monday in observance of Independence Day, but other markets around the world were open.
U.S. crude oil prices rose more than 2% to about $111 a barrel.
The 10-year Treasury yield jumped 8 basis points to 2.97%.
Bitcoin rebounded back above $20,000.
China placed 1.7 million people under lockdown in Anhui province, as the government reported nearly 300 new cases Monday. Anhui is west of Shanghai and east of Wuhan. The provincial capital, Hefei, is where Nio EVs are made.
President Joe Biden may roll back some U.S tariffs on Chinese goods this week as a means of cooling inflation, according to multiple reports.
Stock Market Rally
The stock market rally suffered solid-to-sharp losses once again, with Friday’s gains only trimming weekly declines.
The Dow Jones Industrial Average fell 1.3% in last week’s stock market trading. The S&P 500 index lost 2.2%. The Nasdaq composite tumbled 4.1%. The small-cap Russell 2000 retreated 2.1%.
The 10-year Treasury yield plunged 24 basis points to 2.89%, tumbling below 3%.
U.S. crude oil futures edged up 0.8% to $108.43 a barrel last week, thanks to Friday’s 2.5% gain. Gasoline futures rose Friday but fell for the week.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.1% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.25%. The iShares Expanded Tech-Software Sector ETF (IGV) slumped 5.3%. The VanEck Vectors Semiconductor ETF (SMH) plunged 9.3%. The Micron Technology (MU) warning, following reports of Intel (INTC) cutting PC chip prices, slammed semiconductor stocks.
SPDR S&P Metals & Mining ETF (XME) crumbled 5.4% last week. The Global X U.S. Infrastructure Development ETF (PAVE) slid 1.8%. U.S. Global Jets ETF (JETS) descended 3.4%. SPDR S&P Homebuilders ETF (XHB) edged up 0.5% thanks to a strong Friday bounce. The Energy Select SPDR ETF (XLE) rose 1.4% and the Financial Select SPDR ETF (XLF) declined 1.4%. The Health Care Select Sector SPDR Fund (XLV) edged up 0.4%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) plunged 10.1% last week and ARK Genomics ETF (ARKG) slid 5.3%. TSLA remains a top holding across Ark Invest ETFs. Cathie Wood’s Ark also has small holdings in BYD, Xpeng and Nio.
Tesla reported Q2 production and delivery figures on Saturday. Tesla deliveries came in at 254,695, down nearly 18% vs. Q1’s record 310,048 but up 26.5% vs. a year earlier.
Tesla produced 258,580 vehicles in Q2 vs. 305,407 in Q1, near all Model 3 sedans and Model Y crossovers.
Tesla Shanghai was shut down for much of April and only resumed full output in early June. The recently opened Tesla Berlin and Austin plants are producing relatively few vehicles, partly due to supply-chain issues. The EV giant said June was a record month for production.
However, Tesla Shanghai is shutting down its Model Y and Model 3 production lines, likely in stages, during July for upgrades to significantly increase capacity. Meanwhile, the brand-new Tesla Berlin reportedly will shut down for two weeks starting July 11. The time will be used to upgrade equipment, adding a production line and producing electric motors vs. importing them from the Shanghai plant. Staffing remains a concern at the plant, which will only grow with a new production line.
Tesla stock fell 7.5% to 681.79 last week after hitting resistance at its 10-week line on Monday. Shares are not far from their May 24 low of 620.57. TSLA stock peaked in early November at 1,243.49.
The EV and battery giant topped 100,000 in new energy vehicles —EVs and plug-in hybrids — for a fourth straight month. June’s total was 134,036, up 224% vs. a year earlier and nearly 17% above May’s 114,943.
BYD sold 133,762 passenger NEVs in June, including 69,544 EVs and 64,218 PHEVs. It sold 274 new energy commercial vehicles, such as buses.
Q2 sales surged to 355,021 NEVs, up 256% from a year earlier and 24% above Q1’s 286,329. As a result, BYD roared past Tesla in terms of vehicle sales last quarter — by just over 100,000 — arguably seizing the EV crown.
Tesla still leads in all-electric vehicles, with BYD selling 180,296 passenger EVs in Q2.
