Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures, with the upcoming Fed meeting in focus. The stock correction intensified last week, when the major indices sold out again, plunging into late Friday.
Two market rally attempts failed almost as soon as they started. Investors should stay almost or completely on the sidelines until the market gives clear signals of a sustained upward trend.
Warren Buffetts Berkshire Hathaway (BRKB) reports earnings on Saturday. China EV manufacturers Nio (NIO), Xpeng (XPEV) and Li Auto (LI) should release April deliveries on Sunday, with China’s shutdowns affecting production and shipments. EV giant BYD (BYDDF), which will report sales in April around Tuesday, appears to have been less affected. Tesla (TSLA) China’s production and sales, among the hardest hit, will be released a little later in May.
Nutrients (NTR) kicks off fertilizer revenues on Monday morning. Mosaic (MOS) reports late Monday, with CF Industries (CF) on Wednesday.
NTR shares fell 5.4% to 98.25 last week, but find support around their 50-day line after a major race. The MOS share slipped 6.5% last week, but also closed around the 50-day line. The CF stock retreated to end the week down just 0.2%, slightly above its rising 50-day line.
The Tesla stock is on the IBD Leaderboard. The CF stock is at IBD 50. The CF, Mosaic and NTR stocks are all at IBD Big Cap 20.
The video embedded in this article discusses the volatile market action and analyzes the BRKB share, Exxon Mobile (XOM) and Nutrien.
But the big event this week for investors is the Federal Reserve meeting 3-4. May. Politicians will almost certainly raise interest rates by 50 basis points and are expected to agree to start cutting the central bank’s massive balance sheet. Wall Street will comment on the Fed statement and Fed Chairman Jerome Powell’s press conference on clues about future interest rate hikes.
The markets have priced in at least two more 50-point Fed rate hikes, but there is a chance that decision-makers could move forward with a 75 basis point increase in the near future. Politicians are worried that inflation will take hold, although the increase from year to year may reach its peak. But aggressive rate hikes could derail the economy, especially with China’s Covid closures and the ongoing war between Russia and Ukraine.
Warren Buffett Shares: What’s in Berkshire Hathaway’s Portfolio?
The Berkshire income will be announced on Saturday ahead of the company’s annual shareholders’ meeting, where Buffett will hold the court again.
Berkshire is an insurance giant that owns BNSF railroad, among other companies, with its top stock investment in apple (AAPL). These were strong areas of the market in March. But since then, Apple’s stock and rail operators have declined, while insurance companies have struggled.
Buffett has focused on repurchasing shares in Berkshire, and limited major new acquisitions, although he has taken a large stake in Occidental Petroleum (OXY). Will he continue large buybacks in the coming year, or does he see buying opportunities with stock prices on the way down?
Will Buffett, 91, and deputy Charlie Munger, 98, provide more details on a succession plan?
The BRKB share cleared a flat consolidation at the beginning of March with a buying point around 325, and rose to 362.10 on 29 March. But the stock has retreated. Last week, Berkshire shares fell 4.1% to 321.90, breaking below the 50-day limit and rounding the outbreak in March.
The relative strength line has remained at several years’ highs, as the BRKB share retreated in line with the S&P 500 index. So the Berkshire stock is still worth seeing.
Dow Jones Futures today
Dow Jones futures open at 6pm ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze powerful stocks in the stock market rally on IBD Live
The stock market last week
The stock market suffered a week of major ups and downs, but sold out strongly for the week. Friday’s losses accounted for all the major indexes’ losses and a little more.
The Dow Jones Industrial Average fell 2.5% in last week’s trading. The S&P 500 index fell 3.3 percent. Nasdaq composites fell 3.9%. Small-cap Russell 2000 also fell 3.9%.
The 10-year government interest rate fell 2 basis points to 2.89%, but after falling to 2.72% during the week.
US crude futures rose 2.6% to $ 104.69 a barrel last week.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 5.4% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 2.5%. iShares Expanded Tech-Software Sector ETF (IGV) retreated 1.9%. VanEck Vectors Semiconductor ETF (SMH) decreased 2.1%.
SPDR S&P Metals & Mining ETF (XME) fell 3.8% last week. Global X US Infrastructure Development ETF (PAVE) fell 2.8%. US Global Jets ETF (JETS) fell 3.9%. SPDR S&P Homebuilders ETF (XHB) fell 0.1%. Energy Select SPDR ETF (XLE) fell 1.35% and Financial Select SPDR ETF (XLF) retreated 4.4%. Health Care Select Sector SPDR Fund (XLV) gave up 2.5%.
