The stock market rally suffered further losses last week, with the Nasdaq leading declines as Treasury yields continue to soar. What’s your game plan for the coming week? Be cautious about new buys, focusing on leading sectors. Earnings season adds further uncertainty.
Tesla (TSLA) headlines a big week of results, with the EV giant reportedly moving toward reopening its Shanghai factory. Meanwhile, Tesla CEO Elon Musk’s bid for Twitter (TWTR) took another twist Friday as the social media firm enacted a “poison pill” provision to thwart him. Tesla stock is working on a cup-with-handle buy point, but the chart is messy with earnings just one of the many risks in focus.
Expedia (EXPE), Cheniere Energy (LNG), Merck (MRK), Edwards Lifesciences (EW) and Check Point Software (CHKP) are five stocks near buy points from relatively strong areas of the market.
LNG stock and Tesla are on IBD Leaderboard. Tesla stock also is on the IBD 50. Check Point was the IBD Stock Of The Day.
The video embedded in the article discusses the week’s market action and analyzes EXPE stock, Cheniere Energy and Check Point Software.
Dow Jones Futures Today
Dow Jones futures were 0.1% below fair value. S&P 500 futures sank 0.3%. Nasdaq 100 futures retreated 0.5%.
The 10-year Treasury yield rose 1 basis point to 2.84%.
U.S. stock markets were closed on April 15 for Good Friday. Exchanges in Europe, Australia and Hong Kong, also closed Friday, will remain shut on Monday.
China reported Q1 GDP rose 4.8% vs. a year earlier, better than expected. March industrial production also topped views. But retail sales fell more than expected as unemployment in major cities climbed to 6%. Economic activity is plunging in April due to the widespread lockdowns.
The People’s Bank of China on Friday cut banks’ minimum reserve requirement by 25 basis points starting April 25 to bolster the economy. But it kept its one-year medium-term loan rate steady at 2.85%, surprising most economists.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Stock Market Rally
The stock market rally had some big daily and intraday moves in a short week, but the overall trend remains bearish. The Dow Jones Industrial Average sank 0.8% in last week’s stock market trading. The S&P 500 index slumped 2.1%. The Nasdaq composite lost 2.6%. The small-cap Russell 2000 eked out a 0.5% gain.
The 10-year Treasury yield rallied 12 basis points to 2.83%, hitting the highest level since late 2018.
U.S. crude oil futures shot up nearly 9% to $106.95 a barrel last week. The European Union is drawing up plans to ban Russian crude oil, the New York Times reported Thursday, a painful economic step that Germany, in particular, had resisted. The EU reportedly won’t formally discuss a Russia crude ban until the final round of French presidential voting on April 24. If the EU does go ahead, crude prices could spike higher. The EU is even more reliant on Russian natural gas.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.2% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.8% The iShares Expanded Tech-Software Sector ETF (IGV) sank 2.1%. The VanEck Vectors Semiconductor ETF (SMH) skidded 3.5%, threatening to undercut 2022 lows.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both fell 2.7% last week. Tesla stock remains the No. 1 holding across Ark Invest’s holdings.
SPDR S&P Metals & Mining ETF (XME) soared 7.3% last week to a fresh high. The Global X U.S. Infrastructure Development ETF (PAVE) advanced 1.4%. U.S. Global Jets ETF (JETS) ascended 8%. SPDR S&P Homebuilders ETF (XHB) closed just below break-even. The Energy Select SPDR ETF (XLE) edged up 0.4% and the Financial Select SPDR ETF (XLF) retreated 2.6%. The Health Care Select Sector SPDR Fund (XLV) lost 2
Tesla Stock
Tesla stock fell nearly 4% last week to 985, after losing more than 5% in the prior week. The handle has some depth , presumably shaking out some weak holders after TSLA stock’s powerful late March run. But the chart is deep and messy. A longer handle, with tighter action, would let the major averages continue to catch up.
Tesla earnings are due on Wednesday night. Investors can expect strong year-over-year growth, but will probably be looking ahead. They’ll be looking for fresh clues about the Tesla Cybertruck, Semi and other further products. But they may not get it.
The Shanghai plant, shut down due to Covid restrictions since March 28, reportedly will start to reopen on Monday, though the company itself has offered no confirmation. Some staff have entered a “closed-loop” system, living on site. It’s unclear when actual production will resume, with some indications that it will be a few days. Output, when it starts, will be low initially. A return to full production could take weeks. Suppliers and logistical challenges are also factors.
Tesla will suffer a big drop in second-quarter production, even with the Berlin and Austin plants slowly ramping up. It’s unclear if the Shanghai shutdown has had or will have an impact on production at Tesla Berlin, which gets batteries and some other parts from China.
Musk-Twitter News
Meanwhile, Tesla CEO Elon Musk’s informal $43 billion, $54.20-a-share bid for Twitter (TWTR) also is a potential headwind. If Musk does buy Twitter, he may sell another chunk of TSLA stock to pay for it.
On Friday, Twitter’s board enacted a “poison pill” provision to make it difficult for Musk to buy the company. The provision states that if any individual or company buys more than 15% of TWTR stock, other shareholders could buy additional shares at a discount. Musk currently owns 9.1% of TWTR stock.
While Musk’s bid is well above where TWTR traded before he disclosed his stake, it’s far below Twitter’s all-time high of 80.75 set in February 2021.
Musk continues to blast Twitter’s board, management and practices via tweets. He’s mulling bringing in partners for his Twitter bid, according to multiple reports. That could reduce how many Tesla shares he would need to finance the purchase.
Meanwhile, private equity firm Thoma Bravo reportedly has approached Twitter about a takeover.
TWTR stock rose modestly before Monday’s open.
Stocks To Watch
EXPE stock popped 6.5% to 191.55 last week, reclaiming its 50-day line. Expedia stock has a 204.08 cup-with-handle buy point, according to MarketSmith analysis. Investors could use a downward-sloping trendline from the top of the base to find an early entry around 195.
Expedia stock has a triple-digit price-to-earnings ratio. Highly valued P-E stocks haven’t done well in recent months. However, with Expedia earnings expected to skyrocket 364% it could be an exception.
