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Dow Jones Futures: Jobs Report Is Big Market Test; Tesla cuts prices in China




Dow Jones futures rose slightly early Friday, along with S&P 500 futures and Nasdaq futures. All eyes are on the jobs report for December that comes before the opening.




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Tesla (TSLA) announced major price cuts in China for the Model 3 and Model Y in the wake of demand problems and increased competition.

World Wrestling Entertainment (WWE) and Aehr test systems (AEHR) jumped in extended trading Thursday, while Bed Bath & Beyond (BBBY) continued to churn out breaking news.

The stock market suffered solid losses Thursday on warmer-than-expected labor data, including jobless claims, ahead of the big jobs report. The major indices fell back from key levels.

Microsoft (MSFT) extended Wednesday’s big sell-off while Tesla (TSLA) gave up much of the previous day. Meanwhile, UnitedHealth (UNH), Cigna (CI) and other health insurers continued a terrible start to the new year.

The video embedded in this article analyzed the market action and was reviewed United Therapeutics (UTHR), Trane Technologies (TT) and CI stocks.

Investors should wait until there are clear signs of market strength before adding exposure. Friday’s jobs report may provide a catalyst, but which way?

Dow Jones Futures today

Dow Jones futures rose 0.3% relative to fair value. S&P 500 futures rose 0.3 percent. Nasdaq 100 futures rose 0.3 percent.

The jobs report is sure to swing Dow futures, Treasury yields and more ahead of the open, setting the tone for Friday’s trading.

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

Job report

The Labor Department will release the jobs report for December at 8:30 a.m. ET.

Economists expect to see nonfarm payrolls rise by 200,000, cooling from November’s 263,000. That would be the weakest since December 2020, but still solid. Unemployment is to remain stable at 3.7 percent. Average hourly wages are expected to rise a strong 5% compared to a year earlier, but somewhat down from November’s 5.1%.

Friday’s jobs report will follow several hot labor readings this week, from Wednesday’s still-high vacancy rate to Thursday’s stronger-than-expected ADP employment data and falling jobless claims.

The Federal Reserve wants to see lower hiring and wage growth to ease inflationary pressures. Fed policymakers have also repeatedly signaled, including in Wednesday’s Fed minutes from the December meeting, concerns that a stock and bond market rally could undermine their inflation fight.

Markets still expect the Fed to slow rate hikes again, to just a quarter-point move at its Feb. 1 policy meeting. But the odds fell to 61% from 69% on Wednesday.

Tesla China Price cut

Tesla announced major price cuts for the Chinese market. Tesla cut the entry-level price of the Model 3 to 229,900 yuan ($33,454), down 13.5% from 265,900 set in late October. The new base model Y price is 259,900 ($37,819), down 10% from 288,900 as of late October. Both are down around 18% from before the cut at the end of October.

Tesla had extended year-end incentives worth 10,000 yuan at the start of 2023. So the effective cut isn’t quite as big as the sticker price suggests. Still, it’s a big reduction.

On Jan. 2, Tesla reported record fourth-quarter deliveries, but they fell far short of projections, while inventory swelled. China’s demand slowed despite the price cut in October and big incentives at the end of the year.

One factor is increased incentives. The Tesla Model 3 is now much closer BID (BYDDF) Seal, which starts at 225,800 yuan ($32,857). When the BYD seal was first launched, the price of the Model 3 in China was about $10,000 more.

How much of a sales boost will Tesla get, and how long will it last? How will rivals such as BYD, Nine (NIO) and others answer? The Chinese electric car market is going to be highly competitive in 2023.

The Tesla share gave up 2.9 percent. That’s after jumping 5.1% on Wednesday from Tuesday’s 12% dive to bear market lows.

Company news

Former WWE boss Vince McMahon, who resigned last year after a sexual harassment scandal, plans to return and sell the entertainment company, The Wall Street Journal reported late Thursday. McMahon will name himself and two others to the WWE board, sources told the WSJ.

