Dow Jones futures rose modestly Wednesday night, along with S&P 500 futures and Nasdaq futures. The stock market rally marked time for a second straight day, as the Treasury detailed Biden tax hike plans.
But Apple stock reclaimed its 50-day moving average while Amazon.com (AMZN), Nvidia (NVDA) rose further above their 50-day lines. Microsoft (MSFT), Facebook (FB), and Google-parent Alphabet (GOOGL) continued to advance.
Apple stock rose 1.3% to 127.90, reclaiming its 50-day line. Amazon stock rallied 1.7%, moving up the right side of its consolidation after retaking its 50-day line on Monday. Nvidia stock climbed 2%, moving up the right side of a cup base after moving above its 50-day last week. Microsoft climbed 0.8%, Google 1.35% and Facebook stock 2.2%, all still in buy range from Monday’s breakouts.
Meanwhile, Tesla stock, which had been eyeing upside resistance in recent days, fell back to a key support area. Tesla (TSLA) is pushing back deliveries of its revamped Model S and Model X further, after failing to produce any of the luxury electric vehicles in the first quarter.
The stock market rally showed little movement in the major indexes, with tech giants providing some support. However, the small-cap Russell 2000 undercut key levels.
Biden Tax Plan Details
The Treasury Department released more details about the Biden tax plan. President Joe Biden is still calling for a hike in the federal corporate income tax rate to 28% from 21%. But a proposed 15% minimum tax on corporations, intended to make sure companies like Amazon pay some tax, will apply to companies with more than $2 billion in annual income, up from $100 million. That will limit the affected companies to just 40, the Treasury estimated, vs. 1,100 under the $100 million threshold.
Meanwhile, President Biden said Wednesday that he’s willing to compromise on the size of the corporate tax hike, as Sen. Joe Manchin, D-W.Va., and many businesses raise objections.
Still, Wall Street may be moving from pricing in the boost from Biden’s new $2.25 trillion spending plan to counting the cost of tax hikes on corporate earnings. Also, more attention is being paid to the relatively small share of infrastructure spending in the infrastructure plan.
Fed Meeting Minutes Stress No Move To Tighten
Federal Reserve policymakers said it’ll be “some time” before they begin removing aggressive monetary measures to support the economy, and will communicate well in advance any eventual move. That’s according to newly released minutes from the March Fed meeting. That’s what Fed chief Jerome Powell and most policymakers have been saying, even as the economic recovery picks up.
Dow Jones Futures Today
Dow Jones futures climbed 0.15% vs. fair value. S&P 500 futures advanced 0.35% and Nasdaq 100 futures rose 0.5%.
The 10-year Treasury yield edged up to 1.67% in late trade.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 133.68 million. Covid-19 deaths topped 2.90 million.
Coronavirus cases in the U.S. have hit 31.63 million, with deaths above 571,000.
Stock Market Rally
The stock market rally had another quiet session, at least outside of small caps.
The Dow Jones Industrial Average rose a fraction in Wednesday’s stock market trading. The S&P 500 index climbed 0.15%. The Nasdaq composite dipped 0.1%. The Nasdaq 100 climbed 0.3%, closing in on record highs.
Apple stock and Microsoft are Dow Jones components. They’re also S&P 500 and Nasdaq stocks, along with Amazon stock, Facebook, Google and Nvidia — and Tesla.
But small caps had a tougher time. The Russell 2000 fell 1.6%, below its 21-day and 50-day moving averages.
Leading stocks also retreated.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) sank 2.1%. The iShares Expanded Tech-Software Sector ETF (IGV) edged down 0.2%, with MSFT stock the top IGV holding. The VanEck Vectors Semiconductor ETF (SMH) dipped 0.2%. Nvidia stock is a key SMH component.
Tesla stock fell 3% to 670.97, closing just above to its 21-day exponential moving average. On Monday, Tesla jumped above the 21-day but hit resistance at its 10-week line and just below its March short-term peaks.
People who ordered a revamped Model S or X earlier this year are seeing delivery dates pushed back from April-May to May-July. In late January, CEO Elon Musk said the revamped Model S and X were in production, with the new S sedan starting deliveries in February. But no new Model S or X vehicles were produced in the first quarter.
After the close, CNBC reported that Tesla has refunded customers for double billing them for their EV purchases last month. It sent an email apology with $200 in credit at Tesla’s online store.
While TSLA stock tested its 21-day, the technicals haven’t changed much. One good day and the EV giant would test or surpass recent highs. Then again, Tesla stock is a ways from actually looking strong.
Still, Tesla looked much better than China EV rivals Wednesday. Nio (NIO) lost 6.8% and Xpeng (XPEV) 7.9%. Li Auto (LI), which announced plans for a $750 million convertible debt offering, plunged 13%.
Market Rally Analysis
The stock market rally moved sideways for a second straight session. Following several days of solid gains, it’s healthy for the major indexes and leading stocks to digest gains.
Stocks could use the pause to form handles on their bases or consolidate near recent buy points. Indeed, the Nasdaq and Nasdaq 100 appear to forming handles. The Russell 2000’s retreat below key levels wasn’t great, though it’s still in the middle of its recent range.
Leading stocks generally retreated, but still look to be in good shape.
Market leadership remains broad but with specific winners shifting every few days. Right now, tech titans are taking the lead after consolidating for several months. Microsoft, Google and Facebook stock are all at record highs and still in buy zones, according to MarketSmith analysis. Amazon stock and Nvidia aren’t far from buy points while Apple stock has some work to do.
Don’t buy extended. You might have gotten away with that during the powerful April-September rally, but in the current climate stocks can see big pullbacks.
Don’t get overconcentrated in a particular group or market segment. Take advantage of the broad market rally to generate returns while limiting stock- or sector-specific risk.
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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