Dow Jones futures rose modestly late Wednesday, along with S&P 500 futures and Nasdaq futures, after a strong stock market rally on election results that signaled a decisive change in character, even with the Trump vs. Biden race and Senate control still in doubt.
XDemocratic nominee Joe Biden seems headed toward a narrow Electoral College victory over Donald Trump, though several key states are still counting votes. Biden has a growing popular vote lead over Trump. Republicans seem likely to keep Senate control, though the chamber could end up splitting 50-50. Either way, that makes sweeping policy changes unlikely.
The major indexes on Wednesday gapped above key support and broke recent downtrends, at least intraday.
Leading stocks surged. Among those breaking out or reclaiming buy points were Google parent Alphabet (GOOGL), JD.com (JD), Pinduoduo (PDD), UnitedHealth (UNH), Monolithic Power Systems (MPWR), Teradyne (TER), Xpeng Motors (XPEV) and Zendesk (ZEN).
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Many other top stocks rebounded bullishly or flashed early entries, from Facebook (FB) to Microsoft (MSFT) to Nvidia (NVDA) and arguably Apple (AAPL) and Amazon.com (AMZN).
One growth stock that sat out Wednesday's big rally was Tesla stock. The likely election returns suggest that tougher regulation may spur more competition for Tesla (TSLA), while new subsidies are less likely.
Key Earnings Reports
Meanwhile, MercadoLibre (MELI), Qualcomm (QCOM), Match Group (MTCH), Axonics Modulation (AXNX) and Rapid7 (RPD) reported better-than-expected results late Wednesday. All of these stocks closed in or near buy areas. Qualcomm stock rose strongly overnight, while MercadoLibre and Match Group also rose modestly.
Early Thursday, Alibaba (BABA), Regeneron (REGN), General Motors (GM) and Zoetis (ZTS) earnings are due.
Pinduoduo stock, JD.com, Alibaba, Microsoft, Nvidia and Tesla are all on IBD Leaderboard. Microsoft, Alibaba and UnitedHealth stock are all on IBD Long-Term Leaders, with Zoetis on the watchlist. MPWR stock is on Swingtrader. Nvidia, Alibaba and Amazon stock are on the IBD 50.
Why This IBD Tool Simplifies The Search For Top Stocks
Dow Jones Futures Today
Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures climbed 0.3%. Nasdaq 100 futures advanced 0.55%. Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live.
Coronavirus News
Coronavirus cases worldwide reached 48.41 million. Covid-19 deaths topped 1.23 million.
Coronavirus cases in the U.S. have hit 9.79 million, with deaths above 239,000.
Stock Market Rally On Election Results
The stock market rally attempt made a convincing move Wednesday, with sharp price gains on higher volume for the major indexes.
The Dow Jones Industrial Average rose 1.35% in Wednesday's stock market trading, but closed under its 50-day line and back below a trend line.
The S&P 500 index rose 2.2%, also off highs but holding above its 50-day line. The Nasdaq composite jumped 3.85%, not far from session highs and well above its 50-day line and recent trend lines.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) popped 3.8%. The iShares Expanded Tech-Software Sector ETF (IGV) surged 4.8%, with Microsoft stock a top component. The VanEck Vectors Semiconductor ETF (SMH) gained 3.7%, with Teradyne and Nvidia stock notable holdings.
Big Cap Techs Surge
Big cap techs surged on election returns, with antitrust fears soothed slightly by the prospect of divided government.
Google stock jumped 6.1% to 1,745.85, clearing a 1,726.20 buy point from a cup base, according to MarketSmith analysis. Facebook stock spiked 8.3%, gapping above its 50-day line and clearing a 285.34 early entry. Microsoft rallied 4.8%, moving above its 50-day line and breaking a downtrend, much like the Nasdaq. Apple rose 4.1%, just barely breaking a downtrend, but closing slightly below the 50-day line. Investors might want to see Apple stock clear that before considering a position. Amazon stock vaulted 6.3% to clear its 50-day line slightly, just moving above a trend line.
Key Breakouts
Chinese e-commerce stocks thrived. JD.com and Pinduoduo stock both broke out, leaping 8% and 13%, respectively. Alibaba reclaimed its 50-day moving average after tumbling on the surprise suspension of the Ant Group IPO. Alibaba earnings Thursday morning will likely move the group, with the 11.11 shopping event, Pinduoduo earnings on Nov. 12 and JD.com earnings soon after.
