Dow Jones futures rose slightly early Thursday, along with S&P 500 futures and Nasdaq futures, ahead of a shortened Christmas Eve session, but Alibaba stock tumbled on a new anti-monopoly probe. The stock market rally had a mixed session Wednesday, taking in stride President Trump’s threat to veto the stimulus deal.
The State Administration for Market Regulation has opened an anti-monopoly probe vs. Alibaba (BABA). Separately, payments giant Ant Group, an Alibaba affiliate, said it’s received a notice for high-level talks with financial regulators. Last month regulators suspended the huge Ant Group IPO just days before its debut on the Hong Kong and Singapore exchanges.
Regulators have signaled growing concern about big internet giants, especially platforms run by Alibaba and Tencent (TCEHY). Alibaba in particular has run afoul of regulators, following criticism from founder Jack Ma.
BABA stock plunged 10% before the open. Shares have tumbled in the past several weeks as regulators take aim at Alibaba. JD.com (JD), another e-commerce giant and allied with Tencent, lost 4% in the premarket after rebounding above its 50-day line Wednesday. Tencent stock, which trades over the counter in the U.S., fell in Hong Kong trading.
Chip Stocks In Focus
In Wednesday’s session, Monolithic Power Systems (MPWR) briefly broke out, closing just below a conventional buy point. Meanwhile, Apple chipmakers Taiwan Semiconductor (TSM) and Qorvo (QRVO) are near buy points, with Apple stock itself closing in on a breakout. Chip-equipment makers Lam Research (LRCX) and Applied Materials (AMAT) are finding support around a key level, offering potential buying opportunities. Finally, Advanced Micro Devices (AMD) fell for a sixth straight session, but is in buy range and also trying to find support.
Trump Veto Threat For Stimulus Deal
President Trump’s Tuesday night threat to veto the $900 billion stimulus deal and $1.4 trillion omnibus spending bill came as a surprise, initially knocking Dow Jones futures, but not too much. Trump criticized some spending provisions, but also wanted a big bump in direct checks to adult Americans to $2,000, up from $600 in the stimulus deal. He did follow through on his veto threat on the omnibus spending bill late Wednesday.
House Speaker Nancy Pelosi quickly endorsed Trump’s $2,000 check proposal, but it’s unclear if Senate Republicans will go along. The overwhelming support for the stimulus deal suggests Congress could override a Trump veto, if it actually happens.
Investors may be assuming that the stimulus deal will go through in some fashion, with or without changes.
Dow Jones Futures Today
Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures climbed 0.2% and Nasdaq 100 futures advanced 0.15%.
After the close, President Trump blamed Iran for rocket attacks against the U.S. embassy in Iraq. He warned Tehran in a tweet, “If one American is killed, I will hold Iran responsible.”
The stock market will close at 1 p.m. ET on Christmas Eve and will be closed on Christmas Day.
Coronavirus cases worldwide reached 79.19 million. Covid-19 deaths topped 1.74 million.
Coronavirus cases in the U.S. have hit 18.91 million, with deaths above 334,000.
New U.S. coronavirus cases may have peaked, with some tentative signs that California infections are coming down after exploding for several weeks. The next few weeks will be hard to judge if fewer people are tested during the holidays.
Meanwhile, just 1 million Americans have been received the first dose of a coronavirus vaccine, far short of the year-end goal of 20 million.
Stock Market Rally
The stock market rally had a mixed session, with some real economy names doing well while growth took a step back.
In addition to stimulus deal headlines, a tentative Brexit deal appeared to boost stocks Wednesday morning. If a final post-Brexit agreement is reached between the U.K. and European Union, it would ease fears of a hard break and economic dislocation across Europe that is struggling with renewed coronavirus shutdowns.
The Dow Jones Industrial Average rose 0.4% in Wednesday’s stock market trading, helped by banks and energy names. The S&P 500 index edged up 0.1%. The Nasdaq composite sank 0.3%, fading into the close.
