Dow Jones futures tilted lower late Tuesday, along with S&P 500 futures and Nasdaq futures. The coronavirus stock market rally had another strong session Monday, as Covid-19 vaccine progress fueled hopes for a rapid economic recovery. Alibaba (BABA) and Best Buy (BBY) cleared buy points, while Dow Jones tech giant Apple (AAPL) is just below a new entry. Dow retail giants Walmart (WMT) and Home Depot (HD) report early Tuesday.
XWhile Monday's stock market gains were broad based, "real economy" stocks and sectors outperformed.
During the coronavirus stock market rally, tech and medical growth stocks have led, either as direct Covid-19 plays or as companies that could thrive during the pandemic. Meanwhile, real economy sectors such as travel, energy, auto, retail and banks saw demand plunge during the coronavirus lockdowns. But states and countries are opening up their economies without — so far — a surge in coronavirus cases. On Monday, Moderna (MRNA) touted quick progress on a vaccine candidate. That raises the prospect for a V-shaped economic recovery or something close to it.
As the coronavirus stock market rally looks ahead to a post-coronavirus economic recovery, real economy stocks may continue to lead, or at the very least participate. Direct coronavirus plays, such as Zoom Video (ZM) or Peloton Interactive (PTON), may hit headwinds. Investors should pay close attention to the overall stock market direction but also watch for shifting leadership.
Alibaba stock cleared an early entry as Chinese e-commerce names outperform again. Best Buy stock gapped higher as consumer discretionary names performed well.
Apple stock and Tesla stock have fared well during the coronavirus crisis, but a stronger U.S. and global economy would be a boon for both. Apple stock is just below a handle entry, while Tesla stock has a clear resistance point.
Walmart stock technically is back in a buy zone, while Home Depot stock flirted with a new entry.
Apple stock is a member of IBD Leaderboard and SwingTrader. Alibaba stock is on IBD Long-Term Leaders list.
Dow Jones Futures Today
Dow Jones futures fell 0.3% vs. fair value, while S&P 500 futures fell 0.25%. Nasdaq 100 futures dipped 0.1%. Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Coronavirus News
Coronavirus cases worldwide have topped 4.89 million. Covid-19 deaths are at least 320,000.
Coronavirus cases in the U.S. have cleared 1.55 million, with deaths reaching 91,000.
So far states' gradual reopenings haven't sparked a big upsurge in coronavirus cases. Meanwhile, coronavirus vaccine progress from Moderna (MRNA) raises hope for an early end to the pandemic, allowing for a rapid economic recovery.
Coronavirus Stock Market Rally
The Dow Jones Industrial Average leapt 3.85%, the S&P 500 index 3.15% and the Nasdaq composite 2.4%. The S&P 500 index cleared its late April peak while the Nasdaq topped last week's high, both at their best levels of the coronavirus stock market rally.
The Dow Jones and S&P 500, with far more hard-hit sectors of the economy, have lagged the Nasdaq composite so far in the rally.
This could be the start of a period of outperformance for non-tech sectors. But if the economy does bounce back quickly, it should be good news for growth stocks too.
Among the best ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) climbed 0.7%, as many software stocks are coronavirus plays directly or indirectly. The VanEck Vectors Semiconductor ETF (SMH) surged 4.3%.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Alibaba Stock
Alibaba stock rose 5.7% to 215.20, gapping above a downward-sloping trendline and offering an early entry. BABA stock peeked above that line on April 20, but couldn't close above it. The traditional buy point for BABA stock is 231.24.
While investors can buy Alibaba stock now, there are a few notable risks. Alibaba earnings are due Friday morning, so there isn't much time for shares to build a cushion before results. Also, Alibaba stock has been lagging the coronavirus market rally over the past several weeks, as reflected by its relative strength line. It's also been lagging other Chinese e-commerce firms, including major rival JD.com (JD). On Friday, JD.com reported strong earnings.
Best Buy Stock
Best Buy stock soared 11% to 87.16, gapping above an 80.99 cup-with-handle buy point and closing beyond the 5% chase zone. The consumer electronics retailer has done reasonably well with online orders for home delivery or curbside pickup. But with states letting stores reopen and shoppers more confident in an economic recovery and their own finances, Best Buy stock and other consumer discretionary names may fare well.
Apple Stock
Speaking of consumer discretionary: Apple shares rose 2.4% to 314.96 in Monday's stock market trading. The consumer electronics giant's stock broke out of a cup-with-handle buy point of 228.35 in late April, but the handle didn't show up on a weekly chart. AAPL stock now has a 319.79 handle on a weekly chart, according to MarketSmith analysis. It's also got a new handle on a daily chart, providing an alternate entry.
The RS line for Apple stock is near record highs. The RS line, the blue line in the charts provided, reflect a stock's performance vs. the S&P 500 index.
Apple stock has a $1.365 trillion market cap, second only to Dow Jones giant Microsoft (MSFT) at $1.4 trillion.
Tesla Stock
Tesla stock rose 1.8% to 813.63, pulling back from an intraday high of 834.72. TSLA stock appears to be hitting trendline resistance. On a daily chart, the trendline is in the loose handle starting on April 30. On a weekly chart, the trendline goes back to the Tesla stock record high of 968.99 on Feb. 4.
Crossing that trendline would offer an early entry into Tesla stock. Keep in mind that Tesla stock is in a deep, whipsaw base with shares prone to big intraday swings.
While the Tesla Fremont plant has reopened, the demand outlook is especially murky given the severe recession. Electric vehicle competition is rapidly increasing in Europe and China. Tesla is No. 3 in Western Europe for pure electric vehicles so far in 2020. It's just barely fifth including plug-in hybrids.
Walmart Earnings
Analysts predict Walmart earnings will fall 1% to $1.12 a share with revenue up nearly 6% to $130.9 billion. The company moved to hire an additional 150,000 workers to cope with a spike in demand during the coronavirus pandemic.
Walmart stock climbed 1.4% to 127.66. On Friday, WMT stock moved back above 125.48, arguably a still-valid buy point. But investors might want to focus on 133.48, just above Walmart stock's April 20 peak.
Home Depot Earnings
Wall Street forecasts flat Home Depot earnings per share of $2.27 with sales up 3.5% to $27.31 billion.
Home Depot stock climbed 2.5% to 245.35, hitting a record 248.32. HD stock cleared a 224.32 cup-with-handle entry earlier this month. But, like Apple stock, that handle didn't show up on a weekly chart. So 247.46 is a valid cup-base entry.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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