Dow Jones futures fell slightly overnight, along with S&P 500 and Nasdaq futures. The stock market rally had a strong response on Tuesday to another Target (TGT) earnings warning, rebounding from early lows to close higher.
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Investors can get more clarity on You’re here (TSLA) Sales in China ahead of Wednesday’s opening.
StockVRTX, Ultimate Beauty (ULTA), ZIM Integrated Shipping (ZIM), Albemarle (ALB), Ashland Global Holdings (ASH), Timken Steel (TMST) and Chevron (CLC) are stocks in or near the buy zones. Vertex Pharmaceuticals (VRTX), Ulta Beauty and Albemarle are in the handles. ZIM stock flirts ASH stock is below an official point of purchase but probably actionable now. TMST stock broke Tuesday as Chevron remains in a buy range.
The relative lines of force for these stocks are at or near the highs. The RS line, the blue line in the charts provided, tracks a stock’s performance against the S&P 500 Index.
ALB stock is enabled IBD classification, while Ashland stock is on the ratings watchlist. ZIM stock is on the INN 50. CVX stock is on the IBD Big Cap 20. Vertex Pharmaceuticals was IBD stock of the day. The video embedded in this article discusses Tuesday’s market action and analyzes TimkenSteel, Chevron and ULTA stocks.
Booming EV giant seizes Tesla’s EV crown
Tesla deliveries in China
The China Association of Automobile Manufacturers will likely release May auto sales data early Wednesday morning. In addition to industry-wide electric vehicle and auto sales, investors will get You’re here (TSLA) Deliveries to China.
Tesla China’s production and shipments in May improved significantly from April, when the Shanghai factory was closed for much of the month. Tesla production remained limited in May, although it has resumed in recent weeks and could reach full capacity in June.
Most other automakers reported improved but still limited production and deliveries in China last month. The big exception is China EV and the battery giant BYD (BYDDF), which posted record sales in April and again in May thanks to its in-house battery and chip operations.
Still, Tesla is all but guaranteed to lose its second-quarter EV crown to BYD, though the latter includes EVs and plug-in hybrids.
Tesla stock edged up 0.25% to 716.66 on Tuesday, rebounding from morning lows. Although off the 11-month lows of late May, TSLA stock is well below its 50- and 200-day moving averages. BYD stock fell 0.5% to 38.12.
Dow Jones Futures Today
Dow Jones futures fell 0.1% from fair value. S&P 500 futures fell 0.2% and Nasdaq 100 futures lost 0.2%.
Remember that overnight action in Futures contracts on Dow and elsewhere does not necessarily translate into actual trading over the next stock Exchange session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
Target said big markdowns early Tuesday to deal with surprise inventory hitting profit margins even harder than he had expected a few weeks ago. This heightened concerns about consumer spending and the economy. But Target stock, which fell to 147.15 shortly after the open, closed just 2.3% lower at 155.98.
The stock market rally, which opened sharply lower, quickly erased the losses and rallied strongly.
The Dow Jones Industrial Average rose 0.8% on Tuesday stock market trading. The S&P 500 index advanced 0.95%. The Nasdaq composite climbed 0.9%. The small-cap Russell 2000 jumped 1.6%.
U.S. crude oil prices rose 0.8% to $119.41 a barrel.
The 10-year Treasury yield fell 7 basis points to 2.97%.
From best ETFsthe Innovator IBD 50 ETF (FFTY) jumped 2.9%, while the Innovator IBD Breakout Opportunities ETF (FIGHT) increased by 0.65%. The iShares Expanded Tech-Software Sector ETF (VIG) rose 1.6%. The VanEck Vectors Semiconductor ETF (SMH) increased by 0.8%.
SPDR S&P Metals & Mining ETF (XME) jumped 3.5%, with TimkenSteel stock being just a small component. The Global X US Infrastructure Development ETF (PAVE) gained 1.65%. US Global Jets ETF (JETS) increased by 1.3%. ETF SPDR S&P Home Builders (XHB) increased slightly by 0.4%. The SPDR Energy Select ETF (XLE) jumped 3%, with CVX stock a major holding. The SPDR Financial Select ETF (XLF) increased by 0.8%. SPDR Healthcare Sector Fund (XLV) closed up 1.3%.