Apple stock, a member of the Dow Jones, S&P 500 and Nasdaq composite, dipped 0.8% to 130.96. That follows Monday’s upside reversal for a 1.2% gain and Tuesday’s 2.85% pop to a three-month high. Apple stock is still in range from a 125.49 early entry and nearing the official buy point of 138.08.
Growth stocks underperformed overall. Among the best ETFs, the Innovator IBD 50 ETF (FFTY) sank 1.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) retreated 0.9%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 1.3%. The VanEck Vectors Semiconductor ETF (SMH) dipped 0.5%. TSM stock is the top holding in SMH, which also owns AMD, AMAT, LRCX and Qorvo stock.
Chip Stocks In, Near Buy Zones
While not prone to runs of eye-popping gains day after day like some cloud software names and IPOs, chip stocks have been strong winners since the coronavirus crash. And for good reason. Many are reporting strong, accelerating growth.
Monolithic Power is a data-center chipmaker, along with the bigger, better-known AMD and Nvidia (NVDA). Monolithic Power’s earnings and sales growth have accelerated for the past four quarters.
MPWR stock rose as high as 361.88 intraday Wednesday, a record high and briefly cleared a 358.79 buy point from a cup base. But shares faded to finish off 17 cents at 353.89.
Investors could have bought MPWR stock on Dec. 15, as it rebounded from its 50-day line and cleared a trend line.
The relative strength line for MPWR stock is back near record highs, following a strong run since May 2019. The RS line, the blue line in the charts provided, track a stock’s performance vs. the S&P 500 index.
Taiwan Semiconductor is the world’s largest chip foundry, making chips for the likes of Apple, AMD, Nvidia, Qualcomm (QCOM) and more. With Apple doing more chips in house, shifting from Intel (INTC), that’s good news for Taiwan Semiconductor, which also has market-leading technology.
At $538 billion, TSM stock has by far the highest market cap in the semiconductor sector. TSM stock dipped 0.2% to 103.76 on Wednesday. Shares are in a three-weeks-tight pattern that could turn into a four-weeks-tight. The correct buy point is 107.94, according to MarketSmith analysis, though investors might try to look for a slightly lower entry.
Qorvo is an Apple chipmaker but also a notable 5G wireless play. With 5G wireless taking off and the first 5G iPhone on sale, Qorvo growth prospects look strong. The latest quarter’s earnings and revenue gains were the best in years.
Qorvo stock rose 1.1% to 165.10 on Wednesday, moving toward a 171 ascending-base buy point. Over the last several months, QRVO stock has had a solid advance, but has been a difficult one to hold on breakouts due to various pullbacks.
Lam Research is a leading chip-equipment maker. The highly cyclical sector is on the upswing, with Lam Research earnings and sales growth accelerating for the last few quarters.
LRCX stock fell 1.2% to 471.13 on Wednesday, closing just below its 21-day exponential moving average after pulling back gradually over a few weeks. Aggressive investors could buy LRCX stock if it rebounds from this key level, perhaps if it clears Monday’s peak of 484.71.
Lam Research stock could be trying to build a new base, but would need a few more weeks for that to develop
Applied Materials is another semiconductor-equipment giant. Like Lam Research, Applied Materials boasts several quarters of accelerating growth.
AMAT stock sank 1.9% to 84.03 on Wednesday. Like LRCX stock, it’s now just below its 21-day line after a modest retreat from highs. A rebound from this area, perhaps above Monday’s high of 86.53, would offer an aggressive entry or add-on buy area.
AMD stock retreated 1.7% to 91.47, falling for a sixth straight session, closing just below its 21-day line, like AMAT and LRCX stock. Shares have fallen back from a high-handle entry of 96.47 but are in range from an 88.92 double-bottom buy point. Investors could buy AMD here or wait for a bounce from the 21-day line. It’s possible that the Dec. 15 high of 97.98 will serve as another high handle or shelf.
Market Rally Final Thoughts
While the stock market rally had a mixed session, with growth names generally lower, the general environment still looks positive. The major indexes are all near record highs and above their 21-day lines. Growth stocks have performed well over the last several weeks. Keep reviewing your holdings and paying attention to what the market is doing.
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