Dow Jones futures fell slightly Sunday night, along with S&P 500 futures and Nasdaq futures. Will President Donald Trump suspend new China tariffs set for Dec. 15, or will he escalate the China trade war, imposing duties on a range of consumer goods, including the Apple (AAPL) iPhone? That could have a major impact for the stock market rally and big China-tied leaders such as Apple stock, AMD stock, ASML stock and Alibaba stock.
Also, new IPO stock Datadog (DDOG) may come under pressure Monday due to an early, partial lock-up expiration. Datadog stock fell sharply late Friday.
Meanwhile, the U.K. election and the final Federal Reserve meeting of 2019 are on tap, creating the potential for a wild week for the stock market rally.
Dow Jones Futures Today
Dow Jones futures fell 0.15% vs. fair value, along with S&P 500 futures. Nasdaq 100 futures sank 0.2%. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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China Trade Deal Rally
The stock market rally has powered higher for the past two months on hopes for a “phase one” China trade deal or at least an indefinite trade war truce. But talks to finalize an initial China trade deal have dragged on, while Trump and top officials have left open the possibility that the Dec. 15 tariffs will go into effect.
If Trump delays the Dec. 15 tariffs, the stock market rally could get another boost. But if he escalates the China trade war, the market rally could suffer a serious blow.
Offering just a taste of what might be in store, the Dow Jones industrials fell sharply on Dec. 3 on Trump’s comment that he might like to wait until after the 2020 election to reach a China trade deal. Apple stock, even as it ended near session highs, closed below its 21-day line for the first time in three months. Alibaba (BABA) nearly undercut its buy point. ASML (ASML) retreated to its 50-day line for the first time since late August. Advanced Micro Devices (AMD) extended a pullback intraday, though AMD stock managed to close higher.
More upbeat China trade news, along with a strong jobs report, helped erase the major indexes’ losses by Friday. Apple stock and ASML stock rebounded to hit new highs. Alibaba stock hit a 17-month high. AMD stock rose modestly, forming a three-weeks-tight pattern, according to Marketsmith.
Current Stock Market Rally
The current stock market rally had a constructive week, retreating early but closing little changed. The Dow Jones Industrial Average and Nasdaq composite fell 0.1% while the S&P 500 index climbed 0.2%. Apple stock, a member of the Dow Jones industrials, S&P 500 and Nasdaq, ultimately rose 1.3%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slid 0.8%, though it closed well off weekly lows. The iShares Expanded Tech-Software Sector ETF (IGV) sank 1.8%, as many software stocks fell on earnings results. The VanEck Vectors Semiconductor ETF (SMH) rebounded to climb 0.8%, with AMD stock up 1.2% and ASML rallying 3.5%.
Key News For Stock Market Rally
On Wednesday, the Federal Reserve will end its final policy meeting of 2019. No changes are expected Wednesday or for several months. On Thursday, the European Central Bank is likely to stand pat as well.
Prime Minister Boris Johnson and his Conservative Party are expected to win a parliamentary majority in Thursday’s U.K. election, paving the way for a Brexit deal.
Meanwhile, Adobe (ADBE), Broadcom (AVGO), Costco Wholesale (COST) and Lululemon Athletica (LULU) are notable earnings reports this week.
Trump’s China trade war decision could come at any moment, but that critical news for the stock market rally may not come during the trading week. Trump could wait until Saturday night to announce whether the Dec. 15 tariffs are going forward.
“We head into the Fort Sumter-like December 15th date with Apple and semi stocks looking squarely in the eye at the $160 billion dark cloud over its head into holiday season,” Wedbush analyst Dan Ives wrote Sunday.
Trump says Beijing wants a China trade deal, and that’s true. Chinese exports unexpectedly fell 1.1% in November vs. a year earlier, with exports to the U.S. down 23%. But China is pushing for a rollback of some existing tariffs as part of any “phase one” trade deal.
Datadog stock fell 12% last week, but edged up 0.1% to 35.91 on Friday. That was the bare minimum for some 20% of locked-up Datadog shares to be released on Monday.
Datadog stock fell 4.5% late Friday. That would push shares below their 50-day line after ending last week just below the 10-week. Datadog stock, which came public at 27 in September, hit a record 44.09 on Nov. 25.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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