Futures: rally faces this risk; Musk, Buffett make moves

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Futures Due: Market Rally Faces This Risk; Musk and Buffett make deal movesDow Jones futures open Sunday evening, along with S&P 500 futures and Nasdaq futures. Warren Buffett shares Occidental Petroleum, Elon Musk’s latest move versus Twitter and three top software games are in focus.




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The stock market rally looks set to continue with momentum this week, with the S&P 500 and Nasdaq composite back above their 50-day moving averages and many leading stocks flashing buy signals. However, 10-year government bond yields continue to climb to long-term highs, a potential headwind for the market rally. The consumer price index for August will be released early on Tuesday.

Warren Buffett has more to do Occidental Petroleum (OXY) shares, with Berkshire Hathaway (BRKB) is announcing a 26.8% OXY equity stake at the end of Friday. OXY stocks rose late Friday after a recent breakout last week.

Tesla (TSLA) CEO Elon Musk has advanced a new argument to get out of a $44 billion Twitter acquisition. This week Twitter (TWTR) shareholders vote on Musk’s offer. TWTR shares fell slightly late Friday, but after big gains during the short holiday week. Tesla shares jumped back above key levels, arguably offering an aggressive entry.

In the meantime, Cadence Design Systems (CDNS), Palo Alto Networks (PANW) and Pay location (PCTY) are three software stocks that show strength, set up buy signals or blink.

PANW shares are on the IBD Leaderboard while PCTY shares are on the Leaderboard watchlist. CDNS stocks are listed on IBD Long-Term Leaders. TSLA stock is on the IBD 50. Cadence Design Systems and OXY stock is on the IBD Big Cap 20.

Dow Jones Futures Today

Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.

Keep in mind that an overnight action in Dow futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.

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stock market rally

The Dow Jones Industrial Average climbed 2.7% in stock trading last week. The S&P 500 index rose 3.65%. The Nasdaq composite rose 4.1%. The small-cap Russell 2000 rose 4%.

The Dow Jones closed just below the 50-day moving average, while the S&P 500, the Nasdaq composite and the Russell 2000 all hit that important level on Friday.

There is still some room to run before the major indices face the 200-day moving average. So leading stocks could make quite a bit of profit during that period.

However, it shouldn’t take much effort to see all major indices back below their 50-day lines or last week’s lows.


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Treasury Proceeds

A major concern is the interest on government bonds. The 10-year Treasury yield rose 13 basis points to 3.32% last week. The benchmark index has risen for six weeks in a row, returning to the 11-year high of 3.48% on June 16.

The market rally revived despite government bond yields continuing to rise, but there is no doubt that equities have struggled in 2022 as yields rise. Some of that reflects higher yields that boosted demand for the dollar, which declined from long-term highs on Friday.

On Tuesday, the Ministry of Labor will publish the consumer price index for August. Analysts expected consumer prices to fall 0.1% from the previous month after being flat in July, with falling gasoline prices being a major factor. Overall CPI inflation should cool again, from 8.5% in July to 8%. Core consumer prices are expected to rise 0.3% for a second month. Core inflation could rise to 6.1% from 5.9% in July, fueled by rapidly rising rents.

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A tame inflation report probably wouldn’t stop the Federal Reserve from raising interest rates by 75 basis points for a third consecutive meeting on Sept. 21. But it could bolster expectations of a slower pace of future rate hikes. On the other hand, a hot inflation poll could drive government bond yields and expectations for rate hikes higher.


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Elon Musk’s New Reason To End Twitter Deal

Tesla CEO Elon Musk filed an additional reason Friday night for ending the scrapping of the $44 billion Twitter acquisition deal. He argues that a severance payment to whistleblower Peiter “Mudge” Zatko was out of the ordinary.

It’s unclear if that claim will gain any traction in the Delaware’s Chancery Court, with the five-day Musk-Twitter trial set to begin October 17.

Shares of Twitter fell 1.3% late Friday. But that’s after TWTR shares jumped 9.2% to 42.19 last week, though that’s still well below the $54.20 Musk agreed to pay.

Twitter shareholders will vote on Elon Musk’s offer on Tuesday.

Tesla shares rose 10.9% to 299.68 last week, rebounding from the 50-day line and retaking the 200-day line. Shares of the EV giant are arguably an aggressive entry. Investors may decide to wait for TSLA stocks to rise above 300 or the August 16 short-term high of 314.64.

Warren Buffett Buys More Occidental Petroleum Stock

Warren Buffett’s Berkshire Hathaway Has Its Occidental Petroleum (OXY) stake from 20.2% to 26.8%. Berkshire made the announcement Friday night in an SEC filing.

OXY stock rose late Friday.

The Federal Energy Regulatory Commission has given Berkshire the right to buy up to 50% of Occidental Petroleum. That August 19 news sent Occidental shares past a buy point of 66.26 to 77.13. But the stock ended that breakout late last week. OXY shares rose 1.55% to 65.61 Friday, finding support on the 50-day line.

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Software stocks to watch

CDNS shares rose 3.9% last week to 174.68, catching up on Friday’s 50-day moving average but still just below the 10-week line. Shares of the chip design software maker rose sharply from mid-June to mid-August, clearing early registrations above the 200-day mark. But Cadence Design shares have fallen since hitting 194.97 on Aug. 16. A move above the 21-day line this week could present a buying opportunity from the 50-day moving average.

Shares of Palo Alto rose 4.7% to 564.77 last week, finding support on the 50-day line and regaining the 200-day line. PANW stocks are working towards a 578.89 head-to-hand buy point, according to MarketSmith’s analysis. But the cybersecurity firm broke a downward trend in the handle on Friday, making it doable now.

Paylocity stocks rose 9.6% last week, rebounding from just above the 10-week line and retaking the 21-day line. It may now be executable. Investors might view the recent consolidation – after a profit gap – as a handle in a deep 10-month base. In a week, that handle could become a good foundation for PCTY stocks. Anyway, the official point of sale is 276.98.

Read The Big Picture every day to stay up to date on market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.

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