Stocks throttled back from opening highs Monday, after an early boost from third-quarter GDP numbers out of China, and after U.S. lawmakers imposed a make-or-break pre-election stimulus deadline for Tuesday. Netflix leads off the long list of top stocks due to report earnings this week. Zoom Video leapt out to an early gain, aiming to extend last week’s breakout. Meanwhile, Apple ran stop the Dow Jones today, working to finish a new handle on its base.
The Nasdaq opened 0.7% higher, than pared back to a 0.3% gain, still leading the stock market today, with Zoom Video (ZM) ran at the head of the Nasdaq 100. The S&P 500 trimmed a 0.5% jump to 0.2%. The Dow industrials’ 0.3% opening gain thinend to a 0.1% advance. Small caps outpaced early trade, with the Russell 2000 up 0.5%.
Early trading volume was soft on both the NYSE and the Nasdaq, compared to trading levels at the same time Friday.
Limited Brands (LB) led the S&P 500, climbing 4.2% after JPMorgan boosted the stock’s price target to 50, from 42. Kansas City SouthernKSU swept ahead 3%, after a paid of analst price target hikes.
Microchip Technology (MCHP) led the Nasdaq 100 and S&P 500, up 4% after an upgrade to overweight from Morgan Stanley. The note put that stock’s price target at 131. Zoom Videoshowed early strength, up more than 2% — aiming to continue its breakout from a high-tight flag base. The stock was extended at the closing bell on Friday.
Snapchat operator Snap (SNAP) vaulted 3.9% higher. JPMorgan boosted the stock’s price target to 33 — a bullish move ahead of the company’s third-quarter report, due late Tuesday. Snap is in a buy range above a cup-base buy point at 26.86.
Commercial properties REIT Vornado Realty (VNO) dived to the bottom of the S&P 500, down 2.1% after a downgrade to underperform from Evercore ISI.
Concho Resources (CXO) gave up a brief opening gain and slipped 0.5% after agreeing to a $9.7 billion takeover by ConocoPhillips (CPO), a deal that would create the largest independent domestic oil producer in the U.S. ConocoPhillips shares slipped 1.5%.
The energy sector was also on the radar following third-quarter results from Halliburton (HAL). Halliburton stock shook off premarket losses and rose 0.2% after a mixed report.
Gear up for the coming week’s market action by reading IBD’s Investing Action Plan.
IBD 50: Netflix Rises Ahead Of Earnings
Netflix, Tesla (TSLA), Amazon.com (AMZN) top the list of leaders set to report this week, beginning with Netflix’s report after Tuesday’s closing bell. Texas Instruments (TXN), Lam Research (LRCX) and Abbott Laboratories (ABT) are also due to report. All are in bases or buy ranges.
Dow Jones Today: Getting A Handle On Apple
Apple (AAPL) led the Dow Jones today, opening to a 1.1% gain after some lukewarm press from analysts on Saturday. The upshot: Apple is releasing 5G-ready smartphones into a world where most network providers are behind the curve, and in which consumers are generally stuck at home and using Wi-Fi. Still, many analysts view Apple’s roll out of 5G iPhones as kicking off a multi-year consumer upgrade cycle.
Apple stock is shaping a possible handle on a cup base. The potential buy point, at 125.49, would not become valid until the start of trade Tuesday.
Beyond the Dow, Netherlands-based electronics giant Philips (PHG) jumped 3.2% after scoring a solid third-quarter earnings and revenue beat.
Germany’s BioNTech (BNTX) popped 2.8%, moving the biotech closer to a cup-base buy point at 105.09. BioNTech vaccine partner Pfizer (PFE) gained 1.3% early Monday. Both stocks had jumped on Friday, after Pfizer announced that it could potentially apply for emergency U.S. Food and Drug Administration approval of its coronavirus vaccine in November. Trial data is due later this month.
On Sunday, House Speaker Nancy Pelosi said a stimulus deal must be reached by Tuesday. Otherwise, the House will place a hold on new coronavirus aid until after the election. Pelosi was optimistic that a stimulus deal could be struck.
House Democrats have passed a $2.2 trillion aid measure. Senate Republicans have drawn up a plan calling for $1.8 trillion. President Donald Trump reiterated his willingness to go beyond $1.8 trillion and match the Democrat’s spending targets, in order to reach an agreement. Senate Republicans plan to vote on a $500 billion stimulus on Wednesday, but President Trump expressed confidence that he could sell them on a “good” stimulus deal with Pelosi.
