Stock futures bounced Tuesday, as the Dow looks for a rematch after Monday’s reversal and the S&P 500 aims to snap its four-day decline. Healthcare names knocked out early gains, with Medtronic, Eli Lilly and Bristol Myers staking early leads. Baidu rallied on electric vehicle news. Dropbox positioned for a possible breakout. Apple topped the Dow Jones today, after reports revealed plans to boost its iPhone output.
Futures for the Dow Jones today rose 0.6% in early action, while S&P 500 futures traded 0.7% above fair value. Nasdaq 100 futures firmed to a 0.7% gain on the stock market today. Small caps led the overall premarket session, with Russell 2000 futures up 1.1% as Tenet Healthcare (THC) traded high on the index following an analyst’s upgrade.
Markets in Asia slumped. Trade in Europe was mixed near midday. A smaller, $748 billion Senate stimulus proposal was apparently gaining support in Congress. The Federal Reserve was preparing to launch its two-day meeting. And the rollout of the Pfizer (PFE)/BioNTech (BNTX) Covid-19 vaccine continued in the U.S. and the U.K.
Skyworks Solutions (SWKS) jumped more than 2% after Goldman Sachs boosted the stock’s price target late Monday. Medical names also ran hard atop the S&P 500, with Bristol-Myers Squibb (BMY) and Medtronic (MDT) rallying on analyst actions, and Eli Lilly (LLY) up more than 2% after updating its full-year profit guidance. Medtronic is poised for a possible breakout.
Apple led the Dow Jones today as well as the IBD Leaderboard lineup, rising 1.9% after a report from Nikkei Asia detailed company plans to increase iPhone production.
Baidu (BIDU) rallied 4.1%, to the top of the Nasdaq 100, after Reuters reported the company is looking into the possibility of manufacturing electric vehicles.
Gear up for Tuesday’s market action by reading IBD’s Investing Action Plan.
Early Risers: Baidu, AMD, Medtronic
Baidu, the largest search engine on China’s Internet, is holding discussions with automakers about possibly manufacturing electric vehicles, according to Reuters. The company has already followed Google’s lead, in developing autonomous driving technology. The company so far has discussed a possible partnership with Zhejiang Geely Holding Group, Guangzhou Automobile Group and China FAW Group Corp Ltd’s Hongqi, Reuters said.
Baidu shares are extended, with a gain of more than 17% so far in December.
On the IBD 50 list, China-based Futu Holdings (FUTU) rose 2%. Futu is back below a 41.09 buy point in a cup base. The stock triggered a sell rule by round-tripping the 24% gain that followed a Nov. 13 breakout. IBD 50 peer Advanced Micro Devices (AMD) climbed more than 1%, after exiting a buy range above what IBD MarketSmith plots as a double-bottom buy point at 88.82 on Monday. AMD is an IBD Leaderboard listing, and was Monday’s IBD 50 Stock To Watch.
Medtronic jumped 2% on an upgrade to overweight from Morgan Stanley. The early move positioned shares to retake a cup-with-handle buy point at 112.58. The leading manufacturer of implantable defibrillators has seen its fundamentals deteriorate over the past three quarters, leaving it with a weak IBD Composite Rating of 40.
Blank check outfit Bridgetown Holdings (BTWN) shot ahead 24% after Bloomberg reported the company was exploring a possible merger with Indonesia-based e-commerce giant PT Tokopedia. Bridgetown, a special purpose acquisition company (SPAC) backed by billionaires Peter Thiel and Richard Li, was looking into the feasibility of a deal with Softbank Group (SFTBY) backed startup in a feal that could be worth $8 billion to $10 billion, Bloomberg said. Bridgetown went public at 10 on Dec. 7 and ended Monday 10.8% above its IPO price.
Dow Jones Today: Apple Boosts Production
Apple (AAPL) climbed 1.9%, grabbing an early lead on the Dow Jones today and moving it close to an alternative entry at 125.49. Nikkei Asia reported the company intended to ramp up iPhone production to 96 million units in the first quarter, a 30% year-over-year increase. A tentative, full-year forecast shared by the company with suppliers pointed to a possible 20% rise in production for 2021, to up to 230 million units. And Apple also planned to raise its output of high-end computer products, including the MacBook Pro, Nikkei said.
Apple stock remains in a buy range after clearing an aggressive early entry at 120. Shares are about 8% below a high marked off in early September, and have a year-to-date gain of 65.7%.
Fed Meeting, Empire State Survey, Stimulus
The Federal Reserve launches its two-day meeting today, which wraps up with a policy announcement followed by a Jerome Powell press conference Wednesday afternoon.
