Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures. Investors will look forward to a huge week of earnings, led by Tesla (TSLA), Microsoft (MSFT) and Boeing (BA).
Share price gains retreated mid-week, with the major indexes falling below key moving averages. But they bounced back on Friday, especially the Nasdaq and technology stocks. Nasdaq, the laggard in 2022, has led the majors in 2023 as tech growth names return to favor.
The recent decline gave many stocks a chance to take a breather, forge handles or other new buying opportunities.
Investors should pay close attention, but be cautious about new positions. The market recovery is around critical levels. Earnings season can affect the indices and specific sectors as well as individual stocks.
Hundreds of companies will report this week. Here are 10 earnings reports to watch closely: Tesla, Microsoft, Boeing, ServiceNow (NOW), Chevron (CVX), Visa (V) and MasterCard (MA), as well as chip-gear giants ASML (ASML), Lamb Research (LRCX) and KLA Corp. (CLICK).
These reports will provide insight into their respective industries, and can have a major impact on the overall market. Tesla stock and Microsoft still have a lot of repair work to do, while Boeing is expanding. The NOW stock may be close to an aggressive early entry. CVX shares, Visa and Mastercard are all near buy points. So are LRCX and KLA, while ASML is a bit out of reach.
KLAC stock is on the IBD Big Cap 20. Microsoft stock and ASML are on the IBD Long-Term Leaders.
Microsoft, Boeing, Chevron and Visa stocks are all Dow Jones components.
The video embedded in this article reviews a key market week and analysis Etsy (ETSY), LRCX shares and ServiceNow.
Dow Jones Futures today
Dow Jones futures open at 6:00 PM ET Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally took a downward turn on Wednesday, and fell further on Thursday, but finished relatively well.
The Dow Jones Industrial Average fell 2.7% in last week’s trading. The S&P 500 index fell 0.7 percent. The Nasdaq composite rose 0.55%. The small-cap Russell 2000 fell 1.1%.
The 10-year Treasury yield fell 3 basis points to 3.48% on Friday. The yield hit 3.37% during the week, a four-month low.
The February crude oil futures contract rose 1.8% to $81.31 a barrel last week. The March contract, the new near-monthly crude oil contract, ended at $81.64.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 1% last week. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.45%, with both MSFT shares and ServiceNow significant holdings. VanEck Vectors Semiconductor ETF (SMH) rose 0.7%. ASML stock is a large holding, along with LRCX, KLAC and TER.
Reflecting more speculative storied stocks, the ARK Innovation ETF ( ARKK ) climbed 1.4% last week and the ARK Genomics ETF ( ARKG ) lost 1%. TSLA stock remains a large holding across Ark Invest’s ETFs. In fact, Cathie Wood’s Ark has reloaded its Tesla stock holdings in recent months.
The SPDR S&P Metals & Mining ETF (XME) fell 0.5% after two big weekly gains. The Global X US Infrastructure Development ETF (PAVE) fell nearly 3%. The US Global Jets ETF (JETS) rose just 0.35%, but it’s up sharply in 2023. The SPDR S&P Homebuilders ETF (XHB) fell 2.4%.
The Energy Select SPDR ETF (XLE) climbed 0.7%, a sixth straight weekly advance. The Chevron stock is an important component. The Financial Select SPDR ETF ( XLF ) fell 2.1%. The Health Care Select Sector SPDR Fund ( XLV ) fell 1.1%, its sixth decline in seven weeks.
Top five Chinese stocks to watch now
Tesla earnings are due on Wednesday evening. Investors expect earnings to increase by 34% and revenues by 39%. It would be the first quarter in years that revenue growth would outpace profits, an early sign of margin pressure.
The focus is likely to be on the outlook, especially in the wake of major price cuts worldwide to start 2023. Will Tesla stick to its 50% delivery growth target? Will Elon Musk provide more Cybertruck specs, and will he confirm a reported Model 3 upgrade? What about a new EV plant? Tesla shares rose 9% last week to 133.42, above its 21-day moving average after falling to 101.81 intraday on January 6. But it is still below the 50-day line and especially the 200-day line.
Microsoft earnings are due Tuesday night. Analysts expect Microsoft’s earnings to fall slightly, with a slight increase in revenue. Microsoft’s results will be key for software makers, the PC sector and cloud-computing rivals such as Amazon.com (AMZN). Last week, Dow Jones Technology said it would cut 10,000 jobs, or 4.5% of its workforce. MSFT shares rose 0.4% last week, hitting resistance at the 50-day line. Microsoft undoubtedly has a bottom base below the 200-day mark. But a breakout would involve clearing the 200-day line and a long downtrend line.
Boeing’s earnings are due Wednesday morning, with a slight profit expected after a string of losses. Investors are betting on getting back profits and cash flow in the years to come. Boeing shares fell 3.4% to 206.76 in the past week. After a huge move, the BA share needs to be set up again.
ServiceNow earnings are estimated for Wednesday evening. Analysts expect an increase in EPS of 38%, the second quarter in a row of accelerating growth. Executives have been bullish on IT spending in 2023. The report will be key for highly valued business software names. The NÅ share fell 6.5% to 441.83 after a 13% increase last week. Shares cleared the 200-day line on Friday, hitting a four-month high and bucking a long downtrend. It provided a very early entry, but the upcoming earnings make it very risky.
