Dow Jones futures rose modestly Monday morning, along with S&P 500 futures and Nasdaq futures. The stock market rally hit record highs last week as President Donald Trump finalized a China trade deal with Beijing. Clearing up that uncertainty is good news for current winners such as Apple stock and AMD stock. Boeing (BA) reportedly is mulling cutting or halting 737 Max production, as the Boeing 737 Max grounding pushes into 2020.
Which growth stocks and sectors will join Apple (AAPL), Advanced Micro Devices (AMD) and other 5G wireless plays? Adobe (ADBE) is among a handful of software names to recover. Mastercard (MA) just cleared a buy point, joining other payment stocks. Biotechs are charging ahead, with Amarin (AMRN) set to gap higher on an FDA approval.
Dow Jones Futures Today
Dow Jones futures climbed 0.3% vs. fair value, even with Boeing stock falling. S&P 500 futures advanced 0.55% and Nasdaq 100 futures climbed 0.6%. Remember that overnight action in Dow futures, Amarin stock and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Boeing is considering a halt or cutback in 737 Max output, according to multiple reports. A decision could come as soon as Monday. The FAA’s new chief said last week that the regulator won’t recertify the troubled Boeing 737 Max before 2020. Other reports last said the Dow Jones aerospace giant would delay a Boeing 737 Max production ramp until 2021.
The largest weight in the price-weighted Dow Jones industrials, Boeing stock fell 4% in the premarket. Boeing stock fell 3.5% last week, stuck below 50-day and 200-day moving averages.
China Trade Deal Is Big Lift For Market Rally, Economy
The “very large phase one” China trade deal, as President Trump hailed it, ended the risk of further trade war escalation with new tariffs on Dec. 15 that would have hit the Apple iPhone. Instead, the partial China trade deal includes a rollback of some existing tariffs.
While it still must be signed and implemented, the China trade deal appears to remove a big headwind for the global economy. Along with increased Brexit certainty, the USCMA trade deal moving forward — though Mexico is objecting to some labor provisions — and the Fed signaling it’ll take 2020 off, big uncertainties for Wall Street, businesses and the economy may be fading or fading away.
Overnight, China’s retail sales and industrial production rose better than expected on November.
The current stock market rally is in good shape, with the major averages all hitting record highs. The Dow Jones Industrial Average rose 0.4% last week. The S&P 500 index climbed 0.7% and the Nasdaq composite 0.9%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slid 1.4%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 0.45%. The VanEck Vectors Semiconductor ETF (SMH) 4.4%.
Stock Market Rally Leadership
A China trade deal is an especially good deal for Apple stock, AMD stock and other China and 5G names such as Qualcomm (QCOM) and 5G testing service Keysight Technologies (KEYS). Apple stock is extended. But AMD stock is buyable right now from a three-weeks-tight pattern, while Keysight stock rebounded bullishly from the 10-week line and could be forming a new flat base. Qualcomm stock is close to having a short new base next to a failed consolidation.
While it’s great that the chip sector and related names are leading the stock market rally, more breadth would be positive. Broad strength is a good sign for the market rally, and it’s helpful to have some diversity in your portfolio, even as you focus on leading stocks.
So what other groups and sectors are likely stock market rally leaders?
The medical sector has shown some strength, from biotechs to medical products and devices to health insurers. Insurers such as UnitedHealth Group (UNH) are rebounding from long, deep bases as “Medicare for All” fears fade.
Medical products and device firms looked strong in November, but DexCom (DXCM) and Edwards Lifesciences (EW) have faltered somewhat recently. But a few good days could quickly improve these charts.
The biotech group is red hot, but individual names can be hard to play, especially no-revenue companies skyrocketing on clinical trial or FDA news. However, Vertex Pharmaceuticals (VRTX), Crispr Therapeutics (CRSP) and Amgen (AMGN) are doing well. ETFs such as iShares Nasdaq Biotech ETF (IBB) offer a way to play the group move.
Amarin stock could offer a buying opportunity Monday, As expected, on Friday the FDA approved Amarin’s high triglycerides drug Vascepa to also reduce the risk of heart attacks and other cardiovascular events. Amarin stock spiked in mid-November as an FDA advisory panel backed the new Vascepa use. Shares peaked above a 24.01 buy point on Nov. 15, but then pulled back.
Amarin stock rose 4.9% to 24.12 on Friday before being halted into the close. Before Monday’s open, Amarin stock leapt 7.5% to 25.93. Investors could use 24.77 or, depending on the size of the gap-up, the opening price as an entry on Monday.
Software has improved somewhat, with Adobe stock jumping out to a buy zone on earnings, joining a smattering of breakouts. But is the sector ready to reclaim leadership in the stock market rally? DocuSign (DOCU) is in a buy zone, but it wasn’t really a big software winner in early 2019. Adobe stock was a decent winner, but not a huge one. Paycom Software (PAYC) and Paylocity (PCTY), which were early 2019 leaders, recently broke out, though they have pulled back to just above or below their buy points, according to Marketsmith.
Payment stocks are quietly improving, with Mastercard stock breaking out and archrival Visa (V) back in a buy zone. Fiserv (FISV) is just out of range, while Global Payments (GPN) is in a buy zone.
All of these payment stocks look strong. None of them look like screamers right now, but several have been huge long-term leaders, notably Mastercard stock, Visa stock and Fiserv stock.
Other Possible Leadership
Alibaba (BABA) has been rising solidly, but many other Chinese internets are struggling. Several retail standouts have pulled back, like RH (RH) and Lululemon (LULU), but hardly look broken. Target (TGT) is trading tightly, with several other discounters looking strong. Many auto-rated retailers are doing well, including dealers, parts suppliers and salvage auction specialist Copart (CPRT).
Several stocks mentioned in this story are on Leaderboard, including Apple stock, Adobe stock, Mastercard stock, Fiserv stock, Copart stock and DexCom stock.
Current Stock Market Rally
Author: Ed Carson