The New York Federal Reserve’s Empire State Manufacturing Index slowed to a reading of 4.9 for December, down from November’s 6.3 tally and below the economist average forecast for a 5.8 reading. New orders and shipments rose modestly. The average workweek lengthened as employed staged its largest jump in months. Input prices rose the most in two years, while the increase in selling prices held steady.
A bipartisan group in the Senate proffered a smaller, $748 billion Covid-19 relief package, in another attempt to carve a quicker path to financial relief for hard-hit consumers. The new Senate package included support for small businesses, as well as unemployment funding. The move lowers the total amount from $908 billion, and eliminates liability protections for businesses, which has been a key Republican demand, and also discards support for state and local governments, a point supported aggressively by Democrats.
The “package does not include everything I think we need. But, it is an honest compromise,” said Illinois Democrat Dick Durbin, who encouraged Senate Majority Leader Mitch McConnell to call a vote on the bill this week, before Congress recesses for the holiday.
In addition, election results continued to come, with state electoral college votes on Monday officially naming Joe Biden the president-elect and confirming his victory in the Nov. 3 election. There had been some question about the potential influence of “faithless electors” on the process. Electoral college results now go to Congress, which is tasked with confirming the election’s outcome on Jan. 6.
OPEC Outlook Rocks Oil Sector Stocks
A shift in outlook from the Organization of the Petroleum Exporting Countries Monday rattled energy stocks. OPEC reduced its demand growth forecast for oil to 5.9 million barrels per day for 2021, down 350,000 barrels per day from its prior projection. The change follows the group’s early December decision to begin easing the restraints that have held production back by 7.7 million barrels per day, reducing the curb to 7.2 million barrels per day beginning in January.
Oil prices recovered and rose almost 1% during the session. But the news hit sent oil-related stocks to 13 of the day’s 15 worst performances among S&P 500 stocks. West Texas Intermediate prices moved up 0.3% early Tuesday, trading just above $47 a barrel.
Coronavirus Update: Infections, Deaths Continue To Rise
The rollout of the Pfizer/BioNTech coronavirus vaccine continues in the U.S. and the U.K. And the vaccine advisory committee of the Food and Drug Administration plans to meet Thursday for a final assessment of the vaccine candidate from Moderna (MRNA). That second vaccine could be approved and rolled out within days, reinforcing the fight against the virus.
Pfizer stock slipped 0.3%, BioNTech jumped 4.2% early Tuesday. Moderna had a 1.6% gain.
Meanwhile, worldwide, the coronavirus has infected 73.28 million persons since the beginning of the outbreak. The rate of infection has angled sharply higher since the start of October, with the seven-day average of daily cases topping 627,000 on Monday, more than double the daily rate at the start of October. Total deaths from the virus rose above 1.63 million on Monday, as the daily number of deaths also continued to rise. The seven-day average death rate was at 10,979 on Monday, a 120% increase vs. Sept. 30.
In the U.S., total infections since the start of the outbreak hit 16.942 million on Monday. Deaths rose to 308,091. The average for new cases held above 218,000 on Monday, more than 400% above the numbers of new cases at the end of September. Daily deaths, measured on a seven-day average, rose to 2,527 — up from 732 on Sept. 30.
Stock Market Status, Breakout Watch
The stock market’s confirmed uptrend remains in effect, but the S&P 500 notched its fifth distribution day on Monday and the Russell 2000 remains extended a concerning 30% above its 200-day moving average. IBD’s SwingTrader notes that the Nasdaq has entered a period of sideways trade, recommending a position of 75% exposure.
SwingTrader analysis says, “there are still setups (for investors to make stock buys) and the indexes are resisting selling, but we are still cautious as we could be in for more sideways action.”
For more detailed analysis of the current stock market and its status, study the Big Picture.
Nonetheless, growth stocks continue to show strength. Monday’s breakout watch leader, Sterling Construction (STRL), added another 1.6% in Tuesday’s premarket session. The IBD Stock Spotlight alumnus broke out past a 17.35 cup-with-handle buy point, ending the session extended beyond the entry’s 5% buy zone.
Database software leader Dropbox (DBX) has rebounded 16% so far in December, after reporting its fifth straight quarter of accelerating earnings growth. The stock trimmed its early advance to 1.3% in Tuesday’s premarket trade, positioning shares for a possible starting bell breakout past a cup-base buy point at 24.24. Dropbox has a nearly perfect IBD Composite Rating of 98, and is the top-ranked stock in the database software industry group.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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