Dow Jones futures were little changed late Monday, along with S&P 500 futures and Nasdaq futures, with the House approving the stimulus deal and the Senate poised to do so. The stock market rally staged a bullish rebound from morning losses, closing narrowly mixed.
After the close, workout-at-home leader Peloton (PTON) said it would buy exercise equipment maker Precor for $400 million. That will help Peloton ramp output of its cycles and treadmills, which have a long backlog of orders. Peloton stock jumped 8% overnight. PTON stock rose 3.25% to 144.39 on Monday, hitting a new high and clearing a 139.85 buy point. That’s part of a six-session, 23% run from the 50-day line for Peloton stock.
The stock market rally sold off to start the week amid fears of a new Covid mutation in the U.K. that reportedly is far more infectious. But by late morning the major indexes rebounded. The Dow Jones, S&P 500 index, Apple stock, Advanced Micro Devices (AMD), Nio (NIO), Lam Research (LRCX), Uber Technologies (UBER) and Snowflake (SNOW) all found support at their 21-day exponential moving averages.
Tesla (TSLA), meanwhile, sold off in its S&P 500 debut. But that follows a last-minute spike Friday as index funds bought up Tesla stock. More broadly, TSLA stock exploded for a 70% gain on news that it would join the benchmark index.
Tesla stock closed near session lows — and Apple (AAPL) at session highs — on a late-afternoon Reuters report that Apple plans to begin making self-driving electric cars as early as 2024, with battery design that could “radically” reduce costs and extend EV range. Doug Field, a former TSLA employee, heads the secretive Project Titan.
Apple is a rare company that has a better brand image than Tesla, while also boasting a stellar reputation for quality. While 2024 is a long way off, the current Tesla stock valuation assumes booming sales and a decisive battery edge for at least the next decade.
For Apple, the report helps the megacap ride the EV stock wave. Apple stock advanced 2% in extended trade, signaling a move above last week’s high.
Meanwhile, Exact Sciences (EXAS) broke out of a cup-with-handle base Monday after flashing buy signals late last week. Nike (NKE) cleared a three-weeks-tight pattern after running past earnings views late Friday. JPMorgan Chase (JPM) and other big banks rallied as the Federal Reserve gave the green light for new stock buybacks. Genomics firms such as Crispr Therapeutics (CRSP) spiked higher.
Stimulus Deal Vote
The House approved the $900 billion stimulus deal Monday night. The Senate is expected to vote on the relief package, attached with $1.4 trillion in government funding, in the next few hours. President Donald Trump is expected to sign the legislation almost immediately. The stimulus deal, agreed to Sunday includes $300 in extra weekly unemployment benefits, $600 direct checks to all adult Americans, small business loan funding, aid to airlines, an extension of green energy credits and more. The stimulus deal should help the economy, small businesses and families weather the next few months until coronavirus vaccinations reach the bulk of the population, allowing for a full recovery.
Dow Jones Futures Today
Dow Jones futures fell 0.15% vs. fair value. S&P 500 futures were slightly below break-even. Nasdaq 100 futures rose 0.2%. Apple stock is a member of the Dow Jones, S&P 500 and Nasdaq. Peloton stock recently joined the Nasdaq 100.
Investors have spent weeks — months — trading on hopes for a another stimulus deal, so the actual passage may not buoy stocks.
The U.K. has identified a Covid strain that appears to be more highly contagious. This coronavirus mutation is believed to be driving up Covid cases in the London area. The U.K. government has put Southeast England on a full lockdown. More than 40 countries have suspended travel to and from the U.K., but the Covid mutation has likely spread widely already. A U.K. government spokesman said the mutated coronavirus strain has been found in Gibraltar, Denmark and Australia.
Coronavirus cases worldwide reached 77.71 million. Covid-19 deaths topped 1.7 million.
Coronavirus cases in the U.S. have hit 18.47 million, with deaths above 326,000.
Coronavirus Vaccine News
President-elect Joe Biden got his first dose of the Pfizer coronavirus vaccine. Meanwhile, the first Moderna vaccine jabs also began Monday, one week after Pfizer (PFE) immunizations started in the U.S. The European Medicines Agency approved the Pfizer vaccine for Europe Monday and will review the Moderna (MRNA) vaccine in early January.
Stock Market Rally
U.S. Stock Market Today Overview
Last Update: 4:08 PM ET 12/21/2020
The stock market rally started Monday with losses, as investors worried about the new Covid mutation and the related lockdowns and travel bans. But equities rebounded from intraday lows to close mixed.
The Dow Jones Industrial Average rose 0.1% in Monday’s stock market trading, buoyed by Nike, JPMorgan and Goldman Sachs (GS). The S&P 500 index fell 0.4%. The Nasdaq composite dipped 0.1%. The Nasdaq rebounded from its 10-day line on Monday, but the big-cap Nasdaq 100 bounced from just above its 21-day EMA.
The S&P 500 index lost a little more ground than the Dow or Nasdaq due to its exposure to travel and energy stocks. But the biggest loser in the S&P 500 was its newest member. Tesla stock, the sixth-largest component in the S&P 500, fell 6.5%. The electric-car leader has been on an enormous run in 2020, with much of the gain coming on the S&P 500 announcement. Where will TSLA stock go now that the big TSLA stock news — 5-for-1 split and S&P 500 inclusion — is finally in the rearview mirror?
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) edged down 0.1%. The VanEck Vectors Semiconductor ETF (SMH) retreated 0.5%, but rebounded from its 21-day EMA intraday, much like key holdings AMD stock and LRCX.
The 21-Day Moving Average
The 21-day moving average is a good place for growth stocks and the indexes to find support during a stock market rally. During the stock market rally from April to September, the Nasdaq held its 21-day moving average during its steep ascent, with only a few tests. It’s a nice middle ground between the short-term 10-day line and the longer-them 50-day line. IBD uses the 21-day exponential moving average because it hugs a little tighter: The most recent price action carries a higher weighting than a simple moving average.
On Monday, Apple stock fell as much as 2.5%, touching its 21-day line, but rallied for a 1.2% gain. AMD stock lost 2.8% but had fallen 5% intraday, undercutting its 21-day. Nio stock retreated to its 21-day line, then bounced for a 4.8% gain. Snowflake stock stopped just short of that key line, rebounding 4.7%.
LRCX stock, which had pulled back constructively over nearly two weeks, tested its 21-day line before rebounding for a 0.5% advance. Uber stock, which had been finding support at its 21-day line for a few days, retreated 3.6% intraday but closed up 2.35%.
Investors can use the 21-day moving average as a line in the sand, holding growth stocks until they close below the 21-day EMA, at which point they may take whole or partial profits.
The 21-day line can be a place to start or add a few shares, either as a swing or position trade, as with LRCX, Uber or Nio stock. But buying off the 21-day line is much more aggressive than using pullbacks to the 50-day/10-week line.
Stock Market Rally Analysis
So far in the post-election stock market rally, the major indexes have respected the 21-day line. That’s a sign of strength. Some sideways action for the Nasdaq over several days could allow the major averages to catch up, providing more room for stocks to run without a high risk of a pullback.
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.
YOU MAY ALSO LIKE: