Dow Jones futures fell solidly early Friday, along with S&P 500 and Nasdaq futures. Tesla cut prices in the United States and Europe, following steep cuts in China and major Asian markets last week, sending shares of TSLA and other automakers plummeting. Earnings from JPMorgan, Bank of America, Delta Air Lines and UnitedHealth topped pre-opening views. But those stocks were generally lower.
The stock market rally gained a little more ground on Thursday, although the S&P 500 hit resistance in a critical zone.
The highly anticipated CPI inflation report showed easing price pressures broadly in line with expectations, although gains in services prices were mixed. Nevertheless, the trend of lower inflation should continue for several months, giving hope that the Federal Reserve will soon end the rate hikes.
Investors should seek to add exposure, with caution. This market is subject to setbacks, and could be the cause. Meanwhile, many top stocks are now stretched from at least early buy points. Exxon Mobil (XOM) and Celsius Fund (CELH) are still subject to prosecution.
XOM and Celsius stocks are on the IBD 50. CELH stock is on SwingTrader and on the IBD Leaderboard watchlist.
Tesla Price Cuts
Tesla has slashed prices in the United States, making more of its models eligible for tax credits of up to $7,500. Prices for the US Model 3 have been reduced by 6% to 14%, depending on the version. The base Model Range Standard Range RWD has been reduced from $3,000 to $43,990, which means it would be $36,240 after IRA tax credits. The Performance version was reduced by $9,000 to $53,990, falling below the $55,000 limit for tax credits. The base Model Y has been reduced by $13,000, or almost 20%, to $52,990. The Performance variant was reduced to $56,990, also down $13,000.
Meanwhile, Tesla has slashed Model 3 and Model Y prices in at least Austria, France, Germany, the Netherlands, Norway, Switzerland and the UK.
The price cuts should significantly boost sales in the United States and provide a boost in Europe, where order books had shrunk considerably. But they also raise concerns about Tesla’s prized profit margins.
On Jan. 6, Tesla slashed prices in China for the second time in less than three months as inventories swelled despite large year-end incentives and a temporary production halt at the Shanghai factory. .
Tesla stock fell 6% in premarket trading. General Motors (GM), Ford (F), Rivian (RIVN) and Lucid (LCID) fell 3% to 4% as Tesla’s price cuts could undermine its demand and prices for electric vehicles and other vehicles.
UnitedHealth (UNH) earnings topped fourth-quarter views early Friday. UNH stock fell slightly on Friday morning. Shares sold off in 2023 along with other health insurers, although they rose on Thursday.
Delta Airlines (DAL) also beat fourth-quarter estimates and reiterated recent bullish forecasts for 2023. But stocks fell sharply ahead of the open. DAL stock soared in 2023 with the airline group, adding to Thursday’s gains on bullish preliminary earnings from American airlines (ALA). Delta is well extended from the first entries and works on the right side of a long and deep base.
JPMorgan Chase (JPM) and Bank of America (BAC) topped fourth-quarter views, while Wells Fargo (WFC) and Citigroup (C) had mixed results.
JPM and BofA shares fell slightly, while Wells Fargo and Citi shares also declined. JPMorgan stock closed Thursday in a buy zone after a traditional breakout. Shares of Bank of America and Citigroup were near early entries in the lower bases. The WFC stock still has some work to do.
Dow Jones Futures Today
Dow Jones futures fell 0.7% from fair value. JPM stock and UnitedHealth are both constituents of the Dow Jones. S&P 500 futures were down 0.9%. Nasdaq 100 futures fell 1%. Tesla stock weighs in on S&P 500 and Nasdaq futures, while all banks and DAL stocks hit the S&P 500.
The 10-year Treasury yield rose 3 basis points to 3.48%.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally faltered on Thursday, with volatile pre-market swings continuing into the morning. But as the session progressed, the major indices calmed down and rose before fading somewhat into the day.
The Dow Jones Industrial Average advanced 0.6% in Thursday’s stock trading. The S&P 500 index climbed 0.3%. The Nasdaq composite rose 0.6%. The small-cap Russell 2000 jumped 1.7%.
