Stocks climbed into Thursday’s short, Christmas Eve trading session, as agreements on federal coronavirus relief and government funding in the U.S., as well as a Brexit deal overseas, remained in limbo. SPACs rallied briskly and chipmakers showed early strength, while many top China names were pressured by rising antitrust action from Chinese regulators. Meanwhile, IBM traded high on the Dow Jones today, after settling an intellectual property dispute with Airbnb.
The Nasdaq jumped 0.4% at the starting bell, and the S&P 500 climbed 0.3%. Chipmakers packed the top of the Nasdaq 100, with ASML Holdings (ASML), KLA (KLAC) and Lam Research (LRCX) all up more than 1%. The Dow Jones Industrial Average held to a 0.1% gain, as Walgreens Boots Alliance (WBA) and Boeing (BA) dragged at the bottom of the list.
China stocks came under notable pressure after Chinese regulators began to move aggressively to control large-scale internet corporations. Alibaba Group Holdings (BABA) dived more than 12%. Baidu fell 2%. IBD Leaderboard stock Pinduoduo (PDD) shook premarket losses and gained 5%.
IBD 50 stocks near buy points Thursday included Taiwan Semiconductor (TSM), Repligen (RGEN), Logitech (LOGI) and Fortinet (FTNT). Leaderboard stock Shopify (SHOP) is at the top of a buy range. TSM is also an IBD Leaderboard listing.
Autonomous vehicle software developer Cerence (CRNC) popped 3.4% in premarket trade. Wedbush boosted the stock’s price target to 120, from 90, based on market momentum and design wins in the current quarter. The IBD 50 stock is extended after a rebound from 10-week support, but may be finishing up a three-weeks tight pattern.
SPACs, Small Caps Rally
A handful of SPACs — special purpose acquisition companies — posted big early moves. Bridgetown Holdings (BTWN) kicked up 14% in premarket trade. Indonesian e-commerce start-up Tokopedia is reportedly weighing the merits of a reverse merger with Bridgetown, which is backed by billionaires Peter Thiel and Richard Li, vs. launching as an independent initial public offering.
Among the other blank check outfits in motion, Altimar Acquisition (ATAC) gained 4.5%, Northern Star Acquisition (STIC) rallied 13% and RMG Acquisition (RMG) notched an 8% gain. The Defiance Next Gen SPAC Derived ETF (SPAK) rose 1% before the open.
Small caps once again outran the overall premarket action. Russell 2000 futures climbed 0.65%, with biotechs Odonate Therapeutics (ODT) and Spero Therapeutics (SPRO) trading near the top of the index. Small caps Bandwidth (BAND), Datadog (DDOG) and Axon Enterprise (AAXN) were featured on Tuesday’s Ready List for IBD Live show.
Gear up for Thursday’s market action by reading IBD’s Investing Action Plan.
Dow Jones Today: IBM Settles Airbnb Suit
At the top of the Dow Jones today, International Business Machines (IBM) jumped 0.7% after settling an intellectual property lawsuit filed in Federal District Court in Delaware against short-term home rental site Airbnb (ABNB). Details were not released. Airbnb shares, which went public Dec. 10, rose 0.7%,
Goldman Sachs (GS) climbed 0.6%, angling to cap its eighth-straight weekly advance. The stock has climbed nearly 15% since breaking out past a 225.34 buy point in mid-November. The stock is currently trading at its highest level since April 2018, and about 7% below its March 2018 record high. Goldman Sachs has recovered to trade almost 12% above its price as of Dec. 31, 2019.
JPMorgan (JPM) was also an early Dow Jones leader, up almost 0.6% after Monday’s breakout past a 123.60 buy point in a cup-with-handle base. Shares of JPMorgan remain down 10% year-to-date.
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Coronavirus Relief Legislation
The effort to reach some sort of a deal on coronavirus stimulus relief will be central in Washington on Thursday.
President Donald Trump hasn’t explicitly threatened a veto, the Washington Post reports, but has thus far declined to sign the bill. And even if the Trump was to veto the legislation, the measure passed both the House and the Senate with what are considered “veto-proof” majorities, carrying the more than two-thirds of votes needed to overturn a presidential veto.
However, House Democrats quickly seized on Trump’s call to boost direct stimulus payments to consumers to $2,000, from $600. The House plans a short session on Thursday aimed at making that change. If lawmakers do not reach an agreement, the government is headed toward a shutdown when funding runs out on Tuesday. And stimulus support for consumers and businesses, which a presidential signature could have set in motion before New Year’s, for now remains on hold.
