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Biden Says Putin Set On Invading Ukraine; 5 Stocks That Don't Suck – Investor's Business Daily
Dow Jones futures will open on Sunday evening, along with S&P 500 futures and Nasdaq futures. The stock market rally suffered significant damage last week, with the major indexes below key support and starting to move toward their Jan. 24 lows.
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Fears that Russia will invade Ukraine are weighing heavily on the market rally, which is already dealing with inflation and other big headwinds. The uncertainty over what Russian President Vladimir Putin will do adds significantly to the volatility.
President Joe Biden said late Friday that he is confident that Putin has decided to invade Ukraine within the next few days. Other U.S. and NATO officials have echoed that concern, saying Russia has continued to build up troops near the Ukraine border. That’s despite Kremlin claims that some troops are pulling back.
Cease-fire violations between Ukraine and pro-Russian separatists have surged in the past couple of days, perhaps offering a pretext for Russia to launch a Ukraine invasion.
On Feb. 20, big Russia war games with Belarus are set to end. Moscow has said troops will then return home, but will they? Feb. 20 also is the end of the Winter Olympics in Beijing. Putin may be holding off on a Ukraine invasion to avoid offending China.
But setting aside the geopolitics, the stock market rally looks ever weaker. Investors should take a defensive posture with minimal exposure.
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. However, ETFs tracking the Dow Jones, S&P 500 and Nasdaq 100 retreated Friday evening after Biden made his latest comments on the Russia-Ukraine crisis.
The DIA ETF fell 0.4%. SPY sank 0.5% and QQQ 0.6%.
While Dow futures will open Sunday evening as usual, U.S. markets will be closed Monday in observance of the Presidents Day holiday. Other stock markets will be open around the world, however.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Five Stocks That Don’t Suck
Apple stock, O’Reilly Automotive (ORLY), Commercial Metals (CMC), Union Pacific (UNP) and Nutrien (NTR) are five stocks holding up near buy points with relative strength lines at or near highs.
Apple (AAPL) dwarfs all of these names, but it’s the only one trading below its 50-day moving average.
The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index. It’s an easy way to spot leading stocks in any kind of market. In a weak or choppy market, stocks with RS lines at highs could be leaders in the next rally.
Nvidia, Tesla Just Hanging On
Meanwhile, Nvidia stock and Tesla (TSLA) rebounded from near their 200-day moving averages on Friday. This is an area where Tesla stock and Nvidia (NVDA) found support before in late January. Can these big former winners continue to do so? It’ll likely depend on the market rally’s next moves. But as megacap stocks, Tesla and NVDA stock will have something to say about the overall market direction.
Home Depot (HD) headlines earnings before Tuesday’s open, while Mosaic (MOS) and Palo Alto Networks (PANW) are among those due after the close.
Tesla stock and Nvidia are on IBD Leaderboard. ORLY stock is on the IBD 50. Commercial Metals was Friday’s IBD Stock Of The Day. UNP stock was Thursday’s.
The video embedded in this article discussed the week’s market action in detail, while also analyzing CMC stock, Union Pacific and new SwingTrader stock Dollar Tree (DLTR).
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Coronavirus News
Coronavirus cases worldwide reached 422.11 million. Covid-19 deaths topped 5.89 million.
Coronavirus cases in the U.S. have hit 80.02 million, with deaths above 958,000.
Stock Market Rally
The stock market rally tried to bounce last week but faded badly late in the week.
The Dow Jones Industrial Average fell 1.9% in last week’s stock market trading. The S&P 500 index gave up 1.6%. The Nasdaq composite sank 1.8%. The small-cap Russell 2000 retreated nearly 1%
The 10-year Treasury yield fell 2 basis points to 1.93%, but that’s after hitting a 30-month high of 2.065% intraday Wednesday. Russia war fears sent investors into safe havens, while Fed minutes from the January policy meeting didn’t offer any new hawkish surprises.
