Dow Jones futures rose Wednesday night, along with S&P 500 futures and Nasdaq futures, as Congress returned to Capitol Hill to finish the Electoral College certification of Joe Biden’s presidential victory. Earlier, Georgia runoff election results fueled a stock market rally and a shift into cyclical sectors, but the major indexes closed Wednesday mixed as a pro-Trump mob stormed Capitol Hill.
Target stock, Apple chipmaker Qorvo (QRVO), General Motors (GM), trucking firm XPO Logistics (XPO) and wellness specialist Medifast (MED) all broke out or flashed bullish signals Wednesday, closing in buy range.
The Dow Jones, S&P 500 index and small-cap Russell 2000 rallied to record highs Wednesday, fueled by infrastructure plays, financials, hospitals, casinos, marijuana-related companies as well as old and new energy stocks.
The Nasdaq composite rebounded for modest gains, but faded late on the Trump mob’s Capitol Hill breach. Tech giants such as Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN) and Nvidia (NVDA) retreated, along with many software names.
CAN SLIM expert David Ryan highlighted the shift into cyclical stocks in a special IBD Live on Wednesday. IBD has highlighted a possible change in leadership in recent days and weeks, including in our latest IBD Weekly cover story.
Many of Wednesday’s big winners are extended, such as Caterpillar (CAT), HCA Healthcare (HCA), US Steel (X), Canopy Growth (CGC), JPMorgan Chase (JPM) and Tesla (TSLA). They aren’t actionable now, though investors should keep an eye on them.
Apple stock, Tesla and Target are on IBD Leaderboard. Target (TGT), XPO Logistics and GM stock are on SwingTrader. Microsoft stock is an IBD Long-Term Leader. Nvidia and Amazon stock are on the IBD 50.
Congress Returns To Work
Congress returned to Capitol Hill Wednesday night to complete the Electoral College certification vote, to show that lawmakers won’t be cowed by political violence.
At least a few GOP lawmakers that had previously planned to object to some states’ electoral votes changed their minds after pro-Trump riots. That includes Sen. Kelly Loeffler, who just lost her Georgia runoff Tuesday night.
Law enforcement earlier secured the Capitol building, with a very heavy presence inside and out, but it was different story in the afternoon.
Trump Mob Stormed Capitol Hill
President Donald Trump held a D.C. protest Wednesday, where he repeated his claims that widespread fraud cost him the presidential election. He urged the thousands of supporters to take action. Several hundred then marched to the Capitol Hill, entering the building and then the Senate chamber.
Law enforcement shot at least one rioter inside the Capitol Building. The woman later died. At least one improvised explosive device was found in the Capitol, according to reports. It’s unclear if police arrested any of the rioters.
Vice President Mike Pence and Congress were evacuated, temporarily halting the Electoral College certification vote process.
President Trump, who forcefully denounced Black Lives Matter protests over the summer, initially issued a mild tweet urging Capitol rioters to “remain peaceful.” In a late afternoon video posted on social media, he urged people to “go home now,” even as he continued to repeat his claim that the presidential election was “fraudulent.”
Trump later returned to Twitter in a more defiant tone: “These are the things and events that happen when a sacred landslide election victory is so unceremoniously & viciously stripped away from great patriots who have been badly & unfairly treated for so long.”
Twitter soon removed the post. For the first time, it suspended President Trump’s Twitter account, demanding that he remove tweets excusing violence. Facebook suspended Trump for 24 hours.
Washington, D.C., imposed a 6 p.m. ET curfew as a result of the Capitol Hill riot. Virginia’s governor imposed curfews on the nearby cities of Arlington and Alexandria.
Georgia Runoff Election Swings Senate
Democrats won one Senate seat in Tuesday’s Georgia runoff elections and seem poised to pick up another.
The Senate appears on track for a 50-50 split, with Kamala Harris holding the tiebreaker when she becomes vice president on Jan. 20. With unified control of Washington, Democrats would likely push for a larger stimulus deal. Infrastructure spending could be a bipartisan measure, perhaps with a somewhat green energy tilt. Cannabis reforms are more likely, but probably not full legalization. Democrats could push tax hikes, but perhaps not until later this year.
Caterpillar stock leapt 5.6%, with Vulcan Materials (VMC) up 8.9% and U.S. Steel 17%. Canopy Growth shot up 12%. All four are extended from various buying opportunities. HCA stock and JPMorgan, already extended, added 3.4% and 4.7% on Wednesday.
Tesla stock jumped 2.8% to 755.98 helped by a new Street-high price target and green energy hopes. The electric vehicle leader is greatly extended from any plausible buy point.
