Dow Jones futures fell sharply Monday morning, along with S&P 500 and Nasdaq futures, amid fears over a new Covid strain and travel restrictions despite a stimulus deal vote due today on a $900 billion package. But futures are off their worst levels. Nike (NKE), JPMorgan Chase (JPM), Moderna (MRNA) and Tesla stock also are in focus.
Boeing, airlines, hotels and cruise lines were losers as the new, more-infectious coronavirus mutation in the U.K. spurs new travel bans.
Dow Jones giants Nike, Goldman Sachs (GS) and JPMorgan stock rose early Monday on news, with Nike and possibly JPM eyeing breakouts. Moderna coronavirus vaccine immunizations start today. Meanwhile, Tesla stock retreated amid continued heavy trading as it enters the S&P 500 index.
Stimulus Deal Vote
Now the stock market rally awaits passage of a stimulus deal, with the House and Senate set to vote Monday. Senate Majority Leader Mitch McConnell on Sunday hailed a “bipartisan breakthrough,” announcing that “the four leaders of the Senate and the House finalized an agreement” on a $900 billion stimulus deal. The deal provides fresh extra jobless benefits, provides $600 in direct checks to adult Americans, more funding for small business loans, $15 billion to airlines and more. Wind and solar tax credits will be extended, which could be good news for wind and solar stocks. Solar stocks were winners last week, perhaps in anticipation of clean energy tax breaks being extended.
On Saturday night, lawmakers resolved the last notable hurdle to the $900 billion stimulus package. Sen. Pat Toomey, R-Pa., wanted to rein in the Federal Reserve’s emergency lending powers. Democrats worried that Toomey’s proposal was overly broad and would limit the central bank’s ability to respond to future crises. A more-narrow compromise will provide some limits on the Fed.
The stimulus deal will be combined with a $1.4 trillion spending bill.
With the economic recovery stalling amid coronavirus cases and Covid restrictions and the Jan. 5 Georgia Senate runoffs looming, there have been strong reasons to reach a stimulus deal. Lawmakers also would like to get out of town for the holidays.
Big Techs Aren’t Leading Market Rally
The stock market rally finished slightly lower Friday as stimulus deal talks stalled. Notably, the trillion-dollar giants Apple stock, Amazon.com (AMZN) and Google parent Alphabet (GOOGL) all fell more than 1%, while Microsoft (MSFT) lost a fraction. Intel (INTC) tumbled on a new threat to its chip business.
But tech titans haven’t been leading the recent stock market rally, arguably a good thing. Leading stocks generally held up well Friday, notably cybersecurity names such as CrowdStrike (CRWD) and Zscaler (ZS).
Overall, it was a solid week for the stock market rally, especially the Nasdaq and growth names. All the major indexes hit record highs.
Friday Night Highlights
Nike earnings were better than expected for the athletic apparel and shoe giant. Nike stock jumped late.
The Federal Reserve gave passing grades to major financial firms in the latest bank stress tests. More importantly, the Fed said JPMorgan Chase, Goldman Sachs (GS), Citigroup (C), Bank of America (BAC) and others could resume buybacks, but not raise dividends. JPMorgan and several others announced plans to resume share repurchases. JPMorgan stock are up Monday morning, along with Citigroup, Bank of America and other banks.
Tesla (TSLA) fell 4% in Monday’s premarket, even with a Wedbush price target hike from 560 to 715. On Friday, TSLA stock rallied 6% to 695, hitting yet another record high. Volume was huge, especially in the final minutes, as index funds bought up shares ahead of Tesla stock joining the S&P 500 index before Monday’s open. After a 70% surge over the past month on the S&P 500 announcement, how will Tesla stock react?
Apple, Microsoft, Intel, Nike, JPMorgan and Goldman are all on the Dow Jones Industrial Average and S&P 500 index, with AAPL, MSFT and INTC also Nasdaq components.
Dow Jones Futures
Dow Jones futures tumbled 1.6% vs. fair value, even with gains by Nike, JPMorgan and other banking giants. S&P 500 futures retreated 1.9% while Nasdaq 100 futures lost 1.45% vs. fair value.
Dow futures are off their worst levels of the morning. Futures have been volatile, with big moves in just a few minutes.
While a stimulus deal is likely a positive for the stock market rally, investors may have already priced that in after months of speculation.
Meanwhile, travel stocks plunged on the new Covid strain and related travel restrictions, even with the coming airline aid. Boeing and Delta Air Lines (DAL) sank 5%-6%.
Stocks sold off hard in Europe. Crude oil futures and Bitcoin tumbled.
The pound fell significantly amid U.K. coronavirus restrictions, European travel restrictions with the U.K. and Brexit talks with the EU resuming Monday.
Coronavirus Vaccine News
The FDA late Friday gave emergency use approval to the Moderna coronavirus vaccine. FedEx (FDX) and UPS (UPS) began shipping Moderna coronavirus vaccine doses on Sunday, with immunizations set to start Monday.
Pfizer coronavirus vaccine jabs began on Monday, Dec. 14. Vice President Mike Pence and congressional leaders got their first shots Friday.
The U.K. is expected to approve the AstraZeneca (AZN) vaccine before year-end.
