Dow Jones Rallies After Key Economic Data; Tesla Stock Dives On Lowered China Prices

The Dow Jones Industrial Average briefly rallied 350 points Monday, looking to add to Friday’s powerful stock market gains ahead of a week of key earnings reports. Tesla stock dived more than 5% after cutting Model 3 and Model Y prices in China by as much as 9%.

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The Purchasing Managers’ Index, known as PMI, for the manufacturing and services industries came out at 9:45 a.m. ET. The manufacturing index fell into a contraction, measuring 49.9 and below estimates at 51.2. The services index fell further into a contraction at 46.6, also lower than the forecasted 49.3, according to Econoday estimates.

Stock Market Today: Earnings Season Rolls On

Another round of noteworthy third-quarter earnings results are expected to roll in this week, with key reports from Dow Jones stocks Apple (AAPL), Boeing (BA), Chevron (CVX), Merck (MRK), Microsoft (MSFT)  and Visa (V), among others. Tech giants Alphabet (GOOGL) and Meta Platforms (META) will also report.

Shipping giant FedEx (FDX) declined 0.5% Monday morning after Wells Fargo downgraded the stock from overweight to equal-weight with a lowered price target of 160.

Electric-vehicle giant Tesla (TSLA) skidded more than 4%, while Dow Jones tech leaders Apple and Microsoft moved slightly higher after today’s stock market open. Software heavyweight ServiceNow (NOW) rose more than 1% after Guggenheim Securities upgraded the stock to buy.

AutoZone (AZO), Cardinal Health (CAH), Molina Healthcare (MOH) and Texas Roadhouse (TXRH) — as well as Dow Jones stocks Chevron and Merck — are among the top stocks to buy and watch. Keep in mind that the new stock market rally is the perfect time for investors to put their watchlists into action, and to hone their pyramiding technique.

Young rallies, particularly those fighting bear markets, often fail. Pyramiding provides a method of moving into new stock positions incrementally, in order to minimize risk to capital.

Cardinal and Texas Roadhouse are IBD Leaderboard stocks. Merck and Molina Healthcare were featured in last week’s Stocks Near A Buy Zone column, along with two other top stock ideas. AutoZone was the IBD Stock Of The Day in recent weeks.

Dow Jones Today: Treasury Yields, Oil Prices

After Monday’s opening bell, the Dow Jones Industrial Average rose 0.7%, while the S&P 500 moved up 0.3%. The Nasdaq composite dropped 0.7% in morning action.

Among exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) traded down 0.7%, and the SPDR S&P 500 ETF (SPY) rose 0.3%.

China’s Hang Seng Index dived 6.4% Monday, closing at its lowest level since April 29, 2009. Chinese leader Xi Jinping continued to consolidate his power, appointing a number of supporters to the party’s most powerful decision-making body after securing a convention-defying third term.

Meanwhile, markets in the U.K. and Europe ran higher, picking up Friday’s U.S. optimism toward a possible shift in the Federal Reserve’s mood. Frankfurt’s DAX and the CAC-40 in Paris traded more than 1.5% higher just past midday.

The 10-year Treasury yield rebounded Monday morning, ticking higher to 4.22% after Friday’s fall to 4.21%. Last week, the 10-year Treasury yield settled at its highest level since June 2008.

U.S. oil prices erased early losses Monday, pausing after a three-day win streak. West Texas Intermediate futures traded near $85 a barrel.

New Stock Market Rally Starts

On Friday, the Dow Jones Industrial Average closed up 2.5%, while the Nasdaq composite turned in a 2.3% gain for the day and ended the week up 5.2%. The S&P 500 notched a 2.4% gain and rose nearly 4.8% for the week.

Friday’s The Big Picture commented, “Given this is likely a bear market rally, risk remains elevated. It is not the time to aggressively jump back in to stocks with both feet, but to take a measured approach. Exposure should be limited to a maximum of 20% for most investors. Aggressive investors should stay below 40% exposure until the market begins to prove itself.”

Now is an important time to read IBD”s The Big Picture column. Following Friday’s gains, investors want to put their curated watchlists to work, in order to jump on future breakouts. But not all follow-throughs work, so it’s important to raise exposure slowly and methodically, as the new uptrend proves itself.

Check out IBD Stock Lists, like the IBD 50 and Stocks Near A Buy Zone, for stock ideas.

Five Dow Jones Stocks To Watch Now

Dow Jones Stocks To Watch: Chevron, Merck

Energy giant Chevron moved above an early entry at 166.93 last week and is approaching a 182.50 buy point ahead of the company’s Friday earnings release. Chevron shares dropped 0.2% Monday morning, moving down with falling oil prices.

CVX stock boasts a strong 98 out of a perfect 99 IBD Composite Rating, per the IBD Stock Checkup. Investors can use the IBD Composite Rating to easily gauge the quality of a stock’s fundamental and technical metrics.

Dow Jones member and IBD 50 stock Merck is squarely in buy range above its double bottom‘s 93.12 buy point, according to IBD MarketSmith pattern recognition, following Friday’s 2.9% advance. The 5% buy area goes up to 97.78. The stock’s relative strength line hit a new high in recent sessions, which is a positive sign. Third-quarter earnings results are due Thursday before the opening bell.

Merck shares climbed 1.1% Monday morning.

4 Top Growth Stocks To Watch In The Current Stock Market Rally

Top Stocks To Watch: AutoZone, Cardinal, Molina, Texas Roadhouse

Auto parts leader and recent IBD Stock Of The Day AutoZone is closing in on a cup base’s 2,362.34 buy point. Keep an eye out for a potential handle to offer a lower entry. AutoZone shares were up 1.2% early Monday.

IBD Leaderboard stock Cardinal Health is in buy range past a 71.22 entry out of a short cup with handle, according to IBD MarketSmith chart analysis. Shares are also breaking out past a flat base’s 72.38 buy point. CAH stock gained 1.2% early Monday.

Molina Healthcare closed Friday just below a flat base’s 361.35 buy point. The stock’s RS line hit a new high in recent weeks, indicating the health care stock is a leader to watch. Now look for a powerful breakout to confirm the stock’s institutional backing. Molina’s earnings are expected out on Wednesday. MOH stock was up 1% Monday morning.

Texas Roadhouse is trying to reclaim a flat base’s 95.52 buy point after a brief breakout move last week. Shares finished Friday just below the entry. Earnings are due out Thursday. TXRH stock was down 0.4% Monday.

Join IBD experts as they analyze leading stocks in the current stock market rally on IBD Live

Tesla Stock

Tesla stock climbed 3.45% Friday, rebounding from Thursday’s new 52-week low. Shares are about 48% off their 52-week high.

Tesla stock skidded more than 5% Monday morning after reducing prices for its Model 3 and Model Y cars by as much as 9% in China.

Dow Jones Leaders: Apple, Microsoft

Among Dow Jones stocks, Apple shares rallied 2.7% Friday and are about 19% off their 52-week high. Despite a recent rally, the stock remains below its 50- and 200-day lines. Apple earnings are Thursday after the close. AAPL stock moved up 0.2% Monday morning.

Microsoft rose 2.5% Friday, ending a two-day skid. Shares are still in rebound mode after hitting a 52-week low on Oct. 13. The software giant remains about 31% off its 52-week high. Microsoft earnings are late Tuesday. Shares climbed 0.3% Monday.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.

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