Dow Jones Futures: Biden needs to pick Fed chief as market rally diverges; Time to buy Rivian shares?

Dow Jones futures opens Sunday night with S&P 500 futures and Nasdaq futures. The stock market rise diverged last week, with Apple (AAPL) and other megacap technologies thrive, masking some underlying weaknesses. It comes as President Joe Biden is about to announce whether he will nominate Federal Reserve chief Jerome Powell for another term with inflation at its highest in 30 years. Finally, Rivian Automotive (RIVN) consolidates after the first RIVN listing increase. Is it time to buy this EV startup?




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Apple stock, Amazon.com (AMZN), Tesla (TSLA), Nvidia (NVDA) and Microsoft (MSFT) drove the Nasdaq composite to record highs. The Nasdaq and especially the Nasdaq 100 look extended. But the decline in Nasdaq growth has been slowing. Meanwhile, the Dow Jones and Russell 2000 fell last week as falling oil prices and government interest rates hit energy stocks and finances. Blame it on renewed Covid fears and restrictions that also hit travel names.

Will Biden nominate Fed chief Powell for a second term?

President Biden on Tuesday suggested he would announce his nomination for the Federal Reserve chair in “about four days,” though a White House official later said a decision would come before Thanksgiving.

Will Biden stick with Fed chief Powell, or go along with someone else, such as Fed Governor Lael Brainard?

The stock and bond markets clearly favor Powell, whose current term as Fed chairman ends early next year.

Fed chief Powell is a well-known crowd, and gets high marks on Wall Street for his swift action during the coronavirus crack. Now the Fed is just starting to turn down asset purchases with inflation as a major issue. There is speculation that policy makers may increase the pace of the Fed cut, perhaps as soon as the December meeting. But resurgent Covid cases could derail economic growth again. It’s a delicate time.

Many observers believe that, at least in terms of monetary policy, Fed Governor Brainard would be quite similar to Powell. But there is always the unknown. And it’s not just politics.

Communication to the financial markets is a key role for the US Federal Reserve, explaining not only what the central bank is doing now, but what it can do as economic trends develop. Powell had some rocky moments with politics and communication early on, but has become more agile at his press conferences. Part of that also reflects that analysts and investors are learning to interpret Powell’s statements.

A weekend-fat boss election could be seen as giving the stock and bond markets more time to digest it, suggesting someone other than Powell. On the other hand, Biden might have wanted to wait until after Parliament passed the Reconciliation Act on Friday. This suggests that Biden might be inclined to nominate Powell.

A key factor in favor of Fed chief Powell is that many GOP senators are likely to support another term. President Trump elected Powell. Another choice, such as Brainard, may struggle to get confirmed.


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Shares on IBD lists

Tesla, Microsoft and Nvidia shares are on the IBD Leaderboard. Apple shares are on SwingTrader. MSFT stock is an IBD long-term leader. Tesla shares and Nvidia are at IBD 50.

The video embedded in this article analyzed the complicated market upswing. It also discussed Airbnb (ABNB), by Dash (DASH) and Louisiana-Pacific (LPX).

Dow Jones Futures today

Dow Jones futures open at 18.00 ET on Sunday 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 stock market session.


Join IBD experts as they analyze powerful stocks in the stock market rally on IBD Live


News about coronavirus

Coronavirus cases worldwide reached 256.87 million. Covid-19 deaths peaked at 5.15 million.

Coronavirus cases in the United States have affected 48.49 million, with deaths above 790,000.

Austria announced a nationwide lockdown on Friday, setting a vaccine mandate, amid severe new infections in the country and in large parts of Europe. The United States is also experiencing more cases as people go indoors when the temperature drops. Previous vaccinations may also lose their potency, although they still provide strong protection against hospitalization and death. Coronavirus deaths in the United States continue to trend lower.

FDA OK’d Pfizer (PFE) and Modern (MRNA) coronavirus vaccine boosters for all adults on Friday. A CDC advisory panel approved Pfizer and Moderna booster shots hours later, with the CDC director set to give final approval soon. Several states, including California and New York, had already opened up to booster shots for adults.

Stock market rally

Stock market growth increasingly diverged during the week, with large technology companies masking weaknesses elsewhere.

The Dow Jones Industrial Average fell 1.4% in last week’s trading. The S&P 500 index rose 0.3 per cent. The Nasdaq Composition rose 1.2% while the Nasdaq 100 rose 2.35%. Small-cap Russell 2000 fell 2.8%

The 10-year government bond yield fell 5 basis points last week to 1.54%, reversing lower from a mid-week high of 1.65%. Crude oil futures fell 5.8% to a low of seven weeks.