Reflecting more speculative history stocks, ARK Innovation ETF (ARKK) rebounded 3% and ARK Genomics ETF (ARKG) 3.6%. Tesla stock is still the top position among Ark Invest’s ETFs.
Five best Chinese stocks to watch now
Stocks to Watch
ULTA stock rose 1.8% to 421.02, advancing despite Target’s latest warning. Ulta Beauty’s stock has a cup with handle buy point of 426.93. Last month, shares of the beauty retailer plunged following Target’s initial warning, but rebounded powerfully on Ulta’s earnings.
ZIM stock climbed 1.9% to 68.52, flirting with clearing some short-term levels that could be treated as a near-inning. On a weekly chart, ZIM stock has a tiny handle, offering a buy point of 68.63. But on a daily chart, the container shipping company has a cup bottom with an official buy point of 75.81.
ALB stock edged up 10 cents to 257.89 on Wednesday. Shares of the lithium giant have a buy point of 273.78 in a big cup basis. In late May, ALB stock rose above an early entry of 248 on the heels of a second big gain in earnings in a month, but then briefly fell below those levels a few days later.
ASH stock closed 0.3% higher at 110.51, closing intraday lows nicely. On Monday, the chemical additives firm topped 111.15 flat base intraday buy point, but closed below this level. An investor could use 108.95 as an early entry for Ashland stock.
TimkenSteel stock jumped 8.8% to 26.18, clearing a buy point of 24.90 cups with handle, MarketSmith said. The stock of TMST is slightly increased. Specialty steelmakers distinguish themselves with Howmet Aerospace (HWM) showing strong action. Other steelmakers are starting to bounce back.
Chevron shares rose 1.9% to 180.21, a new closing high and moving back into a buy range from a fixed-base entry of 174.86. CVX stock is less volatile than many energy names and even now is just 5.9% above its 10-week line.
VRTX stock climbed 1.4% to 271.86. Vertex stock has a buy point of 276.10 cups with handle, finding support at the 50-day line.
Market rally analysis
Major economic, trade, and political news are important to the stock market, but what really matters is the market’s reaction to that news.
Target’s previous warning on May 18 triggered a selloff in the market, signaling that the just-confirmed uptrend was in serious trouble. Two days later, the major indices rose above their mid-May lows.
But on Tuesday, the market’s current confirmed rally responded well to Target’s latest warning, bouncing back after initially selling. Even Target broke off morning lows – above its late May lows after its initial profit warning. Other retailers cut their losses or even turned positive.
The major indexes, which undercut their 21-day moving averages on Tuesday morning, rallied for solid gains.
The 10-year Treasury yield, falling back below 3% after big gains on Monday, was quietly a key contributor to Tuesday’s reversal to the upside.
Still, the stock market rally hasn’t quite determined whether it wants to go up or test May’s lows.
Prolonged side action could be positive. Several handfuls have formed in recent days. A longer pause would allow more handles and bases to develop, as well as catch up with the moving averages.
If the major indices move above their recent ranges, they will soon reach the 50-day moving average. The S&P 500 is just below its 10-week line, with the Dow Jones closing just above that key level. The small-cap Russell 2000 is above its 50-day and 10-week averages.
Energy stocks continue to dominate the market. A number of other sectors are trying to rebound, including metals and mining like TimkenSteel. Lithium deposits such as Albemarle can be considered as a mining deposit of metals but also as an energy stock. Drugmakers and big biotechs generally hold their own, such as Vertex Stock. Even some retailers like Ulta Beauty seem interesting.
But all of these non-energy sectors clearly need market recovery to at least hold their own, and could struggle to make much headway without a broad push.
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What to do now
After Monday’s swoon, Tuesday’s action was more positive. But with the market recovery still in motion, investors should still maintain low to modest overall exposure. They should also keep individual positions small, at least to start with. Consider taking partial profits fairly quickly, given current market conditions.
If the market rally exceeds recent levels and the major indices break through their 50-day lines, investors can take advantage of buying opportunities. But continue to gradually increase the exposure.
Investors should keep their watchlists up to date. Some fertilizer names could be shelved, with more attention given to retail and steel names. Make sure you are ready and aware when the market is gaining momentum.
Lily The big picture every day to stay in tune with market direction and key stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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