Stock futures swung into widely mixed trade Wednesday as markets responded to early election results from the Georgia Senate race. Big tech and social media names took hard early hits. Financial stocks dominated the premarket upside, lifting recent breakout stocks Jefferies and T. Rowe Price. An analyst note sent Tesla to the top of the Nasdaq. Clean energy stocks led rallying small caps, while Caterpillar and JPMorgan lifted the Dow Jones today.
Early results in Georgia showed Democrat Raphael Warnock beating incumbent Republican Kelly Loeffler in a startling win. In Georgia’s other senate runoff, Democrat Jon Ossoff was unexpectedly leading Republican David Perdue by a narrow margin as results continued to roll in.
Dow Jones futures pared early gains to 0.1% after the release of weak employment data from ADP. S&P 500 futures steepened their decline to 0.3% below fair value. Nasdaq 100 futures slumped a full 1.6% on the stock market today as big tech and social media names braced for the possibility of a Democrat-controlled Congress. Meanwhile, small caps remained in full rally mode as Russell 2000 futures gained 2.5%, boosted by rallying alternative energy stocks.
SunPower (SPWR) soared 9.3%. Clean Energy (CLNE) grabbed a 7.3% gain. Sunrun (SUN) leapt 6%, and fuel cell leader Plug Power (PLUG) rallied 5%. The early gain position Sunrun for a breakout past what MarketSmith chart analysis pinpoints as a 74.24 buy point in a 14-week cup-with-handle base.
On the IBD 50 list, marijuana REIT Innovative Industrial Properties (IIPR) rallied 3.4%. The REIT, also an IBD Leaderboard listing, is extended after clearing a three-weeks-tight pattern. Tesla topped the Leaderboard roster, rallying 3.8% in premarket trade.
S&P 500: Banks, Energy Lead; Social Media Giants Lag
Banks and materials plays packed the top of the S&P 500 as investors sold bonds and the dollar in reaction to a possible Democrat sweep of the Georgia Senate elections. Markets also largely expect a Democrat-controlled Senate would deploy broader and more rapid stimulus support for the U.S. economy and consumers.
Banks held 12 of the top 20 early gains among S&P 500 stocks. NextEra Energy (NEE) jumped 2.4%. Martin Marietta swung 5.4% higher, Vulcan Materials gained 5%, to the top of the S&P 500.
Near the bottom of the S&P 500, social media giants Facebook (FB) and Twitter (TWTR) — key targets for potential regulatory reform under a unified Congress — each dropped 2.6%. Netflix (NFLX), Amazon.com (AMZN), Apple (AAPL) and Alphabet (GOOGL) all posted losses in the 2% range.
Office and lab space REIT Alexandria Real Estate Equities (ARE) posted the S&P 500’s steepest loss, down 3.3% after announcing a six million share follow-on offering.
Bond Yields, Oil Prices Rise; Dollar Slips
There was a glimpse of normalcy in the market’s vital signs early Wednesday as 10-year bond yields bounced above 1.0% for the first time since March, and West Texas oil prices rebounded above $50 a barrel. WTI has not closed above the $50 mark since late February. Oil prices rebounded partly on Saudi Arabia’s decision on Tuesday to trim its production in February, while other leading producers continue to notch production levels higher in anticipation of recovering demand. Oil investors were also reacting to the seizure of a South Korean oil tanker in the Persian Gulf by Iran’s Revolutionary Guard.
Bitcoin traded just below $35,000 after rallying to a record of $35,690 late Tuesday, according to CoinDesk. Bitcoin-related stocks were mixed, with Marathon Patent Group (MARA) up 6% and MicroStrategy (MSTR) traded 1.9% higher. PayPal Holdings (PYPL) was down 2.5%.
Banks and energy stocks led a rally in Europe that lifted London’s FTSE 100 3.1% in afternoon trade. The CAC-40 in Paris and Frankfurt’s DAX were each up about 0.9%
Payroll process ADP’s National Emloyment Report showed U.S. non-farm private employers trimmed payrolls by 123,000 workers in December. That was far below the 304,000 new hires in November, surprising economists who had projected an increase of 123,000 for the month. That marked the report’s first decrease in employment asince April. Small and large businesses did all of the cuting, whereas mid-size businesses added 37,000 workers during the month.
Research Markit releases its final December purchasing managers index for the U.S. economy at 9:45 a.m. ET. Minutes from the Federal Reserve’s Dec. 16 meeting are due out at 2 p.m. ET.