Apple stock rose 7% last week, broke out of a cup-with-handle base, according to MarketSmith analysis, and hit a record high. Amazon stock rose 4.3%, also clearing a cup-with-handle bottom. Nvidia shares rose 8.5% on earnings after pausing for several sessions after a metaverse-led rise. Tesla stock rose 10%, recaptured its 21-day line and regained much of the previous week’s 15% drop. And Microsoft shares? It rose solid 1.9% to a fresh high in its seventh consecutive weekly rise.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.2%. iShares Expanded Tech-Software Sector ETF (IGV) fell 0.9%, even with MSFT shares as a huge IGV portfolio. VanEck Vectors Semiconductor ETF (SMH) rose 3.7%, with NVDA stock being a major component.

The SPDR S&P Metals & Mining ETF (XME) was down 7.2% and the Global X US Infrastructure Development ETF (PAVE) was down 0.6%. US Global Jets ETF (JETS) fell 5.7 percent. SPDR S&P Homebuilders ETF (XHB) rose 1.9%, its seventh consecutive weekly increase. Energy Select SPDR ETF (XLE) fell 5% and Financial Select SPDR ETF (XLF) gave up 2.9%.

As a result of more speculative history stocks, the ARK Innovation ETF (ARKK) fell 4.4% and the ARK Genomics ETF (ARKG) 6.7%, with the latter at a low of 52 weeks. The Tesla share remains No. 1 across ARK’s ETFs.


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Rivian stock

Rivian stock hit a record high of 179.47 intraday on Tuesday, more than double the RIVN IPO price of $ 78 as of November 9th. The shares then tumbled 15% on Wednesday and 15.5% on Thursday. But with an increase of 4.2% on Friday, the Rivian stock ended down only 1% to 128.60 for the week.

Is it time to buy RIVN shares? While it is tempting to buy a red-hot listing like Rivian Automotive, investors should wait for a price discovery on a new issue. Look for a listing base to form. IPO bases can be very short, but the Rivian IPO stock chart is not there yet.

When a Rivian IPO base is formed, look for early records. Early entries have several advantages over traditional buy points, especially for listing shares in 2021.

Analysis of market rally

Just a few weeks ago, the stock market rise looked healthy with a broad-based progress. Now the market is a bit like one that has chatted in junk food, at the same time stuffed and malnourished. On the one hand, Apple, Amazon stocks and other technology megacaps are stronger. On the other hand, the market breadth and several sectors are struggling.

The Nasdaq composite is now 5.8% above its 50-day line, just below the 6% level, signaling an extension. The Nasdaq 100 is now 7.1% over its 50 days. This increases the risk of a withdrawal, with higher odds that such a withdrawal will be more severe.

Nasdaq able to grow even more and stay that way for a while before retiring. In August 2020, the Nasdaq was increasingly expanded, driven by Apple and Tesla’s stock rises, stock split news and huge option activity. On September 2, 2020, the Nasdaq closed 11.2% above its 50-day line. But it marked a peak with a market correction and choppy action over the next few months.

Meanwhile, even though megacaps are being extended, Nasdaq’s advance fall line has deteriorated significantly, signaling growing weakness even among many technicians. Also the Dow Jones and especially Russell 2000 have retreated over the last two weeks. Energy and finance are driving these declines.

The S&P 500 performs relatively well as a broad market index. It is just at record highs while not being extended.

Perhaps the overall stock market rally will level off in a graceful way, with technology giants pausing while other areas advance. Other scenarios are less inviting. If the progress of the Tesla stock and other giants lifts the rest of the market, then the rally will be extremely extended very quickly. Alternatively, if Apple stocks and other megacaps retire solidly with other sectors extending withdrawals, the market upswing could witness some notable losses. It could be constructive in the medium term, but not so fun in the short term.


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What should I do now

While the S&P 500 looks good, a market upswing that looks too strong and too weak at the same time makes it difficult to feel comfortable with the short-term outlook.

This is not a good time to add exposure. Outside of the tech titans, many stocks are fighting. And if the overall market upswing recedes, most new purchases will quickly be underwater.

Investors may want to take some more partial profits to make it easier to cope with any short-term turbulence, both financially and mentally. Also sell losing stocks or modest winners who give up the bulk of their gains, especially in weakening sectors. Such steps free up capital, so when market conditions look clearly favorable again, you will be able to take advantage.

Increase your watch lists and make sure to cast a wide net. With sector rotation returning after several weeks of broad-based gains, make sure you do not miss the next sector recovery.

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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