Data-center chip play Monolithic Power and chip-gear maker Teradyne both jumped nearly 7%, clearing buy points. Semiconductor equipment giant Lam Research (LRCX) briefly cleared a buy point, while Nvidia stock reclaimed its 50-day and broke a downtrend.
Xpeng stock skyrocketed 23%, vaulting above an IPO base, following Li Auto's breakout on Monday. Li Auto rose 5.2%, hitting a record high intraday. Nio (NIO) keeps soaring, adding 6.2%. All three China EV makers reported strong October deliveries on Monday.
Zendesk stock jumped 7% to 122.74, closing above an ascending base after briefly topping the 116.64 buy point on Friday following earnings.
UnitedHealth stock vaulted 10% to a new high, offering a new buying opportunity. Most other healthy insurers rallied on election returns, with the prospect of a Biden presidency and GOP Senate. That mix likely preserves the ObamaCare status quo, without more radical health care changes. Drugmakers and biotechs rallied for similar reasons.
Gaming stocks popped as more states legalized sports betting. Uber stock and Lyft (LYFT) spiked as California voted to let app-based drivers stay independent contractors. Uber (UBER) broke out, but has earnings late Thursday.
Canadian cannabis producers that trade in the U.S. sold off even though a few more states legalized marijuana because the odds of major change at the federal level dimmed.
There were some losers: Banks fell on plunging Treasury yields, Caterpillar (CAT) and infrastructure plays sank on less likelihood of a big stimulus and infrastructure spending. Solar stocks retreated with sweeping green energy legislation unlikely.
Tesla Stock
Tesla stock largely sat out Wednesday's big stock market rally, dipping 0.7% to 420.98 and edging back below its 50-day line. That's in sharp contrast to other big-cap techs as well as China EV rivals.
A Biden presidency and GOP Senate could be a worst-case election results scenario for Tesla. A Biden administration would likely restore or exceed Obama-era fuel economy standards and emission limits. That would act as a soft mandate for automakers to sell more plug-in hybrids and full electric cars. Biden also would not stand in the way of California and other states imposing explicit EV mandates. That would certainly encourage traditional automakers to make more electric cars for the U.S. market. Meanwhile, a GOP Senate could stymie Biden efforts to expand federal EV credits. Currently, only Tesla and GM have reached the manufacturer cap on the $7,500 EV credit, with GM not ramping up EV production until 2022.
Of course, it's just one day for Tesla stock. It's not far from a 466 handle buy point.
After running up for much of the year on upcoming news, several would-be catalysts for Tesla stock haven't come off: S&P 500 inclusion, Battery Day, Q3 deliveries, Q3 earnings and Election 2020. Then again, TSLA stock hasn't fallen off either.
Stock Market Analysis
Wednesday marked day three of a stock market rally attempt for the Nasdaq, with Monday's day one advance tepid at best.
However, last Friday was a "pink rally day" for the Dow Jones and, barely, the S&P 500 index. So Wednesday was day four of a stock market rally attempt for those two indexes.
This is an important day to read The Big Picture.
But let's set aside follow-through days and a confirming stock market rally.
When the stock market is in a downtrend, as it had been for a few weeks, investors don't want to try to guess the bottom and buy on one positive session. The aim is to get into a new market rally relatively quickly but wait until there's evidence of a decisive character change. You want a few days of trending higher, then a big day to confirm the new stock market direction.
So what do we have now? The stock market rally attempt has been going for a few days. On Wednesday, the major indexes jumped, with the S&P 500 and especially the Nasdaq surging above their 50-day lines in higher volume and breaking above trend lines. Leading stocks look even better. Many top stocks are breaking out, offering other entries or setting up.
Of course, while the stock market rally is showing positive action, that has to continue. While the expectation is for further gains over the coming days and weeks, that might not happen. Election results could suddenly shift, unsettling markets. Earnings season remains heavy while coronavirus fears could again reassert themselves.
Investors can be moving back into the market, but there's no need to rush in. If this market rally has legs, there will a number of opportunities to build up exposure over the next several sessions. Hopefully, investors used the past couple of weeks to update their watchlists multiple times, so you have stocks to target.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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