Dow Jones futures were little changed late Wednesday, along with S&P 500 futures and Nasdaq futures. The stock market rally rebounded Wednesday on yet another tweet from President Donald Trump. The major indexes are at recent highs while leading stocks are strong.
Tesla stock rallied on yet another Elon Musk “leaked” email, this time suggesting a new production milestone is in reach. Tesla (TSLA) shares added to gains overnight on an analyst upgrade.
Meanwhile, Domino’s Pizza (DPZ) reports earnings early Thursday. Domino’s stock is holding just above a buy point.
Tesla and Microsoft stock are on IBD Leaderboard. Apple (AAPL) and Alibaba stock are on SwingTrader. Microsoft, Domino’s and Epam stock are IBD Long-Term Leaders. Alexion stock, Alibaba and Microsoft are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures and Nasdaq 100 futures were about flat. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 36.33 million. Covid-19 deaths topped 1.05 million.
Coronavirus cases in the U.S. have hit 7.76 million, with deaths above 216,000.
Stock Market Rally Wednesday
The stock market rally rebounded Wednesday on the latest Trump tweets raised hopes for some form of stimulus, just hours after he dashed optimism for a big relief bill.
President Trump late Tuesday said that he favored targeted stimulus bills, including for airlines. House Speaker Nancy Pelosi signaled openness to airline relief aid in a call with Treasury Secretary Steven Mnuchin, but not other standalone bills.
The latest back-and-forth came after Trump tweets during Tuesday’s market session that called off talks on a broad stimulus deal until after the election. That news sent the major indexes reversing sharply lower.
The Dow Jones Industrial Average climbed 1.9% in Wednesday’s stock market trading, topping Tuesday’s intraday high. The S&P 500 index rose 1.7% and the Nasdaq composite 1.9%, both just below Tuesday’s peak but posting their best closes in weeks. The Russell 2000 jumped 2.2%, with the small-cap index hitting its highest close since late February.
Apple rose 1.7% and Amazon stock 3.1%, both just reclaiming their 50-day moving averages. Microsoft climbed 1.9%, just below the key level.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rallied 1.9%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 2.3%, with Microsoft stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) also advanced 2.3%.
Fastly stock surged 20% to 120.33, vaulting above a 117.89 buy point. Shares of the edge computing networking specialist already closed above a 99.79 early entry on Tuesday. Given the huge run in recent days, there’s a good chance that Fastly stock will pull back or consolidate in the short run. So it might be tricky to buy right now. But there’s no doubt that this is one of the big stock market winners of 2020.
FSLY stock rose slightly overnight.
Fastly was the IBD Stock Of The Day.
Etsy stock leapt 6% to 142.66, moving above a 141.51 cup-base buy point. Because the arts and crafts e-commerce site has raced higher in the past few weeks, there’s a risk of a pullback or consolidation here. But the relative strength line is at a new high, a bullish sign.
Alibaba stock rose 1.4% to 296.50, moving above a pseudo-handle, offering another early entry. The Chinese e-commerce giant already offered early entry rebounding from its 10-week line and prior buy point.
The official flat base buy point is 299.10, with BABA stock briefly clearing that intraday. Shares rallied on higher volume Wednesday and generally have shown heavier trading on up days.
The RS line is right at new highs.
Epam Breaks Out
Epam stock closed above a 339.01 flat-base buy point, according to MarketSmith analysis, after trying to break out Tuesday. During the brief correction, Epam stock just edged lower, trading tightly and rebounding after touching its 10-week line. The RS line kept rising, continuing its long record of outperformance.
Alexion stock leapt 8% to 125.33, a 52-week high and clearing a 120.91 cup-with-handle buy point. The biotech giant raised guidance early Tuesday.
Ultragenyx stock rose 6% to 94.20, racing past a 91.02 double-bottom buy point in above-average volume.
Tesla Production Could Hit 500,000
Elon Musk, in his latest “leaked” email to employees, signal that Tesla production could reach 500,000 in 2020.
“It will be tough, but super exciting if we can exceed half a million cars made in a single year for the first time in Tesla history!”
Tesla would have to produce about 170,000 electric vehicles in the fourth quarter to hit that target. That would be a 20% jump from Q3’s 145,000, itself a record level.
In the coming months, the Shanghai plant will begin producing made-in-China Model Y, boosting capacity.
Meanwhile, Tesla would need to deliver about 182,000 cars in Q4 to reach 500,000 for the full year. That would be a huge 31% increase from the record 139,300 delivered in Q3.
Tesla deliveries lagged production in Q3, which itself lagged stated capacity at the Shanghai and Fremont, California, plants.
Tesla recently cut made-in-China Model 3 prices by 8%-10%. Model 3 and Model Y price cuts in North America and Europe in the coming weeks also could spur demand. But competition is heating up in Europe and China, with even the U.S. seeing more Tesla rivals by the start of 2021.
Tesla stock rose 2.7% to 425.30, moving back above its 21-day exponential moving average. Shares are starting to settle down and could have a new base after this week. If the stock can move sideways for another week or two, the 10-week moving average could catch up.
New Street upgraded Tesla stock to a buy late Wednesday with a fresh Street-high price target of 578. Shares rose a fraction overnight.
Stock Market Rally Trend Bullish
Looking at the major averages, the current stock market rally is solid. Yes, markets are choppy and headline-driven, but looking at a weekly chart, there’s a clear uptrend in the past few weeks after several weeks of selling.
To understand the stock market health, though, investors also need to follow the leading stocks. And those are looking strong.
More and more breakouts are appearing and those breakouts are generally working. Leadership is broad-based. Chips, software, solar, housing, transports and many medicals are showing strength.
In many ways the current market rally dynamic is ideal. It’s unlikely that the stock market rally could resume the April-early September ascent. A more gradual uptrend would let leaders run without the overall market getting overheated.
As the past several days have shown, the stock market rally is headline driven and likely to remain so through the election. It can be difficult to navigate when stocks suddenly tumble on a headline or tweet, then rebound in an hour or day on the next bulletin.
When the market does tumble on a headline, it’s a good idea to focus on weekly charts, to eliminate the noise and see how your stocks are holding up on a long-term horizon.
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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