Written by Norman Isaac Mwambazi

Dow Jones Futures rally higher despite Trump threat to reject ‘disgrace’ of a stimulus deal

On Tuesday, December 22, 2020, outgoing US President Donald Trump threatened to reject the second stimulus bill that was passed …

On Tuesday, December 22, 2020, outgoing US President Donald Trump threatened to reject the second stimulus bill that was passed by Congress on Monday, December 21, 2020, after the Senate voted 92-6 to approve the bill. Before that, the House had voted 359-53 in favour of the bill.

However, Trump called the stimulus bill “a disgrace” in a video posted on his Twitter page. Trump is in favour of having direct payment of $2,000 per person as opposed to what he termed as a “ridiculously low” $600 passed by Congress.

Trump also wants each couple to receive $4,000. He asked Congress to send him a suitable bill, or else he will leave the COVID-19 relief package to be delivered by the incoming Biden Administration.

If Trump rejects the bill, Congress could override his rejection if they get a two-thirds majority vote in both the House and Senate.

In recent months, the stock market has been rising on the positive news of stimulus bill and slightly fell on negative such news but it is different this time. Trump’s planned rejection of the bill did not affect the stock market in any significant way.

On Wednesday morning trading session, the Dow Jones futures, the benchmark S&P 500 futures, and the tech-heavy Nasdaq 100 futures were all up slightly after reversing from solid losses late Tuesday (Dow Jones Industrial Average fell 0.7%, while the S&P 500 slipped 0.2%) when President Trump threatened to veto the COVID-19 stimulus deal.

On Tuesday, Dow Jones leader Apple Inc. rose nearly 3%; Microsoft (MSFT) rallied 0.6%, while tech giants Peloton and Shopify surged 11.6% and 6.7% respectively to all-time highs. Automaker Tesla, who is new inclusion on the S&P 500, slid 1.5% for a second straight day. Nasdaq composite hit a record high when it rose 0.5% on Tuesday.

Stocks in or near buy zones:

  • Chegg (CHGG) rose 3.55%
  • DraftKings (DKNG)
  • Lululemon (LULU) and
  • Qorvo (QRVO) rose 104%

Leaderboard stocks:

  • Apple
  • Microsoft
  • Nike and
  • Tesla.

Nike is one stock to watch

Apparel-maker Nike fell over 1% Tuesday, easing from Monday’s nearly 5% advance after the company reported strong Q2 FY21 earnings and sales results. Shares hit a new high Monday, December 21, 2020, and moved above a 141.24 add-on entry on a three-weeks-tight formation.

That said, Nike is now the third best-performing Dow Jones stock for 2020, with a 40.6% advance through Tuesday. You surely want to keep an eye on that. 

On Wednesday early session, Dow Jones futures, S&P 500 futures, and Nasdaq 100 futures were higher versus fair value. Dow Jones futures rose 0.2%, S&P 500 futures 0.2% and Nasdaq 100 futures rose less than 0.1%.

It is worth noting that trading in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.

Here is how Exchange Traded Funds (ETF) performed

Innovator IBD 50 (FFTY) rose 1.05%

Invesco QQQ Trust (QQQ) rose 0.3%

SPDR S&P 500 (SPY) fell 0.2%.

Amid the coronavirus stock market rally, the tech-heavy Nasdaq is up 42.7% for the year through Tuesday’s close. The S&P 500 is up 14.1%, while the Dow Jones Industrial Average is up 5.2% year to date.

Coronavirus stock market rally

The stock market was shaken by the COVID-19 pandemic but overall, it performed well, with November proving to be a key month for the stock market and December sees the stock market near record highs, with the tech-heavy Nasdaq already setting more all-time records.

On Monday, Investor’s Business Daily (IBD) said that the stock market was not ready to give in to fear Monday as it dug itself out of a deep intraday hole. This bullish move keeps the market’s direction upright.

As such, IBD advises investors to use the stock market’s strength to buy breakouts instead of chasing extended stocks.

If the new breakouts work, then add more exposure. However, if breakouts start to fail, then you can back away, IBD said.

This means that investors should focus on stocks with strong Relative Strength (RS) and these can be identified using the relative strength line.

The RS line measures a stock’s price performance vs. the S&P 500. If the stock is outperforming the broader market, then the RS line angles upward. If a stock is performing worse than the broad market, then the line will point lower.