The stock market rally showed strong action this past week, as bank fears ebbed. The major indexes reclaimed key levels and many leading stocks are flashing buy signals or setting up.
Li Auto reported record March and first-quarter sales Friday night, or Saturday morning local time. Fellow startups Nio and XPeng also will report Saturday, with EV and battery giant BYD due this weekend as well.
Tesla will release first-quarter delivery and production figures, probably on Sunday. Analysts expect another record quarter for deliveries, thanks to hefty price cuts.
Tesla stock broke past a buy point Friday, but is just below the 200-day moving average. LI stock is just below a buy point. BYD stock has rebounded to near an aggressive entry. XPeng and Nio stock are also trending higher but have work to do.
Meanwhile, General Motors (GM), Chrysler-parent Stellantis (STLA) and several other automakers will release first-quarter U.S. sales on Monday. Ford Motor (F) will be out on Tuesday. STLA stock is setting up near a buy point while GM and most other traditional automakers need repair work.
Investors should be putting cash to work, gradually building up exposure. But don’t buy extended stocks or get too concentrated in a particular sector.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Stock Market Rally
The stock market rally started this past week sluggishly, but took a decisively bullish turn starting Wednesday, closing near weekly highs.
The Dow Jones Industrial Average ran up 3.2% in last week’s stock market trading. The S&P 500 index leapt 3.5%. The Nasdaq composite jumped 3.4%. The small-cap Russell 2000 popped 3.85%.
The 10-year Treasury yield rose 11 basis points to 3.47%, but pulled back Friday.
U.S. crude oil futures surged 9.25% to $76.67 a barrel last week, but still fell 5.7% for the quarter.
SPDR S&P Metals & Mining ETF (XME) rebounded 5.75% last week. The Global X U.S. Infrastructure Development ETF (PAVE) rallied 4.9%. U.S. Global Jets ETF (JETS) ascended 7.75%. SPDR S&P Homebuilders ETF (XHB) gained 3.9%. The Energy Select SPDR ETF (XLE) popped 6.3% and the Health Care Select Sector SPDR Fund (XLV) climbed 1.7%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) bounced 6.9% last week and ARK Genomics ETF (ARKG) 5%. TSLA stock is a major component across Ark Invest’s ETFs. Cathie Wood’s Ark Invest also owns some BYD stock.
Tesla deliveries for the first quarter should come in around 432,000, besting Q4’s record 405,278 and up 39% vs. a year earlier. Big Tesla price cuts worldwide and new U.S. tax credits fueled demand.
On Friday, the IRS laid out some guidelines on battery mineral and components sourcing to qualify for the full $7,500 EV credit. It’s still not clear which vehicles may be affected. The entry-level Model 3, which has used China-made LFP batteries, will likely see a reduced credit. But for the next few weeks, buyers can still get the full credit.
Following Q1 deliveries, investors will turn to Tesla earnings to see how price cuts affected EPS and profit margins. Will the EV giant need further price cuts to keep demand high?
Tesla stock jumped nearly 9% to 207.46 this past week, including a 6.2% pop on Friday. That pushed TSLA stock above a 200.76 cup-with-handle buy point, according to MarketSmith analysis. However, shares are now closing in on their 200-day moving average, which could serve as resistance.
China EV Deliveries
Li Auto early Saturday reported March deliveries of 20,823 hybrid SUVs, up 89% vs. a year earlier. That follows 16,620 in February and 15,141 in January. Q1 sales totaled 52,584, at the lower end of its late February forecast of 52,000-55,000. March sales include the new L7, a five-seat electric SUV.
BYD and most other China EV makers also should report improving sales in March vs. February. A Tesla-triggered price war and more-sluggish EV demand growth amid stepped-up production capacity is a challenge for automakers.
BYD in particular is ramping up exports, providing an escape valve from a brutal home market. On March 28, BYD reported huge 2022 earnings growth, with Q4 net income up more than 1,100%.
BYD stock jumped 9.8% in the latest week to 29.40, building the right side of a new base with a 34.04 buy point. Shares reclaimed their 50-day line and finished just below their 200-day line. A decisive move above the 200-day could offer an early entry.
LI stock has a double-bottom base with a 25.46 buy point that’s just above the 200-day line. Shares climbed 6.7% to 24.95, last week, but dipped 1.5% Friday as Li Auto hit resistance at the buy point and 200-day.
XPEV stock leapt 15.5% last week and Nio stock nearly 16%. Both are above their 50-day lines but below their 200-day lines.
China EV makers are set to unveil or release a slew of new models at the Shanghai Auto Show starting April 18. BYD and its premium Denza line in particular will showcase a number of new EVs. New models could spur new sales, but could also put further pressure on existing EVs.
Market Rally Analysis
After showing resilience in the prior week, the major indexes made strong gains this past week. The Nasdaq and S&P 500 staged follow-through days on Wednesday, confirming the stock market rally.
The Nasdaq powered above 12,000 and is closing in on the Feb. 2 high. The Nasdaq 100 has vaulted to its best levels since late August.
The S&P 500, which reclaimed its 50-day line on Wednesday’s FTD, continued to advance through Friday. The Dow Jones reclaimed its 200-day line during the week and moved above its 50-day line on Friday. The Russell 2000, which as recently as March 24 was hitting five-month lows, has reclaimed the 21-day line as bank stocks at least stabilized.
The bank crisis appears to be waning. Fed rates are likely to peak well below what markets thought a month ago. That’s a bullish combination, especially for growth stocks.
While megacaps such as Apple (AAPL), Microsoft (MSFT), Meta Platforms (META), Nvidia (NVDA) and Tesla stock accounted for a massive share of the Nasdaq and S&P 500 gains in the first quarter, market breadth did improve somewhat in the past week. So has market leadership.
Chip stocks continue to shine, with leaders extending breakouts and other names setting up or clearing buy points, with AEHR stock an unfortunate exception Friday.
But software is also coming up, with cybersecurity and a variety of business software plays flashing buy signals, including NOW stock.
A few payment stocks and networks also are impressing, such as Shift4 (FOUR) and Juniper Networks (JNPR). Meritage Homes (MTH) and several other builders are acting well, along with some related plays.
Several footwear stocks are stepping up, such as On Holding (ONON) and Crocs (CROX), as well as select retailers from Ulta Beauty (ULTA) to Walmart (WMT). Some China internet and EV plays are around buy points, including Baidu (BIDU), NetEase (NTES), BYD and LI stock.
Many other stocks and sectors are moving into position.
What To Do Now
The stock market rally is in a confirmed uptrend. A growing number of stocks are flashing buy signals. A major risk factor, banks, appears to be receding.
Investors need to take advantage of the current environment. But build exposure up gradually, letting the market draw you in. It’s not yet clear if this is the start of an extended market rally or just a short-lived advance. It’s also possible that the major indexes will pause or pull back briefly.
Don’t buy extended stocks. And while investors could fill their portfolios with, say, only quality chip stocks, it’s not wise to get too concentrated in particular sectors.
Rework your watchlists. Focus in on stocks in or near buy zones, but keep an eye on other names that are setting up. If this rally has legs, many of those will be actionable soon.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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