Crude oil prices fell more than 2% to $91.07 a barrel, but held above the $90 mark.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) slumped 3%. The iShares Expanded Tech-Software Sector ETF (IGV) tumbled 5.4%. The VanEck Vectors Semiconductor ETF (SMH) closed flat, but fell sharply on Thursday-Friday. Nvidia stock is a major SMH component.
SPDR S&P Metals & Mining ETF (XME) rose 2.1% last week. The Global X U.S. Infrastructure Development ETF (PAVE) gained 1.3%. U.S. Global Jets ETF (JETS) ascended 1.8%. SPDR S&P Homebuilders ETF (XHB) dipped 0.5%. The Energy Select SPDR ETF (XLE) gave up 3.35% and the Financial Select SPDR ETF (XLF) sank 2.3%. The Health Care Select Sector SPDR Fund (XLV) pulled back 2.1%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) plunged 9.9% last week, hitting a fresh 20-month low on Friday. ARK Genomics ETF (ARKG) tumbled 6.6%. Tesla stock remains the No. 1 holding across ARK Invest’s ETFs.
Five Best Chinese Stocks To Watch Now
Apple Stock
Apple stock dipped 0.8% to 167.30 last week. During the late January market sell-off, the iPhone giant never came close to its 200-day line. AAPL stock now has a cup-with-handle base with a 176.75 buy point, according to MarketSmith analysis.
Commercial Metals Stock
Commercial Metals stock rose 3.1% to 36.75 last week. It’s slightly above its 50-day moving average, working on a 38.82 buy point. CMC stock could be starting to form a handle, with a potential lower entry of 37.59. Investors already could use that as an early entry.
Union Pacific Stock
Union Pacific jumped 5.2% to 251.19 last week. UNP stock is trading just below a 256.11 buy point in a very shallow flat base. Investors arguably could buy it now or just shy of 255.
O’Reilly Stock
ORLY stock edged up 1.3 to 676.96 last week, its fourth straight modest weekly gain. O’Reilly stock has reclaimed the 50-day line, offering an early entry in a shallow cup base. The official buy point is 710.96.
Nutrien Stock
NTR stock had a wild week, tumbling to undercut the 50-day line briefly before quickly rebounding to record high before pulling back slightly. But, ultimately, Nutrien stock dipped 0.7% to 75.78. That’s just below a 77.45 buy point.
On Wednesday night, the fertilizer maker reported a 929% EPS surge with revenue up 79%. Other fertilizer stocks also are doing well, despite some big intraday and daily swings. That includes MOS stock, which reports late Tuesday.
Tesla Stock
Tesla stock edged down 0.35% to 856.98 last week, but closed low in its range and nearly tested its 200-day line again on Friday. TSLA stock has been hitting resistance at its falling 21-day line for the past few weeks, while the 50-day line is racing lower. Holding the 200-day line, and its Jan. 28 low of 792.01, is key for the EV giant. On the upside, Tesla stock has a 1,208.10 buy point, and doesn’t really have an early entry.
Nvidia Stock
Nvidia stock fell 1.3% to 236.42 for the week, but after hitting resistance at its 10-week line, the chip giant tested its 40-week again and nearly touched its 200-day line. As with Tesla, NVDA stock pared Friday’s losses slightly.
Nvidia earnings and guidance late Wednesday topped views, but investors focused on forecasts for unchanged profit margins.
If Nvidia stock can rally above its 50-day line and its Feb. 10 high of 269.25, also breaking a steep downtrend, that would offer a very aggressive entry. NVDA stock would still have a long way to reach its Nov. 22 peak of 346.47.
Market Rally Analysis
The stock market rally, already under pressure, sold off again late last week. The Dow Jones, S&P 500 index and Nasdaq composite broke below their recent ranges and are heading toward their Jan. 24 lows. The S&P 500 and Nasdaq composite are now below their Jan. 31 follow-through day lows, with the odds high that they break to new lows. Undercutting the Jan. 24 lows would mark the end of the market rally.