In the U.S., the daily average of new coronavirus infections over the seven days through Wednesday was 216,469, down from a Dec. 18 peak of 223,866. The daily average at Dec. 1 was 165,421 new cases, 84,203 at the beginning of November, and 43,311 on Oct. 1. Deaths reported daily rose to 2,750 on Wednesday, up 73% from the start of the month. The daily average for deaths reported on Dec. 1 was 1,587. On Nov. 1 it was 850. On Oct. 1 it was 732.
Worldwide, Wednesday’s seven-day average for new infections was 642,698. That was up from 585,107 on Dec. 1, and 509,261 at the start of November. Deaths were being reported at a daily rate of 11,622. At the beginning of December, the daily average number of deaths was 10,333, up from 6,601 on Nov. 1 and 4,975 at the beginning of October.
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The Centers for Disease Control and Prevention reported on Wednesday that almost 9.47 million doses of Covid-19 vaccine had been distributed in the U.S. The CDC reported one million doses had so far been administered.
Vaccine makers Moderna (IBD) and BioNTech (BNTX) each slipped less than 1% in early action. Pfizer (PFE) shares were unchanged.
In Europe, both sides of the English Channel eagerly awaited a cliffhanger Brexit deal announcement expected on Thursday. The U.K. formally parted from the European Union on Jan. 31, but the governing trade rules were extended to Dec. 31. The U.K.’s imports from the EU run about $107 billion more than exports to the union, Reuters reports. The U.K. is Europe’s second largest economy, next to Germany. The EU is the U.K.’s largest trading partner.
European markets were once again mixed, with London’s FTSE 100 down 0.1% as China joined the list of countries barring travel to and from the U.K. due to the U.K.’s rebound of coronavirus infections. Frankfurt’s DAX rallied 1.3%. The CAC-40 in Paris inched ahead 0.1%. All three exchanges will close for the Christmas holiday on Friday.
China Markets Mixed, Regulators Eye Alibaba, Pinduoduo, Tencent
Markets in Asia moved generally higher, although the Shanghai Composite dropped 0.6%. Regulators summoned executives from Alibaba Group, JD.com, Tencent Holdings (TCEHY) and Pinduoduo, among others, in a move to control monopolies and prevent the “disorderly expansion of capital,” according to the South China Morning Post.
A statement from the State Administration for Market Regulation set an “administrative guidance meeting” with the six e-commerce giants on Tuesday, and cautioned the group to pay attention to problems of “low price dumping and squeezing jobs.”
Hong Kong’s Hang Seng Index finished the short session up 0.2%. In Japan, Tokyo’s Nikkei 225 climbed 0.5%. Markets in Shanghai and Tokyo will operate normal trading sessions on Friday. The Hong Kong stock exchange will close for the Christmas holiday.
IBD 50 Early Risers: TSM, Repligen, AMD
Chipmakers made some of the strongest early moves on the IBD 50 list. Broadcom and Advanced Micro Devices (AMD) both added less than 1%.
Chip foundry Taiwan Semiconductor rose 0.6% in premarket action. The stock ended Wednesday 4% below what MarketSmith analysis charts as a 107.94 buy point in a three-weeks-tight pattern.
Bioprocessing products maker Repligen (RGEN) gained 1%. The stock is in a buy range as it rebounds from a test of support at its 10-week moving average. The rebound is occurring after a third-stage base, which adds risk. The stock is also finishing the sixth week of a possible cup base, with a buy point at 212.65.
Uptrend Intact, Rotation Into Small Caps
The stock market remains in a confirmed uptrend, with its status little changed in the holiday-shortened week, with the Dow Jones, S&P 500 index and Nasdaq didn’t move much during the short week, all holding near record highs. Late-day gains faded on Wednesday after President Trump vetoed the $740 billion defense deal. Rotation into small caps stocks has been a hallmark of recent action, with the Russell 2000 up 10.3% so far in December, better than double the Nasdaq’s 4.7% advance.
The Russell 2000 is now poised to log its eighth-straight weekly advance. The rally has left the index extended 34.7% above its 200-day moving average at the end of Wednesday’s session. That is the widest margin above the 200-day level in the index’s history. The previous record was a 32% margin, recorded in March 2000.
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