Dow Jones stumbles as government shutdown is certain; Big Tesla news scheduled

Dow Jones futures will open Sunday night, along with S&P 500 futures and Nasdaq futures, with a government shutdown certain for Sunday. The House of Representatives on Friday rejected a temporary spending bill introduced by House Speaker Kevin McCarthy. Tesla deliveries are also on the horizon.

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A rally is underway in the stock market, with major indexes pulling back from their mid-week lows. But the recovery has been lackluster at best, especially for the Dow Jones. Friday’s pullback from the day’s highs raises the possibility that the rally attempt will end in a short-term bounce.

A follow-up day is needed to confirm the new uptrend. Investors should be cautious about adding exposure until then.

Tesla (TSLAIt is expected to report third-quarter production and delivery numbers as early as Monday, with analysts rushing to cut expectations in recent days. New (New), Lee Otto (for me) And XPeng (XPEV) September and third-quarter sales will be published on Sunday, with the EV giant… BYD (BDDF) scheduled before opening on Monday.

Tesla stock briefly dealt with a strong entry on Friday while XPeng arguably provided an early buy signal. BYD has some work to do while Li Auto and NIO stock need significant repair time.

Tesla stock exists Bahraini dinar 50.

Government shutdown is near

A federal government shutdown appears increasingly likely on Sunday, October 1. The GOP-led House and Democratic-led Senate disagree on spending bills, with narrow majorities complicating efforts in both chambers.

The House of Representatives on Friday rejected a short-term funding bill introduced by House Speaker Kevin McCarthy, with 21 hardline GOP members voting to reject it. The measure had no chance in the Senate, but McCarthy’s struggle to get anything through the House is a bad sign for a final deal.

On Saturday, House leaders were working on another short-term spending measure without severe cuts and some disaster relief, which could make it more palatable to House Democrats.

If an agreement is not reached, up to 3.5 million government employees will remain without pay starting Sunday. Key economic data, including the September jobs report scheduled for Friday, will not be published.

A short government shutdown will have little impact on the economy or the market, but a long shutdown could have significant effects.

Fears of a government shutdown were a major reason why strong market gains on Friday morning faded so badly.

Dow Jones futures

Dow Jones futures open at 6pm EST on Sunday, along with S&P 500 futures and Nasdaq 100 futures.

Remember, an overnight move in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.

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Stock market pool

The stock market’s rally attempt began midweek, but gains have been mediocre at best since then.

Over the course of the week, the Dow Jones Industrial Average fell 1.2%. The S&P 500 index fell 0.4% in stock market trading last week. The Nasdaq Composite Index finished slightly higher. The Russell 2000 small-cap index rose 0.5%.

Friday marked the third day of an attempted rally for the S&P 500 and Nasdaq, but it made little headway. A follow-up day could come on Monday, but these leading indicators are not far from undermining the recent lows.

The Dow fell below the 200-day line on Tuesday, and efforts on Friday to regain that level quickly failed. The Dow Jones index did not shatter Wednesday’s lows but ended with its worst close in nearly four months. Technically, the Dow Jones is on its second day of trying to rise.

One positive thing in the last few days has been that the market has expanded nicely, but the overall trend has been weak in the last few weeks.

The yield on the 10-year Treasury note rose 13 basis points to 4.57%. During the day on Thursday, the yield reached 4.69%, the highest level since October 2007. The yield rose 75 basis points in the third quarter.

US crude oil futures rose 0.8% to $90.79 a barrel last week, after touching $95 at one point. Crude oil rose 28.5% during the quarter.

Energy stocks started the week strong, but gave up much of their gains along with crude oil prices. Some technology, construction and insurance companies look interesting, but need the cooperation of the broader market.

At Friday’s highs, a number of stocks triggered buy signals, including Tesla, but most of them faded along with the market. A few were commented, e.g Zscaler (ZS) And PDD Holding (PDD).

These five stocks are showing upward movement after strong waves

ETFs

Among the growth ETFs is the Innovator IBD 50 ETF (FFTY) rose 1.45% last week. iShares Extended Technology Software Fund (ETF)IGV) rose by 0.2%. VanEck Vectors Semiconductor ETF (Trait) rebounded 2.1%.

