Stock Market Gains Traction; Tesla Trims Losses; Planet Fitness Muscles Higher

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The major stock market indexes traded higher on Tuesday as Americans cast their midterm votes.




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The Dow Jones Industrial Average gained 1.5% in the first half while the S&P 500 added 1.2%. The Nasdaq composite rose 1.6%. The Russell 2000 small-cap index shook off early selling pressure, lifting 1.2%.

Volume rose on the Nasdaq and was flat on the NYSE vs. Monday levels.

The 10-year Treasury note shed a few basis points to 4.14% while crude oil ticked down to $90.80 per barrel.

Gold rallied more than 2% in a third strong session, with the yellow metal lifting off after nearing a 2022 low.

The CME FedWatch tool now projects 45% odds for a 75-basis-point hike at the December meeting, close to an even split with the 55% looking for a 50-basis-point hike.

Stock Market Outlook

Stocks and indexes have been retracing the boundaries of last week’s post-Fed sell-off for the past two sessions, and are adding to it this morning. However, given overhead supply, it will take more buying pressure to get back to last week’s highs and establish more positive technical signals.

For now, investors should heed last night’s warning in The Big Picture: “While Monday’s steps were encouraging, the stock market has more work to do to gain investors’ confidence. IBD last week moved the market outlook to ‘uptrend under pressure’ after the nascent rally came under selling pressure.”

This defensive posture should limit stock exposure to no more than 20% of a portfolio.

Election Day USA

All major indexes are trading higher so far this week but many institutions are keeping their powder dry ahead of today’s election.

Polls favor Republican control of the House of Representatives but the Senate looks like a tossup. The stock market loves the idea of gridlock into the 2025 inauguration because new spending packages would pour fuel on inflation and aggravate the Fed. And gridlock would likely mean fewer new spending packages.

Major investment houses also view the midterm election as a tailwind for stocks, according to FactSet.

Jefferies focuses on market performance since 1934, noting that returns three- and six-months out “tend to be quite positive,” after an election. The firm also says performance tends to get a boost if year to date performance into the midterms is below average. In addition, the best returns were booked in the following year when price action into the vote was subpar.

Goldman Sachs takes a similarly positive view.

It notes the S&P 500 has booked a 3% median return through year-end after dozens of elections in the last 90 years, and a 17% return in the following 12 months. Their research also reveals that returns have been slightly stronger under divided governments.

Bank of America issued a report as well, noting that a split government under a Democratic president is Goldilocks for equities, with average annual returns of +16%.


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Stock Market: Buyers And Sellers

Tesla (TSLA) has transformed from EV automaker into a full-blown proxy for Elon Musk’s big adventure with Twitter. Investors worry the idiosyncratic CEO and billionaire has diverted too much attention from his primary duties as head of Tesla. They are also fearful of major brand destruction, given the bumper-car ride of his first days at the troubled social media platform.

Many technicians are also sounding the alarm, noting that TSLA’s stock chart has completed a weekly head-and-shoulders breakdown. Regardless of the pattern’s authenticity, it may be used as another excuse for investors to sell.

Tesla trimmed early losses but was still lower by about 2% in afternoon trading.

Planet Fitness (PLNT) rocketed 12.5% after beating Q3 estimates and raising guidance. PLNT stock fell to a two-year low in September but is now fully engaged in a post-Covid recovery, with profits and sales rising rapidly.

Ride-share provider Lyft (LYFT) sold off aggressively despite few surprises in its Q3 report, dropping more than 11% in heavy volume. The market is no longer rewarding companies with bright prospects but meager earnings growth.

Sanmina (SANM) surged 11.8% after beating fiscal Q4 top- and bottom-line estimates.

The company posted a profit of $1.50 per share, beating estimates by 17 cents, while revenue surged 34% year over year to $2.2 billion, nearly $200 million higher than the consensus. This top performer holds a 98 Composite Rating of 99, and 95 Earnings-Per-Share Rating.

It is currently trading at an all-time high in the market-leading Electronic-Contract Manufacturing industry group.

Medtronic (MDT) fell 4.5% after its SPYRAL HTN-ON MED clinical trial failed to demonstrate a “statistically significant reduction” in 24-hour ambulatory systolic blood pressure during the six-month research.

IBD 50 Leaders

Let’s look at top-performing IBD 50 components in this week’s stock market action.

Diamondback Energy (FANG) is inside the 5% buy zone on Tuesday after climbing above the 162.34 buy point on Monday. The oil producer beat Q3 earnings estimates by a wide margin, posting a profit of 72 cents per share. Revenue rose 27.6% year over year to $2.44 billion, right on consensus.

Delek U.S. (DK) surged above the buy zone on Monday and is down 1.1% on Tuesday. A larger-scale cup base is setting up with a 35.33 buy point. However, 2023 growth is forecast to shrink 38% after windfall 2022 oil-refining profits.

W.W. Grainger (GWW) is sitting in the buy zone, up 1.4%, following a cup breakout last week. This stock market leader is trading at an all-time high.

Follow Alan Farley on Twitter at @msttrader.

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