Dow Jones futures rose slightly overnight, as did S&P 500 and Nasdaq futures. Salesforce.com (CRM) headlined major earnings after the close, with Nio and other Chinese EV makers releasing pre-opening sales data. The stock market rally closed on a mixed note Tuesday after initially pulling back, with the Nasdaq holding at a key level after last week’s strong advance.
The market is in a confirmed uptrend and investors have the green light to add some exposure. But don’t fall into the trap of buying hot stocks that are extended, such as Schlumberger (SLB) and Albemarle shares.
Salesforce and HP Inc. (HPQ) released after the close.
Salesforce revenue fell but exceeded views. Tips were medium to light. But CRM stock jumped 9% overnight. Shares recently hit a two-year low, but the enterprise software giant remains an industry bellwether.
HP’s earnings also beat views as the printer and PC giant raised the bottom of its full-year EPS target, although the overall outlook was roughly in line. HP stock edged higher in the extended trade. Shares edged up 0.2% in Tuesday’s regular session to 38.84, the fourth consecutive gain as they rebounded from the 200-day line and recovered the 50-day line. HP stock has a consolidation buy point of 41.57, but 39.81 could serve as an early entry.
Sales of electric vehicles in China
Meanwhile, Chinese electric vehicle makers Nio (NIO), Xpeng (XPEV) and Li-Auto (LI) is expected to signal May deliveries ahead of Wednesday’s market open.
Nio stock surged on Tuesday, with Xpeng and Li Auto on easing Covid restrictions, improving economic data and various new incentives for electric vehicles. But all three are in downtrends.
The Chinese electric vehicle and battery giant BYD (BYDDF) will likely release May sales on Friday, after defying the impacts of Covid with record sales in April. BYD stock is still within the range of an early buy point.
You’re here (TSLA) China sales will be released in a week or two as production at the Shanghai factory resumes. TSLA stock has rebounded from 2022 lows in recent days.
The video embedded in this article discusses Tuesday’s market action and analyzes Schlumberger stock, Albemarle (ALB) and ADM (SMA).
The ALB stock is on the IBD ranking. ADM stock is on SwingTrader.
Dow Jones Futures Today
Dow Jones futures were up 0.45% from fair value. The CRM stock is a component of the Dow Jones. S&P 500 futures advanced 0.4% and Nasdaq 100 futures climbed 0.45%.
The 10-year Treasury yield rose 2 basis points to 2.86%.
Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally lost ground on Tuesday, but closed intraday lows.
The Dow Jones Industrial Average fell 0.7% in trading on Tuesday. The S&P 500 index fell 0.6%. The Nasdaq composite fell 0.4%. The small cap Russell 2000 slipped 1.3%.
U.S. crude oil prices fell 0.4% to $114.67 a barrel, after briefly rising above $119. The European Union’s decision to partially block Russian crude imports supported prices on Tuesday morning, while China eased the blockages. But OPEC is considering whether to exclude Russia, which has seen production plummet amid import bans and sanctions, OPEC+ production limits, according to the Wall Street Journal. This could pave the way for Saudi Arabia and the United Arab Emirates, which have excess capacity, to pump significantly more.
Natural gas futures fell 6.7%.
The 10-year Treasury yield rose 10 basis points to 2.84%, rebounding from its 50-day line. China easing Covid restrictions and Fed Governor Christopher Waller backing “several” more half-point rate hikes helped boost Treasury yields, which had trended lower for several weeks.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.75%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 1.2%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 2%. CRM is a major holding company of IGV. ETF VanEck Vectors Semiconductor (SMH) edged down 0.4%.
The SPDR S&P Metals & Mining ETF (XME) fell 3.5% and the Global X US Infrastructure Development ETF (PAVE) fell 1.4%. The US Global Jets ETF (JETS) fell 0.6%. The SPDR S&P Homebuilders ETF (XHB) fell 1.3%. ETF Energy Select SPDR (XLE) fell 1.5%, with SLB stock a notable holding. The Financial Select SPDR ETF (XLF) fell 0.3%. The SPDR healthcare sector fund (XLV) fell 1.3%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) fell 2.9% and ARK Genomics ETF (ARKG) fell 4.1%. Tesla stock is the largest holding among Ark Invest’s ETFs. Ark also owns BYD shares.