Dow Jones Futures Today
Dow Jones futures rose 0.5% vs. fair value. S&P 500 futures climbed 0.6%. Nasdaq 100 futures advanced 0.75%.
That’s been true in the past few days, with Dow Jones futures signaling gains or losses only for blue chips to go the other direction by the close.
Coronavirus cases worldwide reached 87.63 million. Covid-19 deaths topped 1.89 million.
Coronavirus cases in the U.S. have hit 21.85 million, with deaths above 369,000. Amid all the other news, U.S. coronavirus cases hit a new daily record of more than 260,000. Covid deaths topped 4,000 for the first time.
Stock Market Rally
U.S. Stock Market Today Overview
Last Update: 4:14 PM ET 1/6/2021
The stock market rally had a wild session, reflecting big changes on Capitol Hill … and big changes on Capitol Hill. The major indexes initially fell following the Georgia Senate runoffs, but the Dow Jones quickly rebounded, with the S&P 500 index and later the Nasdaq following suit. But as protestors stormed the Capitol Building, taking over the Senate chamber, stocks turned mixed again.
Also weighing on the market, or at least Chinese stocks, was a report that the U.S. government is mulling new stock trading bans on Chinese internet giants Alibaba (BABA) and Tencent (TCEHY). Alibaba, Tencent and JD.com (JD) sold off, while Chinese EV maker Nio (NIO) reversed lower.
The Dow Jones Industrial Average rose 1.4% in Wednesday’s stock market trading. The S&P 500 index rose 0.6%. The Nasdaq composite fell 0.6%.
Apple Stock, Big Techs Slump
Apple stock formed a high-ish handle this week on its cup base, but on Wednesday undercut its 21-day exponential moving average, falling 3.4%. Microsoft lost 2.6%, Amazon stock 2.5% and Nvidia 5.9%, all sinking or tumbling below their 50-day lines.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) sank 0.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) off 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) tumbled 2.4%, with Microsoft stock a major component. The VanEck Vectors Semiconductor ETF (SMH) dipped 0.3%, as Taiwan Semiconductor (TSM) and several other chip names offset laggards such as AMD (AMD) and Nvidia stock.
Target stock rose 4.7% to 188.92, clearing a flat base with a 181.27 buy point, according to MarketSmith analysis. The flat base is arguably part of a base-on-base formation, or a base-on-base-on-base pattern. In recent weeks, TGT stock found support at its 21-day line on a daily chart and the 10-week line on a weekly chart. The relative strength line for Target stock is at a record high. The RS line, the blue line in the charts provided, tracks a stock vs. the S&P 500 index.
GM stock climbed 3.2% to 42.98, extending a rebound from its 50-day and 10-week lines. Wednesday’s move pushed General Motors above its 21-day line, offering an opportunity to start a position. GM stock has a flat base with a 46.81 buy point.
Medifast stock leapt 9.5% to 218.13, clearing a 208.67 buy point from a flat base as part of a base-on-base formation. Volume was heavy in the breakout. The RS line for Medifast stock is at a new high.
Medifast stock was Wednesday’s IBD Stock Of The Day.
XPO Logistics Stock
XPO Logistics stock rose 4.5% to 123.33, setting a closing high and clearing a five-weeks-tight, a long version of the three-weeks-tight. XPO stock closed just below the official 123.69 entry, but investors could start buying it here, above the bulk of the tight pattern.
Qorvo stock climbed 1.6% to 172, peeking out above a 171 buy point from an ascending base. The RS line for QRVO stock is also at a record high. As a 5G and Apple iPhone chipmaker, Qorvo is well-placed to benefit from the 5G wireless boom and the first-ever 5G iPhone.
Stock Market Rally Parting Thoughts
The stock market rally appears to be in a transition. Cyclical stocks have been coming on for several months, but they may be ready to take clear market leadership. Tech giants, perhaps even Apple stock, may need to take a breather, along with many big software winners.
Of course, the stock market rally has had several short-lived rotations, only to swing back to growth. That could still be possible. It’s likely that some tech leaders will continue to do well, as the Qorvo stock breakout suggests.
Still, investors should at least keep many cyclical stocks on their radar, and perhaps include at least some in their portfolios. Many cyclical stocks have lousy results in recent quarters due to the coronavirus pandemic and shutdowns. When running screens, focus more on relative strength and earnings estimates.
While Wednesday’s market action was generally encouraging, there’s also no guarantee that the current stock market rally will move steadily higher.
Stay engaged, keep an open mind and follow your buy and sell rules.
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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