Dow Jones futures were little changed Sunday night, along with S&P 500 futures and Nasdaq futures. The stock market rally showed surprising strength last week, but it isn’t unprecedented. New coronavirus cases are trending lower, with Apple iPhone maker Foxconn and the Tesla Shanghai plant set to resume production. Alibaba stock, Nvidia stock, Dexcom stock, Shopify stock and Chegg stock among the most important earnings this week.
Alibaba (BABA) results and guidance will provide insight into Chinese internets and broader economy amid the ongoing China coronavirus crisis. Nvidia (NVDA) is a leading chipmaker as some chip stocks are starting to struggle. Dexcom (DXCM) is one of a trio of hot diabetes products stocks. Shopify (SHOP), a 2019 stock market rally leader, will show if that model book example has yet another chapter. Chegg (CHGG) is one of a few U.S. education stocks setting up.
Dexcom stock is in a buy zone, Chegg stock is just a buy point while Alibaba stock and Nvidia stock are potential buys.
Apple stock and Tesla stock are both consolidating after huge runs.
Tesla stock, Apple stock, Dexcom stock and Nvidia stock are all on IBD Leaderboard. Alibaba stock and Chegg stock are on the IBD 50 list.
Dow Jones Futures Today
Dow Jones futures were flat vs. fair value amid up-and-down trading. S&P 500 futures were steady and Nasdaq 100 futures advanced 0.1%. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Dow Jones futures briefly turned higher on reports that Foxconn will reopen a key Zhengzhou plant for making Apple iPhones. It’s not clear if all Foxconn plants in China will reopen Monday.
China coronavirus cases rose by 3,052 on Feb. 9, for a total of 40,171. There are less than 400 confirmed coronavirus cases outside of mainland China, including 64 on a “Diamond Princess” cruise ship off Japan. Virus deaths have topped 900 worldwide, all but two in mainland China.
Still, Chinese efforts to stop the spread of the coronavirus are taking a toll on the world’s No. 2 economy.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) gained 1.9%. The iShares Expanded Tech-Software Sector ETF (IGV) rallied 3.3%, . The VanEck Vectors Semiconductor ETF (SMH) popped 4.3% after tumbling 6.8% in the prior week.
Stock Market Rally: It’s Not Different This Time
The stock market rally’s instant recovery from the coronavirus sell-off was surprising. Normally, when the stock market sells off so fast, it takes some time to recover, especially when the underlying concerns — the coronavirus and related economic impact in this case — remain.
But unusual stock market rally action doesn’t mean unprecedented.
On Friday’s IBD Live, Head Market Strategist Mike Webster discussed several similar periods: A strong stock market rally with a sharp, short pullback followed by a quick recovery to new highs. Here are two of the numerous historical precedents.
In 1954, the Dow Jones suffered a sharp two-day pullback, but found support at the 50-day line. Stocks rebounded quickly. Within a few weeks the Dow was back at record highs.
In early 1986, the Nasdaq abruptly pulled back to its 50-day line, then quickly rebounded, though it took weeks to hit new highs. A few weeks earlier, the Nasdaq suffered a less-sudden retreat but quickly shook it off. That compares to the start of 2020, when stocks shrugged off U.S.-Iran tensions.
Apple iPhone Plant To Open
Many Chinese factories are due to restart on Monday. Over the weekend, Japan’s Nikkei said that the local government was blocking Foxconn plans from reopening on Feb. 10 as planned due to coronavirus fears, according to several Foxconn sources. But Monday morning local time, Reuters reported that China’s government had OK’d Foxconn to reopen its Zhengzhou plant, where half of all Apple iPhones are made
The Shenzhen government, via social media said that Apple iPhone plants could reopen once inspections were concluded.
News on Feb. 4 that Foxconn and other iPhone and Air Pod suppliers would resume production on Feb. 10 gave a big boost to Apple stock and the broader market rally that day.
Separately, Apple stores in China, previously set to reopen Feb. 10, will remain closed. A few may reopen Feb. 13-14 but most will be shut until Feb. 15.
Apple stock has been consolidating for the past few weeks during the coronavirus outbreak. Shares rose 3.4% last week, but did not hit a new high. Apple stock has had a huge run over the past year.
Tesla Shanghai Plant To Reopen
The Tesla Shanghai plant will reopen Feb. 10, according to a local government official. However, even the state-run Global Times questioned “much production capacity can be restored” right away. Some Tesla workers may still be stuck in China’s interior while many suppliers are shut down for the coronavirus.
Tesla stock continued its parabolic advance last week, hitting a record 968.99 intraday Tuesday. Shares tumbled 17% on Wednesday, then traded tightly for the rest of the week. Tesla stock, which hasn’t seemed to trade on China coronavirus news, still ended the week up 15%.
Ideally, Tesla stock would consolidate for several weeks and form a new pattern.
Chegg earnings are late Monday. Analysts expect Chegg earnings to rise 20% to 30 cents a share with revenue up 28% to $123 million, according to Zacks Investment Research. Chegg stock closed Friday at 42.71, near a 43.97 buy point point from a cup-with-handle base, according to Marketsmith analysis.
Strayer Education (STRA) has a 168.07 cup-with-handle entry.
Shopify earnings are early Wednesday. Wall Street forecasts Shopify earnings to fall 12% to 23 cents a share amid heavy investments. Q4 revenue should pop 40% to $482 million. Analysts expect Shopify earnings to spike 400% in 2020.
Shopify stock had a huge run in 2019, and was one of the last software leaders to buckle late last summer. Shopify stock has roared back and now is well extended again.
It’s one of many top software stocks reporting this coming week.
Dexcom earnings are Thursday. Analysts expect Dexcom earnings to climb 39% to 75 cents a share with sales up 28% to $433 million,
Dexcom stock closed at 240.22, in range from a 232.10 flat-base entry and just below an alternative buy point of 242.24.
Dexcom’s continuous glucose monitors are in high demand. Also in the diabetes products space, Insulet (PODD) is extended from a buy point. Tandem Diabetes (TNDM) is in a buy zone.
Alibaba earnings are early Thursday. Wall Street expects Alibaba earnings to rise 28% to $2.28 a share and revenue 34% to $22.8 billion. China’s e-commerce and payments leader should have insight into the coronavirus’ economic impact.
Alibaba stock pulled back from a record 231.14 on Jan. 10 to as low as 199.50 on Jan. 27. Shares rebounded from their 50-day line last week and are just above the 10-week line, at 216.53. A bullish rebound from the 10-week line would offer a buying opportunity for Alibaba stock. Investors likely should avoid any buys until after Alibaba earnings, unless adopting an earnings options strategy.
Nvidia earnings are late Thursday. Analysts expect Nvidia earnings to more than double to $1.66 a share as revenue climbs 34% to $2.96 billion. Nvidia stock, much like rival AMD (AMD), has held up well during the coronavirus outbreak, even as many chip stocks struggle.
Nvidia stock rebounded from its 10-week last week to 251.59. A move above its recent high at 259.60 might offer a buying opportunity for Nvidia stock. But, as with Alibaba stock, investors should probably await Nvidia earnings results.