ARK Innovation ETF (ARKK) reflects more speculative history stocks, plunging 10% last week and ARK Genomics ETF (ARKG) 11.15%, both to the lowest level in two years. The Tesla share is still number 1 across Ark Invest’s ETFs. Cathie Wood also has holdings in the Nio share, Xpeng and BYD.
The BYD share is also owned by Buffett’s Berkshire.
Five best Chinese stocks to see now
China EV sales
On Sunday, Nio, Xpeng and Li Auto will report April deliveries. Nine production was reportedly shut down during parts of the month when the Covid shutdowns hit suppliers’ production and shipments. Xpeng and Li Auto have also signaled problems with production and deliveries.
Such large delivery declines compared to March are given for these three EV startups. But how much do they see Covid shutdowns affecting operations? Revised quarterly delivery forecasts should provide clues.
Meanwhile, the EV giant BYD has reportedly been relatively less affected. BYD makes its own batteries and chips. The low to medium price models also have strong demand beyond the large cities most affected by the current shutdowns. BYD is guaranteed to report enormous growth from year to year, and can actually top March’s record sales of 104,878 cars.
In the last week, BYD reported that net income for the first quarter rose 241% compared to a year earlier.
The nine-share fell 2.8% to 16.70. Chinese stocks did not rise until Friday on regulatory hopes, but gave up. China signaled on Friday that it may withdraw to technical breakdowns. Chinese and US regulators are also reportedly close to an audit agreement that will remove the risk that US listed Chinese shares will be delisted.
Xpeng shares rose 3.1% last week. The Li share rose 0.45 percent.
The BYD stock, which is traded over the counter in the US, fell 0.85% for the week. Unlike its smaller peers, the BYD stock is above the 50-day line.
Tesla vs. BYD: China EV Giant Set To Seize EV Crown
Tesla China sales
Tesla China sales for April will be released later in May as part of industrial trade data on total car sales. The Tesla plant in Shanghai was closed from March 28 until approx. April 21st. It is now in operation with limited staff working on site. Production is still low, and it is unclear when production can return to normal.
Tesla Shanghai production is expected to decline well more than 50% compared to March.
Tesla is likely to lose its EV sales crown in the second quarter to BYD, although the Chinese company will do so with electric cars and plug-in hybrids. Even when Tesla Shanghai is in full operation, with the factories in Berlin and Austin slowly increasing production, BYD is likely to retain its sales advantage.
Tesla shares fell 13.4% to 870.76 last week. CEO Elon Musk sold 9.6 million shares Tuesday-Thursday worth around $ 8 billion, and tweeted late Thursday that he was done for now. It came after he promised a lot of TSLA shares as part of the $ 44 billion deal to buy Twitter (TWTR). The Tesla stock tried to bounce on Friday, but met resistance on the 50-day line and closed a little lower, stuck below the 200-day line.
Technically, the Tesla stock has a cup-with-handle base with a buying point of 1,152.97, according to MarketSmith analysis, but the chart is wrong.
Market Rally Analysis
Last week had some major daily fluctuations, including some positive sessions. But in the end, the major indices sold out again, expanding their weekly losing streak.
After Thursday’s big jump, Nasdaq, the S&P 500 index and finally the Dow Jones undermined Wednesday’s lowest levels during the day, ending their short-lived rally attempts.
Nasdaq is at its worst levels since the end of 2020. The S&P 500 is still above its lowest levels in February, but had its worst close since June last year.
The market breadth is anemic, with losers surpassing winners and new downturns hitting new heights.
The market correction may be on the verge of a new leg down. Nasdaq is in a full-fledged bear market.
Fear meters such as the CBOE Volatility S&P 500 index are trending higher, but have not yet reached the tops from earlier this year. The CBOE Nasdaq Volatility Index, or VXN, is approaching.
Energy and fertilizer stocks still look OK, but with a number of earnings reports for both sectors in the coming week. Defense giants are not far from buying points with earnings largely out of the way. Some drug stores show strength, but others struggle.
Some travel stocks do it OK, but like most groups need a positive market tailwind to get serious.
REITs, which had kept up with the market correction, sold out late in the week.
Time market with IBD’s ETF market strategy
What to do now
Investors should not try to guess a market bottom. Do not get sucked into the morning rally or even big daily wins like Thursday’s.
So what should you do? Stay on the sidelines. If you are going to dip your toe in a stock flashing buy signal in the middle of a correction, be ready to get out again. Being completely in cash still makes a lot of sense.
But stay engaged. If the market upturn suddenly gets a follow-up day, you will be ready to gradually increase your exposure. So keep working on watch lists, and focus on a select group of names that are at the top of potential buy lists.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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