U.S. crude oil prices rose 1.3% to $78.39 a barrel, up 7.6% over the past six sessions.
Copper climbed 0.8% on Thursday, up 11.9% over the past six trading days.
The 10-year Treasury yield fell 11 basis points to 3.45%, near recent lows. The two-year Treasury yield, more closely tied to Fed policy, hit a three-month low. Markets almost fully priced in a quarter-point rate hike on Feb. 1, which would be down from the 50 basis points and 75 basis points in the previous two meetings. Investors also strongly expect another quarter-point rise in March, in the range of 4.75% to 5%. Right now, the markets are betting that this is the end.
Time the Market with IBD’s ETF Market Strategy
Among growth ETFs, Innovator IBD 50 ETF (FFTY) and Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 0.8%. ETF VanEck Vectors Semiconductor (SMH) climbed 1.5%.
The SPDR S&P Metals & Mining ETF (XME) jumped 2% and the Global X US Infrastructure Development ETF (PAVE) rose 0.8%. The US Global Jets ETF (JETS) climbed 4.6%, with DAL shares and American Air being the two key holdings. The SPDR S&P Homebuilders ETF (XHB) edged up 0.3%. The SPDR Energy Select ETF (XLE) rose 1.9%. The Financial Select SPDR ETF (XLF) rose 0.2%, with JPMorgan, Wells Fargo, Citigroup and BAC stocks being all major constituents. The SPDR health care sector fund (XLV) fell 0.3%, with UNH shares prominent.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) jumped 2.1% and ARK Genomics ETF (ARKG) 3.45%. TSLA stock is a major holding in Ark Invest ETFs. Cathie Wood’s arch has been loaded with Tesla stock in recent days and weeks.
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Market rally analysis
After wobbling in the morning, the large indices finally rallied slightly, while the small caps surged.
The S&P 500 hit its 200-day moving average, closing just below that key level. The Nasdaq held support at its 50-day line and moved a little higher from that area.
The Dow Jones and Russell 2000, especially their moving averages, are trending towards their December highs.
Overall, the market rally has made tremendous progress over the past five sessions. Investors see light at the end of the tunnel for Fed rate hikes.
Still, the major indices face other tests. The S&P 500 must decisively cross the 200-day line, where it has hit resistance several times. The December highs are the ultimate test for indices. But after running for several sessions, with the major indexes just around key levels, a break or pullback wouldn’t come as a surprise.
Dow Jones futures point to a decline at Friday’s open.
Major stocks are showing better action, but many are now extended, at least from early entries or moving averages.
Exxon Mobil stock rose 1.7% to 113.22, just below a fixed base buy point of 114.76, according to MarketSmith analysis. But the XOM stock is within the range of the 50-day line. Celsius stock fell 0.2% to 106.40 but found support at the 21-day line. CELH stock is still tradeable since Wednesday’s jump, bouncing off the 50-day line and breaking a short trend line.
In a positive sign for the broader market recovery, the chip sector has regained momentum, with the SMF ETF moving decisively above its 200-day line this week. Taiwan semiconductor (TSM), SMH’s largest holding, broke above its 200-day earnings line. And this despite revenue falling short and TSMC also guiding low in the first quarter. But few chip names, even those that are clearly market leaders, are unworkable at the moment.
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What to do now
The stock market rally has widened strongly, moving above some key resistance areas and with the CPI inflation report in the clear.
Investors can add exposure, gradually, if conditions continue to improve. Major indices, sectors and major stocks have tended to make large pullbacks just when they appear to be gaining momentum. And the market rally is gaining momentum.
Earnings season could upset the market rally or send down specific sectors or stocks.
Investors who have largely stayed on the sidelines in recent days may feel like big opportunities have passed them by. It is true that some stocks may be out of reach at this time. But don’t chase extended names. Wait to see if they stop or retreat or establish new bases. Meanwhile, other stocks will come to the fore.
If this market rally has real legs, there will be plenty of chances. If it stalls again quickly, you’ll be glad you’re not heavily invested.
But it’s crucial that your watchlists are up to date. Cast a wide net to find actions that are taking place in different sectors. Then focus on actions that are “ready” or nearly so.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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