China’s Economy: Strong Retail Sales, Industrial Output
China reported a lightly weaker-than-expected 4.9% gross domestic product expansion in the third quarter. But the gain marked a second quarter of acceleration from pandemic-induced losses in the first quarter. September industrial production and retail sales were stronger-than-projected, up 6.9% and 3.3%, respectively. Industrial production levels matched levels marked in December, early in China’s coronavirus outbreak. Retail sales accelerated from August’s 0.5% gain — the first increase in seven months.
While the industrial numbers have been driven largely by government economic stimulus related to the pandemic, the retail sales numbers gave some indication that China’s consumer segment could be beginning to normalize.
China markets finished Monday’s session sharply mixed, with Hong Kong’s Hang Seng up 0.6% and the Shanghai Composite down 0.7%. Tokyo’s Nikkei 225 rallied 1.1%. Europe’s markets weakened in afternoon trade, with London’s FTSE 100 down 0.5%. Frankfurt’s DAX traded down 0.2% after giving up early gains. The CAC-40 in Paris narrowed a 0.5% gain to 0.2% — after trading on the exchange was halted for two hours Monday due to technical problems.
Coronavirus cases counted worldwide since the start of the outbreak rose above 40.32 million on Monday. That was up more than 6.1 million from Sept. 30, an 18% increase. Total deaths from the virus topped 1.11 million. Some 99,704 persons have died since Sept. 30, a 10% increase.
The running count of coronavirus cases in the U.S. climbed above 8.38 million, with more than 224,000 deaths. Since Sept. 30, more than 981,000 new cases have been reported, a 13.2% increase. During that period, 13,935 persons died, raising the death toll 6.6%.
Europe is outpacing the U.S. as both wrestled with an acceleration in new Covid-19 cases. Investors are awaiting initial final-stage data on coronavirus vaccines in the coming weeks — including last week’s heads-up from Pfizer and partner BioNTech.
Homebulders: Up Ahead Of Data
Homebuilder stocks could see some action after 10 a.m., when the National Association of Home Builders releases its October Housing Market Index. The release kicks off the monthly flurry of housing market economic news, with housing starts and building permits due on Tuesday, and existing home sales on Thursday.
D.R.Horton (DHI) and Toll Brothers (TOL) traded 1.6% higher in early action. Pultegroup (PHM) was up 1.2%. IBD Leaderboard stock LGI Homes (LGIH) gained 1.5%. LGI is in a buy range above a 124.04 buy point.
Dow Jones Today: Election Countdown
Caterpillar (CAT) will be a stock to watch this week, particularly after Monday’s strong industrial data out of China. CAT stock ran far ahead of the market last week with a 6.2% rally. And it has trounced techs this month, so far up more than 13% vs. a 4.54% gain for the Nasdaq. CAT stock ended Friday less than 3% below its record high, set just as trade war sanctions were launched in January 2018. Caterpillar reports third-quarter results on Oct. 27.
Like the Nasdaq, the Dow Jones today starts Monday sitting on a five-week advance. Under normal circumstances, expectations for any further gains just 11 trading days before a hotly contested presidential election would be slim. These are not normal circumstances. A fiscal stimulus deal or vaccine news could easily spur a market rally. A breakdown in stimulus talks or a vaccine trial are just two of many things that could send markets into a tailspin.
For more detailed analysis of the current stock market and its status, study the Big Picture.
The stock market’s confirmed uptrend remains in good standing. Scores of top stocks are coiled below buy points in valid bases. Some recent breakouts, like Beyond Meat (BYND) and ServiceNow (NOW), are holding up nicely. Others, such as D.R. Horton (DHI), PerkinElmer (PKI) and Axonics Modulation Technology (AXNX), have faltered.
A strong defense is the name of the game over these next two weeks. That means keep a close eye on the stocks you own, lock in gains where prudent. The wealth of leading stocks in bases during earnings season makes new buys, or increasing exposure, tempting. Just keep in mind, this is a volatile market, prone to downshift sharply on a headline or a tweet. Investors should consider how exposed they want to be to such a move.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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