Reflecting more speculative stocks, the ARK Innovation ETF (Ark) rebounded 2.2% last week and the ARK Genomics ETF (Arkj) decreased by 0.2%. Tesla stock is the #1 stock in Ark Invest’s ETFs. Cathie Wood’s Ark also owns some BYD shares.

SPDR S&P Metals and Mining Fund (XME) rose 1.8% last week. US Global Jets ETF (Planes) decreased by 0.8%. SPDR S&P Homebuilders ETF (XHB) rose by 0.5%. Energy Select SPDR ETF (XLE) by 1.2%. Selected Industrial Sector SPDR Fund (forty-first) decreased by 0.4%. Financial Select SPDR ETF (XLF) decreased by 1.5%.

Two arrows flash aggressive entries

Tesla deliveries

The electric car giant is expected to announce its third-quarter production and deliveries before Monday’s open. Tesla deliveries are expected to fall from a second-quarter record of 466,140 vehicles, with analysts belatedly rushing to temper optimistic forecasts in recent days. Production will likely decline sharply compared to the second quarter, as Tesla saw temporary shutdowns and slower production overall. Some of that reflects manufacturing upgrades for the updated Model 3 and the upcoming Cybertruck, but it appears Tesla has been seeking to trim bloated inventories.

Tesla bulls are already looking beyond third-quarter deliveries, betting on a strong rebound in the fourth quarter and the potential launch of the Cybertruck.

Tesla stock rose 2.2% to 250.22 last week. Stocks briefly cleared the 50-day line on Friday before paring gains. A decisive move above the 50-day level may provide an early entry. TSLA stock has a buy point of 278.98 cups-with-handle, according to MarketSmith.

Tesla vs. BYD: EV giants vying for the crown

Electric vehicle deliveries in China

Leading electric vehicle companies Li Auto, Nio and XPeng will report September and third-quarter deliveries on Sunday.

Li Auto should lead the way again with another record month, although there are some rumblings that the hybrid SUV maker is offering discounts, finally joining the electric vehicle price war.

XPeng is benefiting from demand for the G6 crossover, a competitor to the Tesla Model Y, as well as the just updated G9 SUV at a lower price.

Nio may struggle to reach 20,000 deliveries in September.

Li Auto’s stock fell 9.2% last week to three-month lows on downgrade fears. Nio stock rebounded to a weekly gain of 5.9%, but well below key moving averages. XPEV stock rose 11.7% to 18.36, reclaiming its 50-day line and surpassing a downward-sloping trend line. Investors may wait for a less aggressive entry, such as the 19.96 level. The official buy point is 23.62.

Meanwhile, BYD is likely to report another record month before Monday’s open, with new models and booming exports leading the way. Total sales of electric cars and batteries, including hybrid cars, exceeded Tesla sales last year. BYD is also quickly closing the gap versus Tesla in all-electric vehicle sales. It will likely be slightly behind its US rival in the third quarter, but it could capture that crown in the fourth quarter.

BYD stock fell 1.7% to 30.89, trading between its 50-day and 200-day lines. The official buy point is 36.27, but it is possible to have an early entry with a decisive move above the 50-day low.

Time the market with IBD’s ETF market strategy

What are you doing now

Friday’s fadeout shows why investors shouldn’t rush into buying stocks at the first rally. Yes, there is an attempt at a market rally underway, but in reality there has been no evidence that it is anything more than a short bounce in a correction.

A follow-up day could still come in the next few days, especially if a government shutdown is avoided or ended quickly. So investors should spend this weekend turning on screens and preparing their watch lists. Focus on stocks with strong relative strength lines.

Remember, not every FTD succeeds. So be patient. If the market ends up having a strong rally that lasts for several weeks or months, you will have plenty of opportunities to capitalize on. If the market correction hits new lows, you’ll be glad you’re largely on the sidelines.

One way to keep an open mind is to look for potential short selling opportunities, even if you rarely sell. This can help you maintain perspective as leading stocks move toward the 50-day line and other key levels.

Read The Big Picture every day to stay on top of market trend and leading stocks and sectors.

Please follow Ed Carson on X/Twitter at @IBD_ECarson And the topics in @edcarson1971 For stock market updates and more.

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