Chevron earnings are due Friday morning. Analysts expect another quarter of booming EPS growth compared to a year earlier, but down from Q2-Q3. CVX shares rose 1.8% to 180.81 last week, retracing their 50-day line. Chevron is in a flat base, but a move above Wednesday’s high of 182.38 would offer an early entry. Chevron earnings will be important for the oil and gas sector, especially large oil companies such as Exxon Mobil (XOM).
Mastercard earnings are due early Thursday, with Visa earnings after the close. Mastercard EPS is up nearly 10% with Visa’s up 11%. The credit card giants’ results and comments will be important for other payment companies and for insight into consumption trends. Both Visa and Mastercard shares are working handholds in long consolidations, trading around key resistance levels back to early 2022.
ASML earnings are due early Wednesday, with Lam Research and Teradyne following the close. The UCK reports this late on Thursday. ASML revenue is expected to fall 11%, but Lam Research revenue should rise 15% and KLA’s 27%. Guidance will be key in what is likely to be a challenging 2023. Along with these earnings reports, along with chipmakers such as Intel (INTC), will provide insight into the semiconductor area and end markets.
The ASML stock is expanding from the 200-day line. LRCX stock is trading just above its 50-day and 200-day lines in a bottom base. KLAC stock has a small handle on a weekly chart for a consolidation going back a year.
Market rally analysis
The stock market boom had to return, and it got one. The major indexes turned sharply lower on Wednesday and continued to fall on Thursday. But they closed off Thursday’s lows and bounced back strongly on Friday.
The Nasdaq posted a weekly gain, retracing its 50-day moving average on Friday. Friday’s action was another follow-up day for Nasdaq.
The S&P 500 retook its 50-day line and crept back above its 200-day line. The Russell 2000 found support on the 200 day and could look to test its late 2022 highs soon.
The Dow Jones was the week’s biggest loser, falling below its 50-day and ending the week well below that level.
Outside of the Dow, the recent pullback looks normal and healthy so far.
The break provides a chance for leading stocks to forge handles while few break. If anything, a slightly longer withdrawal might be helpful in this regard.
But the major indices have a number of important resistance levels. The S&P 500 must decisively retake the 200-day line, with last week’s highs and December’s highs as key milestones.
Earnings season can be the catalyst for big market gains or losses – or both.
The coming week will also offer the first reading of fourth quarter GDP, along with the PCE inflation gauge for December. These will pave the way for the Federal Reserve’s policy meeting on February 1.
Tesla vs. BID: EV Giants Vie For Crown, But Which Is The Better Buy?
The Tech Revival continues
The stock rally seems to be rotating towards technological growth after a long hiatus. The Nasdaq Composite hit a bear market, closing low as recently as December 28. But in 2023, the Nasdaq is up 6.4%. The SMH chip ETF has increased 12%, the IGV software ETF 5.5% and the speculative ARKK 16.8%.
What is driving technological growth?
Treasury yields are falling, which is positive for highly valued growth stocks. Meanwhile, there are hopes for an economic soft landing, as China and Europe improve and Fed rate hikes appear to be nearing a peak. It increases the odds that much of the bad news is priced in for growth stocks
The Russell 2000, another risk play, is nearly even with the Nasdaq, up 6.1% in 2023.
The S&P 500 is up 2.5% to start the new year. The Dow Jones has risen 0.7%, and only positively thanks to Friday’s solid rise.
There aren’t many tech growth names in place yet. The LRCX share is among the emerging major chip leaders that are establishing themselves. Software is in short supply, but NOW makes a case. E-commerce is picking up, too Free market (MELI) breaks out and Etsy (ETSY) setup. Chinese e-commerce and internet companies are also doing well.
The big earnings reports in the next two weeks are tech-heavy, so investors will want to see if growth growth has legs.
Meanwhile, many financials struggled last week, while defense contractors and defensive-minded food and consumer goods stocks stumbled.
But metals and mining stocks look strong. Airlines have flown, while investors are moving into hotels too. Retail is a mixed bag. So are medicines: Biotechnology looks interesting, but health insurers are weak.
Time the market with IBD’s ETF market strategy
What to do now
The market rally showed some resilience late last week, along with many quality stocks. It remains possible that the current withdrawal will resume, triggering more lasting damage. Earnings season can trigger big moves in specific stocks, but also their rivals, suppliers and customers.
So while the market, especially the Nasdaq, may signal “risk on,” investors should be careful about adding exposure. A possible alternative is via market or sector ETFs, to avoid individual share risk. If you add exposure, be ready to exit quickly. If you are not ready and willing to exit quickly, you need to be more conservative when entering positions.
But the next few weeks can offer many buying opportunities. So get your watch lists ready and stay engaged.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
YOU MIGHT ALSO LIKE:
Why this IBD tool simplifies the search for top stocks
Get the next big winning stock with MarketSmith
Do you want to make quick profits and avoid big losses? Try SwingTrader
Best growth stocks to buy and watch
5 shares close to buy point with great growth potential