Nasdaq: Tesla, Walgreens Lead; Workday, Zoom Video Dive
There were only a handful of advancers at the top of the Nasdaq 100. Tesla (TSLA) rallied 2.9% and Walgreens (WBA) briefly soared more than 3% before paring gains. Drug distribution giant AmerisourceBergen (ABC) announced it would acquire Walgreens Alliance Healthcare businesses in a $6.5 billion cash andstock deal. AmerisourceBergen vaulted 5.3% higher.
Tesla jumped after Morgan Stanley hoisted the stock’s price target to 810, from 540, based on the EV maker’s fourth-quarter year-over-year delivery growth of 61%. The note also raised 2030 production expectations to 5.2 million units, from 3.8 million.
Wednesday’s early gain pointed Tesla toward yet another new high. The IBD Leaderboard stock is up nearly 60% following a November breakout from a cup-with-handle base.
Stay-at-home stocks, names tending to benefit from the consumer shifts caused by the pandemic economy, took hard early hits. Collaboration software developer Workday (WDAY) fell hardest, down 2.4%. Splunk (SPLK), Adobe (ADBE) and Zoom Video Communications (ZM) traded near the bottom of the Nasdaq 100.
Facebook, Alphabet, Microsoft and Apple all traded near the bottom of the index. China-based ecommerce leader JD.com (JD) was also in the downside mix, off 2.2%, after surging nearly 11% to a record high on Tuesday.
Dow Jones Today: Caterpillar Rallies, UnitedHealth Slides
Early advancers and decliners were fairly evenly divided on the Dow Jones today. Caterpillar (CAT) jumped 2.4%, signaling a clear move above a three-weeks-tight pattern. JPMorgan (JPM) and 3M (MMM) each rose around 2%. Goldman Sachs (GS) climbed 1.4%, suggesting the stock could enter a profit-taking zone, up more than 20% from a late-November breakout. Goldman shares also ended Tuesday less than 2% from their record high, set in March 2018 — at the start of the U.S. trade war with China.
Near the bottom of the Dow, UnitedHealth Group (UNH) tumbled 2.4%. The stock is among those vulnerable to Democrat controlled congress, aiming to for braod-based healthcare reform.
Intel (INTC) pared losses after an early 2.6% dive, and Apple dropped 2%. On Monday, Apple triggered the automatic sell rule for investors who had bought at the brief tick above the 138.08 cup base buy point. The rule, which kicks in when a stock falls more than 7% to 8% below a buy point, would not apply to investors who had bought during the IBD Leaderboard stock’s run up through several prior alternative entries.
Microsoft shares fell 1.8%. The stock is continuing its basing project, after pulling back below its 21-day exponential moving average on Monday. The IBD Leaderboard listing has now added a handle buy point to its 19-week cup base, lowering its possible entry point to 227.28.
Stock Market Rally Vs. Georgia Election Results
The stock market’s nine-week old rally began when the market posted a follow-through day on Nov. 4, as market’s reacted to the presidential election. The Dow industrials and S&P 500 briefly touched record highs, before pulling back on Monday. On Tuesday, the Dow, the S&P 500, the Nasdaq and the Russell 2000 all executed bullish rebounds showing support at their 21-day exponential moving averages.
Nasdaq 100 futures on Tuesday pointed to an open back below that index’s 21-day line. However, early trade was highly volatile and mixed. This is an important day to remember that premarket action does not always show what will happen when actual trade begins after the starting bell. Election results from Georgia are still not yet final, and the mood of the market can change with surprising speed.
Senate, Congress To Affirm Electoral Votes
Also getting underway in Washington D.C. are the highly uncertain events surrounding the affirmation of electoral votes by Congress, presided over by Vice President Mike Pence. A number of Republican lawmakers, most vocally Texas Senator Ted Cruz, have said they intend object to elector votes from certain states. In addition, President Donald Trump as reportedly preside Pence to invalidate some or all of the results. News reports Tuesday said Pence had informed the President that such an action was not legally within his power.
Meanwhile, Trump had called for his supporters to gather in the capitol and rally against the election validation. A number of groups announcing plans to attend include pro-violence activists, most notably the group called the Proud Boys. Proud Boys leader Henry Tarrio was arrested by Metropolitan Police for burning church property during a prior D.C. protest. Tarrio, who was also charged with possessing high-capacity firearm magazines, was released and ejected from D.C. and barred from returning, except for very limited cirtcumstances, including meeting with his attorney or attending a court date, according to The Associated Press.
The Pentagon approved a requestion by D.C. Mayor Muriel Bowser, deploying National Guard troops in the city and capitol area to support police, in the event of unrest or attempts to disrupt the Congressional proceedings.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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