The U.S. said its year-end goal of distributing 40 million coronavirus vaccine doses will be pushed back a week into 2021. Gen. Gustave Perna, in charge of the Covid vaccine rollout, said Saturday that he didn’t realize how long it would take for the FDA to carry out quality control checks.
Still, with two coronavirus vaccines approved, and more likely in next few months, immunizations hopefully can reach much of the country by the end of March. Just reaching the majority of senior care facilities will substantially reduce the daily Covid death toll. Heading into late spring, the economy may be able to start fully recovering from the pandemic.
Coronavirus Cases, New Covid Strain
Coronavirus cases worldwide reached 77.26 million. Covid-19 deaths topped 1.70 million.
Coronavirus cases in the U.S. have hit 18.26 million, with deaths above 324,000. On Friday, new U.S. Covid cases hit a fresh record of 254,680, with California continuing to see surging infections.
On Saturday, U.K. Boris Johnson put the London and Southeast England on full lockdown, with all non-essential businesses closed through Dec. 30. Johnson cited a new, more-infectious Covid-19 strain that U.K. experts say is helping to fuel a surge in London-area cases. European nations and several other countries suspended travel to and from the U.K. over the new coronavirus mutation. There is evidence that the strain is already in continental Europe.
Stock Market Rally
U.S. Stock Market Today Overview
Last Update: 4:10 PM ET 12/18/2020
The stock market rally had a down day Friday according to the major indexes, but they slashed losses in the final minutes.
The Dow Jones Industrial Average lost 0.4% in Friday’s stock market trading. The S&P 500 index dipped 0.35%. The Nasdaq composite lost less than 0.1%.
For the week, the Dow Jones climbed 0.5%, the S&P 500 1.3% and the Nasdaq just over 3%.
Tech Giants Retreat
Intel tumbled 6.3% on a report that Microsoft is working on its own in-house chips for PCs and servers. That comes as Apple has already started using its own chips for Mac computers, with the prospect of more.
Apple stock fell 1.6% to 126.65, still above a 125.49 early entry. If shares can consolidate for a few days, Apple could form a handle with a proper buy point. Google stock fell 1.2% to 1,720.03, back below a 1,726.20 buy point. Shares fell 2.7% for the week, but settled just above their 10-week line. Amazon stock sank 1.1% on Friday but gained 2.7% for the week, holding its 50-day and 10-week lines. Microsoft stock pared its Friday loss to 0.4%, up 2.5% for the week.
Growth stocks overall had a strong week.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 1.3%, capping weekly gains of 5.2% and 4.1%, respectively. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.4% on Friday and 5.6% for the week. The VanEck Vectors Semiconductor ETF (SMH) dipped 0.3% on Friday with a 2.2% weekly gain.
The ETFMG Prime Cyber Security ETF (HACK) spiked 4% on Friday and 7.5% for the week, as the SolarWinds (SWI) hacking attack compromised more government agencies and companies such as Microsoft. That’s highlighting the need for better cybersecurity, and pushing up cybersecurity stocks. CrowdStrike stock leapt 16% for the week, with Zscaler stock and Okta (OKTA) up 7.7%. SailPoint (SAIL) raced 14% higher and Palo Alto Networks (PANW) 15%.
Nike earnings per share unexpectedly rose 11% to 78 cents in its fiscal Q2. Sales advanced 9% to $11.24 billion after two down quarters. Digital sales surged 84%, up from 82% in Q1 and 75% in the quarter before that.
Bank Stress Tests
The Federal Reserve gave JPMorgan and other banking giants clearance to resume stock buybacks next year, but will continue to cap dividends for now. The Fed suspended buybacks and dividend hikes in June to preserve capital as the coronavirus pandemic and shutdowns slammed the economy.
With economic prospects improving, especially after coronavirus vaccinations reach the bulk of the U.S. population, the Fed is less concerned about banks’ financial health.
JPMorgan said it will buy back $30 billion in stock. Morgan Stanley (MS) expects to repurchase $10 billion, while Goldman Sachs and Citigroup say they’ll resume buybacks.
JPMorgan stock rose 3% early Monday, eyeing a possible breakout from a handle in a consolidation going back to the start of the year. Goldman Sachs advanced 3%, Citigroup climbed 3% and Bank of America stock was up 2%.
A stimulus deal also would should be a positive for banks, by boosting the real economy and interest rates.
Stock Market Rally Pullback
The Nasdaq composite, which reversed from a record high Friday, is still 7.2% above its 50-day moving average. That’s not extended per se, but close to being so. It’s been that way for the past couple of weeks.
So Friday’s retreat in the major indexes, with growth stocks doing well, was fairly positive.
Furthermore, the somewhat-sluggish action in tech giants, with Apple stock somewhat excluded, also may be a positive for the market rally and especially growth investors. If tech titans like Amazon stock just keep pace with the market rally, rather than resume leadership, that can keep bullish sentiment and the major indexes in check. Meanwhile, growth stocks can power ahead without overheating the market.
While Dow Jones futures indicate that the stock market rally will take a pause, it’s unclear if that will last far beyond the opening bell or Monday. This is a time to be invested. Growth stocks are doing well, while more are breaking out successfully. So keep working on your watchlists. Go through your screens to find possible candidates, then dig deeper into those that look particularly interesting.
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