In late 2018, the stock market correction or bear market had two failed follow-through days, finally bottoming on Christmas Eve.
The ailing market rally has retreated sharply over the last several days, so arguably it’s due for a bounce. But it doesn’t have to happen right away, and one or two good days wouldn’t be that meaningful.
New losers are still far outstripping new winners, while market breadth also weakened once again after briefly improving in early February.
In the very short run, the stock market will continue to focus on fears that Russia invades Ukraine. The long Presidents Day weekend could have major developments related to Russia and Ukraine, raising the potential for a big move up or down on Tuesday. But all of those moves could quickly reverse with the next headline.
Beyond the Russia-Ukraine crisis, inflation and Fed rate hikes hang over the market. On a somewhat related note, supply-chain woes have been a constant refrain in recent weeks.
General Electric (GE), Applied Materials (AMAT) and Roku (ROKU) were among the many companies that cited supply-chain issues continuing to restrict production and more.
Getting supply chain issues resolved would not only bolster corporate profits and economic growth, but also likely curb inflation. With Covid cases plunging and restrictions quickly ebbing, there may be a light at the end of the tunnel, but it could be a long way off.
Time The Market With IBD’s ETF Market Strategy
What To Do Now
Rather than try to guess how Russia, the Federal Reserve and supply chains play out — and how financial markets will react — focus on what the market is doing now. Right now, the major indexes and leading stocks — outside of a few pockets of strength — are simply not healthy.
Don’t get lured in by one or two good market days. The major indexes have a lot of work to do. In any case, there are only a handful of stocks setting up right now. At some point, there will be a strong market rally with a slew of quality stocks flashing buy signals and moving higher from there.
When that happens, you want to be ready. Keep your watchlists fresh and stay engaged with the market.
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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Divisions within the Bank of Canada over the timing of a much-anticipated cut to its key overnight interest rate stem from concerns of some members of the central bank’s governing council that progress on taming inflation could stall in the face of stronger domestic demand — or even pick up again in the event of “new surprises.”
“Some members emphasized that, with the economy performing well, the risk had diminished that restrictive monetary policy would slow the economy more than necessary to return inflation to target,” according to a summary of deliberations for the April 10 rate decision that were published Wednesday. “They felt more reassurance was needed to reduce the risk that the downward progress on core inflation would stall, and to avoid jeopardizing the progress made thus far.”
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Others argued that there were additional risks from keeping monetary policy too tight in light of progress already made to tame inflation, which had come down “significantly” across most goods and services.
Some pointed out that the distribution of inflation rates across components of the consumer price index had approached normal, despite outsized price increases and decreases in certain components.
“Coupled with indicators that the economy was in excess supply and with a base case projection showing the output gap starting to close only next year, they felt there was a risk of keeping monetary policy more restrictive than needed.”
In the end, though, the central bankers agreed to hold the rate at five per cent because inflation remained too high and there were still upside risks to the outlook, albeit “less acute” than in the past couple of years.
Despite the “diversity of views” about when conditions will warrant cutting the interest rate, central bank officials agreed that monetary policy easing would probably be gradual, given risks to the outlook and the slow path for returning inflation to target, according to the summary of deliberations.
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They considered a number of potential risks to the outlook for economic growth and inflation, including housing and immigration, according to summary of deliberations.
The central bankers discussed the risk that housing market activity could accelerate and further boost shelter prices and acknowledged that easing monetary policy could increase the likelihood of this risk materializing. They concluded that their focus on measures such as CPI-trim, which strips out extreme movements in price changes, allowed them to effectively look through mortgage interest costs while capturing other shelter prices such as rent that are more reflective of supply and demand in housing.
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They also agreed to keep a close eye on immigration in the coming quarters due to uncertainty around recent announcements by the federal government.
