Dow Jones futures were slightly lower early Monday, along with S&P 500 futures and Nasdaq futures, on a report that Beijing wants more talks before signing off on the "phase one" China trade deal that President Donald Trump hailed Friday. China trade hopes spurred a strong stock market rally, though Friday's gains faded on the actual trade truce. Apple stock did hit a record high, reclaiming its crown as the world's most valuable company.
Meanwhile, large cap techs Microsoft stock, Nvidia stock, Google parent Alphabet (GOOGL), Facebook (FB), and Visa (Visa) are near buy points. Finally, Boeing (BA) late Friday stripped CEO Dennis Muilenburg of his role as chairman.
Apple (AAPL) is now slightly extended from a buy zone. Boeing stock is in a buy zone. But Microsoft (MSFT), Nvidia (NVDA) and Google stock are within 2.5% of buy points, while Visa stock and Facebook stock are some 5% below proper entries, just reclaiming their 50-day lines.
Apple stock, Boeing stock, Microsoft stock and Visa stock are all Dow Jones components.
Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value, off their worst levels of the morning. S&P 500 futures dipped 0.1%. Nasdaq 100 futures sank 0.15%. 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 had been modestly higher until a Bloomberg report, citing sources, that Beijing wanted more talks before finalizing a written agreement.
That could be true heading into Monday's session. Dow Jones futures could point in one direction, but as more-active trade takes hold in regular trade, especially with new China trade news or Trump tweets, the indexes could close very differently.
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China Trade Deal
The "substantial phase one" China trade deal, as President Donald Trump described it, is really a trade truce. The White House said Beijing will buy $40 billion to $50 billion more in U.S. farm goods and offered vague intellectual property commitments. The most concrete result from the China trade talks is that Trump will hold off on China tariff hikes set for Tuesday. December tariffs on nearly all remaining imports from China, include the Apple iPhone, are still on the schedule for now.
China's Commerce Ministry cited "substantial progress" but didn't mention a deal or any specific steps, including farm purchases.
The Bloomberg report that Beijing wants more talks before signing a written "phase one" China trade deal may or not be significant. It was clear Friday that there was no deal on paper yet, with details needing to be hammered out in the coming weeks. To some extent, more trade negotiations on the written specifics were clearly in the offering.
Beijing may send Vice Premier Liu He, China's lead negotiator, back to D.C. for more discussions, according to one source. Another said China wants the U.S. to drop plans for the December tariffs as well. If there is a signed China trade deal, however limited, Trump would likely at least suspend new tariffs on the Apple iPhone and more.
But even if everything goes smoothly, the China trade deal will still leave key thorny questions for later. Existing Trump tariffs on Chinese goods apparently will remain in place.
Current Stock Market Rally
The current stock market rally is still under pressure, though in a better place than a few weeks ago.
The Dow Jones Industrial Average and Nasdaq composite rose 0.9% while the S&P 500 index climbed 0.6%. The Dow Jones today is back above its 50-day moving average, along with the S&P 500 and Nasdaq. Apple stock, a Dow, S&P 500 and Nasdaq component, rallied just over 4%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) climbed just 0.5%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.2%. The VanEck Vectors Semiconductor ETF (SMH) rallied 1.8%.
Boeing CEO Loses Chairman Role
Boeing named lead director David Calhoun as chairman, stripping that post from CEO Dennis Muilenburg. The board pledged its strong support for Muilenburg, but also "active oversight" of his performance. That adds to pressure on Muilenburg, who is trying to win regulatory approval to resume Boeing 737 Max flights while soothing customers, pilots and passengers.
Calhoun, a senior Blackstone (BX) executive, was previously chairman of Caterpillar (CAT), another Dow Jones giant.
Separately, Trump tweeted Saturday that the China trade deal could mean up to $20 billion in Boeing jet sales. There was no mention of aircraft purchases in Friday's trade deal announcement.
Boeing stock dipped 0.2% to 374.92 last week, though it rose 1.1% on Friday. Shares found support at their 200-day line and holding above a 369.79 cup-with-handle buy point. That cup base is within a larger consolidation with a potential 446.11 buy point.
Nvidia stock briefly cleared a 188.50 handle buy point Friday, but pared gains to close at 185.99, still up 2.2% for the week. The relative strength line for Nvidia stock is at a 5-month high, though that follows a sharp drop from October 2018-June 2019.
A China trade deal would be good news for Nvdia stock and other chip names. However, Friday's trade truce didn't include any moves on Chinese telecom gear giant Huawei, a key customer for Nvidia and many other U.S. chipmakers.
Microsoft stock rose 1.1% to 139.68. Its market cap rose to $1.0665 trillion, but couldn't hold off fast-rising Apple stock, now at $1.0675 trillion. Microsoft stock is close to retaking a 141.77 flat-base buy point. Investors might want to treat 142.47 as a better entry, keying off Microsoft's all-time high.
The RS line for Microsoft stock has been holding at or near record highs for several months.
Microsoft, like Apple stock, is on IBD Leaderboard.
Google stock rose just 0.4% last week to 1,215.71, though it had decent gains Wednesday-Friday. Shares are in a cup-with-handle base with a 1,268.49 buy point. But the handle is long enough to be its own consolidation, and it boasts its own handle with a 1,248.12 entry.
The RS line has moved sideways for the past few months but is still below its 2019 peak or its July 2018 all-time high. In fact, Google stock has moved sideways with the S&P 500 since early 2016.
Facebook stock climbed 2.1% last week to 184.19, just retaking its 50-day moving average. Shares have been consolidating since July 25, as they reversed lower following the latest Facebook earnings report. Facebook stock has a double-bottom base with a 193.20 entry.
The RS line for Facebook stock is even worse than fellow FANG stock Google, lagging during much of the current consolidation. It's still well below its July 2018 peak.
The weak RS lines for Facebook stock and Google stock are a concern for investors. However, even if Facebook stock and Google stock are no longer true leaders, just modest rallies from these internet giants would help lift the overall market.
Separately, the Facebook Libra project has lost Visa, Mastercard (MA), PayPal (PYPL) and eBay (EBAY) as partners as the stablecoin faces regulator and political skepticism to outright opposition.
Straddling the line between finance and technology, fintech payment stocks like Visa and archrival Mastercard have been leaders for some time. Visa stock rose 0.6% last week to 117.06, just retaking its 50-day line on Friday. Visa stock also has a new flat base with a 187.15 buy point.
The relative strength line for Visa stock is off its early September peak but not by much. Meanwhile, Leaderboard stock Mastercard also is near a buy zone with a very similar chart to Visa's.
Can Stock Market Hit New Highs?
The current stock market rally has shown remarkable resilience, refusing to die amid negative China trade headlines and recession risks. Now that there's a China trade truce and progress toward at least a partial trade deal, will that be enough to propel the stock market rally to record highs? A lot may depend on whether China trade news is sufficient to stabilize and revive global economic growth.
Earnings season is ramping up this week, with analysts predicting the first S&P 500 earnings decline in three years. Investors may overlook weak results if they see stronger economic growth ahead to revive profits.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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