Schlumberger stock briefly rose to a three-year high of 48.67 on Tuesday and just extended from the official consolidation buy point of 46.37 reached last Thursday. At that time, SLB stock was more than 15% above its 50-day line. But as crude oil prices erased big morning gains, SLB stock reversed lower, undercutting the official buy point. Investors who bought the oil services giant from early buy points, including 44.61, are still slightly positive, although they may have wanted to take partial profits on Friday or Tuesday morning. But SLB stock shows the risks of buying breakouts, especially when the stock is extended from the 50-day line.
Albemarle shares fell 3.9% to 260.42 on Tuesday after big gains last week and for May. After flashing an early entry around 248 on Thursday, ALB stock was clearly extended from that level on Friday. Perhaps the lithium giant will form a handful.
Five best Chinese stocks to watch now
Sales of electric vehicles in China
EV startups Nio, Xpeng and Li Auto are expected to show improved production and sales from a dismal April when Covid lockdowns slammed production and supply chains. A full recovery could take place in June, as Shanghai significantly eases Covid restrictions from Wednesday.
Li Auto shares rose 3.25% to 25.07 on Tuesday, after recovering to their 50-day line on Friday. Stocks are still in a downtrend, with some distance from their 200 days.
Nio stock rose around 5% to 17.39, just below its 50-day long slippery line. Xpeng stock jumped 4.4% to 23.50, also below its 50-day line.
BYD stood out with record sales in April, thanks to its in-house production of batteries and chips. BYD stock rose 2.8% to 35.80, a 2022 high. Last week, shares traded an early entry at 34.60 from a not-quite-completed handful. BYDDF stock has a buy point of 41.34 from a deep cut basis.
Tesla Shanghai production is approaching normal, but May production was still well below normal. Tesla’s China sales data won’t come for a week or two as part of industry trade data. Tesla stock fell 0.2% on Tuesday to 758.26, after hitting a 10-month low on May 24, but rebounded for a weekly gain of 14%.
Chinese EV giant flashes buy signal as it takes on Tesla’s Model 3
Market rally analysis
The stock market rally did not advance on Tuesday but did not lose much ground.
Major indexes fell Tuesday morning, which comes as no big surprise after last week’s solid gains, especially with Treasury yields surging to start the week. But the Nasdaq found support at its 21-day moving average while the Dow Jones and S&P 500 never went that far.
Still, it was a day of distribution, with increased volume on the NYSE and Nasdaq.
The stock market rally is in a confirmed uptrend thanks to the Nasdaq’s Thursday tracking day. The Nasdaq followed up with another big price gain in rising volume on Friday. The Dow Jones and S&P 500 have had no trailing days so far, but are approaching their 50-day moving average.
The 50-day line could be a key test for the stock market rally. This could be where the major indices are retracing towards lows. A decisive move above the 50-day line would suggest this could be more than a bearish rally. But there would still be plenty of overhead resistance, with the 200-day line and the late March highs also key levels.
Growth stocks, especially speculative growth, had a tough Tuesday, although Chinese electric vehicle and internet stocks generally rebounded. Drugmakers and some big biotechs have backed down. Mining and metals stocks, some of which were just showing signs of life, had a rough day.
Time the Market with IBD’s ETF Market Strategy
What to do now
Tuesday’s market action was normal. With few stocks to buy on Tuesday, there was no good reason to increase exposure from low to modest.
It’s never a good idea to buy a protracted stock, but especially in a thin and volatile market. Oil stocks were big movers on Tuesday morning. But many have been extended from buy points or their 50-day lines, such as Schlumberger.
While investors should be looking for opportunities, there is always time to be cautious. Keep a cool head and work on your watchlists.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
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