“The projection incorporated continued strong population growth in the first half of 2024 followed by much softer growth, in line with the federal government’s target for reducing the share of non-permanent residents,” the summary said. “But details of how these plans will be implemented had not been announced. Governing council recognized that there was some uncertainty about future population growth and agreed it would be important to update the population forecast each quarter.”
• Email: bshecter@nationalpost.com
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Shares in US tech giant Meta have sunk in US after-hours trading despite better-than-expected earnings.
The Facebook and Instagram owner said expenses would be higher this year as it spends heavily on artificial intelligence (AI).
Its shares fell more than 15% after it said it expected to spend billions of dollars more than it had previously predicted in 2024.
Meta has been updating its ad-buying products with AI tools to boost earnings growth.
It has also been introducing more AI features on its social media platforms such as chat assistants.
The firm said it now expected to spend between $35bn and $40bn, (£28bn-32bn) in 2024, up from an earlier prediction of $30-$37bn.
Its shares fell despite it beating expectations on its earnings.
First quarter revenue rose 27% to $36.46bn, while analysts had expected earnings of $36.16bn.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said its spending plans were “aggressive”.
She said Meta’s “substantial investment” in AI has helped it get people to spend time on its platforms, so advertisers are willing to spend more money “in a time when digital advertising uncertainty remains rife”.
More than 50 countries are due to have elections this year, she said, “which hugely increases uncertainty” and can spook advertisers.
She added that Meta’s “fortunes are probably also being bolstered by TikTok’s uncertain future in the US”.
Meta’s rival has said it will fight an “unconstitutional” law that could result in TikTok being sold or banned in the US.
President Biden has signed into law a bill which gives the social media platform’s Chinese owner, ByteDance, nine months to sell off the app or it will be blocked in the US.
Ms Lund-Yates said that “looking further ahead, the biggest risk [for Meta] remains regulatory”.
Last year, Meta was fined €1.2bn (£1bn) by Ireland’s data authorities for mishandling people’s data when transferring it between Europe and the US.
And in February of this year, Meta chief executive Mark Zuckerberg faced blistering criticism from US lawmakers and was pushed to apologise to families of victims of child sexual exploitation.
Ms Lund-Yates added that the firm has “more than enough resources to throw at legal challenges, but that doesn’t rule out the risks of ups and downs in market sentiment”.
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Oil companies planning to ship crude on the expanded Trans Mountain pipeline in Canada are concerned that the project may not begin full service on May 1 but they would be nevertheless obligated to pay tolls from that date.
In a letter to the Canada Energy Regulator (CER), Suncor Energy and other shippers including BP and Marathon Petroleum have expressed doubts that Trans Mountain will start full service on May 1, as previously communicated, Reuters reports.
Trans Mountain Corporation, the government-owned entity that completed the pipeline construction, told Reuters in an email that line fill on the expanded pipeline would be completed in early May.
After a series of delays, cost overruns, and legal challenges, the expanded Trans Mountain oil pipeline will open for business on May 1, the company said early this month.
“The Commencement Date for commercial operation of the expanded system will be May 1, 2024. Trans Mountain anticipates providing service for all contracted volumes in the month of May,” Trans Mountain Corporation said in early April.
The expanded pipeline will triple the capacity of the original pipeline to 890,000 barrels per day (bpd) from 300,000 bpd to carry crude from Alberta’s oil sands to British Columbia on the Pacific Coast.
The Federal Government of Canada bought the Trans Mountain Pipeline Expansion (TMX) from Kinder Morgan back in 2018, together with related pipeline and terminal assets. That cost the federal government $3.3 billion (C$4.5 billion) at the time. Since then, the costs for the expansion of the pipeline have quadrupled to nearly $23 billion (C$30.9 billion).
The expansion project has faced continuous delays over the years. In one of the latest roadblocks in December, the Canadian regulator denied a variance request from the project developer to move a small section of the pipeline due to challenging drilling conditions.
The company asked the regulator to reconsider its decision, and received on January 12 a conditional approval, avoiding what could have been another two-year delay to start-up.
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