BYD stock cleared a 39.81 buy point from a deep cup-with-handle base during last week, closing up 1.2% to 39.97 for the week. BYDDF is still 17% above its 50-day line. A high handle or short, shallow base could be ideal.
China EV Startups
On Friday, Nio reported record deliveries in June, while Xpeng and Li Auto had their best month since December. With Covid lockdowns in the past and EV subsidies picking up, all three startups should see big growth in the second half as they roll out new models.
Li Auto stock fell 1.6% to 37.70 on Friday and 7.6% for the week, testing a 37.55 buy point. LI stock was greatly extended from moving averages, so that entry always was highly risky. A new shallow base next to the deep consolidation would be ideal.
Nio and Xpeng stock sold off 11.3% and 14.2% last week, respectively, retreating from near their 200-day lines after running up for several weeks.
BYD and Tesla also should see stronger China production and demand in the coming months, with expanding capacity. BYD also will launch several models in the coming months, including the Seal sedan, a Model 3 rival.
Stocks To Watch
Northrop stock rose 4.9% last week to 486.37, rebounding from the 50-day line. Shares also moved above an old 477.36 buy point that’s technically no longer valid. But a lot of trading took place around that level in recent months. In another week, NOC stock could have a flat base.
McKesson stock climbed 2.5% to 329.53 last week, trading just above its 50-day line. MCK stock has a 340.04 flat-base buy point. But investors could use a move above Friday’s high of 330.16 as an early entry.
Centene stock advanced 3.9% to 86.21 last week. Shares hit resistance this week at an 87.44 double-bottom buy point. But a pause in the current market could be healthy. It’s possible CNC stock will form a handle in a few days, lowering the official entry slightly to 87.08.
AstraZeneca stock also is hitting resistance near a double-bottom base buy point, pulling back after just topping a 67.50 entry on Wednesday, according to MarketSmith analysis. AZN stock fell 1.4% to 65.95 last week, but found support at the 50-day line on Friday.
Shockwave stock edged up 0.5% last week to 198.62, consolidating after soaring 25% last week. The big move pushed SWAV stock above a messy 194.41 cup-with-handle bottoming base buy point. Investors could use 203.03, just above Tuesday’s high, as an entry. That could be an alternate handle after Tuesday.
Market Rally Analysis
Once again, a newly confirmed stock market rally quickly ran into trouble. On Monday, the Nasdaq composite hit resistance at the 10-week moving average and turned tail.
On Tuesday, the Nasdaq and S&P 500 index closed below the lows of their June 24 follow-through days, a bearish signal that their rallies would likely ultimately fail. The Dow Jones followed suit on Thursday.
The major indexes fell significantly for the week, despite Friday’s low-volume upside reversal.
The market rally isn’t technically finished, but it is “under pressure.”
Macroeconomic conditions are worsening. The Atlanta Fed’s Q2 GDP tracker fell to -2.1% on Friday from -1% on Thursday and 0.3% on Wednesday. JPMorgan cut its growth forecasts, saying the U.S. is “perilously close” to recession.
Consumer spending is slowing, with inflation-adjusted spending falling. Manufacturing activity is still expanding, at a slower pace, but the ISM’s new orders subindex turned negative in June.
Companies are just starting to acknowledge the negative impact, with warnings from Micron, RH (RH), General Motors (GM) and Nike (NKE) in the past week. That will likely continue heading into and during earnings season over the next several weeks.
Of course, while investors should be aware of the big economic and business trends, you should focus on what the market is doing right now. Right now, the market is in a severe downtrend going back to the start of 2022 or late last year. The latest rally seems to be heading for a quick exit.
Medical stocks are showing strength, though they may lose ground if the bear market takes another leg down. Defense stocks are moving back up, with Northrop joined by several other players.
BYD and Li Auto are looking interesting, but could use an extended breather. Most auto stocks, including Tesla, are well out of position.
What To Do Now
It’s not a good time to be investing. If you buy stocks in resilient areas such as medicals or defense, be ready to take at least partial profits quickly. The down-trending, volatile market can wipe out decent gains quickly.
Rather than trying to pick the rare winner in a bear market, investors should be looking to spot the big leaders in the next sustained uptrend.
Build up your watchlists and do research on some promising companies.
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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