WWE stock jumped 11% in late trading, rising above its 50-day line and not far from its Nov. 28 peak of 81.63. Shares rose 2.3% to 72.04 on Thursday, up 5.1% for the week so far as WWE stock bounces off its 50-day line.

Aehr revenue shot up 220% compared to a year earlier. Second-quarter revenue rose 54% to $14.8 million for the chip testing firm with exposure to the electric car market. AEHR stock rose 14% overnight. Shares fell 3.55% to 17.27 on Thursday, even paring an early entry. AEHR stock is down 14% to start 2023 after falling in the last five weeks of 2022.

Bed Bath & Beyond plans to file for bankruptcy in the coming weeks, The Wall Street Journal reported late Thursday. It comes after the struggling household retailer issued a “going concern” warning early on Thursday. BBBY stock fell 8% in overnight action after plunging 30% in the regular session.


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


Stock market Thursday

The attempted stock market rally pulled back on falling jobless claims, nearly ending recessionary times.

The Dow Jones Industrial Average fell 1% in Thursday’s trading. The S&P 500 retreated 1.2%. The Nasdaq composite gave up 1.5 percent. The small-cap Russell 2000 lost 1.1%.

Microsoft shares lost 3%, a day after the Dow Jones tech giant fell 4.4% as UBS raised concerns about growth in Azure cloud computing.

UnitedHealth stock, a Dow component like Microsoft, lost 2.9% to its lowest close since June. Shares are down 7.6% to start 2023, plunging through the 200-day line. Cigna shares gave up 2% after falling below the 50-day mark on Tuesday. CI shares are down 8.2% this week.

US crude oil prices rose 1.1% to $73.67 a barrel after the plunge until the start of 2023. Natural gas futures plunged 10.8% to a one-year low.

The 10-year government yield rose 1 basis point to 3.72%. The 10-year yield hit 3.78% on Thursday morning after the jobless claims data, but hit resistance at the 50-day line. The two-year yield, more closely linked to Fed policy, rose 6 basis points to 4.45%. The three-month Treasury yield jumped 11 basis points to 4.62%. The highly inverted yield curve sends a recession signal.


Tesla vs. BID: EV Giants Vie For Crown, But Which Is The Better Buy?


ETFs

Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 0.2%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.15%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 3.2%, with MSFT stock a large holding. The VanEck Vectors Semiconductor ETF ( SMH ) yielded 1.8%.

The SPDR S&P Metals & Mining ETF ( XME ) rose 0.5%. The US Global Jets ETF (JETS) rose 1.1%. The SPDR S&P Homebuilders ETF ( XHB ) fell 0.75%. The Energy Select SPDR ETF (XLE) gained 1.8% and the Financial Select SPDR ETF (XLF) gave up 0.75%. The Health Care Select Sector SPDR Fund ( XLV ) fell 1%. The UNH stock is XLV’s largest component, with Cigna also a notable stake.

ARK Innovation ETF ( ARKK ) reflected more speculative stock stocks, falling 2.4% and ARK Genomics ETF ( ARKG ) 0.9%. TSLA stock remains a top holding across Ark Invest’s ETFs. Cathie Wood’s Ark has increased its Tesla holdings in recent months.


Top five Chinese stocks to watch now


Market rally analysis

After rising modestly to key resistance levels on Wednesday, the major indexes fell back on Thursday.

The Dow Jones, which nearly closed above its 21-day and 50-day moving averages on Wednesday, retreated on Thursday. The S&P 500 and Russell 2000 retreated from their 21-day lines, while the Nasdaq also retreated.

Microsoft shares, Tesla and UnitedHealth were drags on the S&P 500, but losses were broad-based. The Invesco S&P 500 Equal Weight ETF ( RSP ) fell 1%, back below its 21-day, 50-day and 200-day lines after reclaiming them on Wednesday.

The biotech, industrials, residential, medical, infrastructure/building products and mining sectors, along with some retailers and energy names, continue to show relative strength, along with the sudden rebound in Chinese stocks. Many flashed buy signals on Tuesday or Wednesday, but most pulled back or turned lower.

A market rally attempt continues for the major indexes, but has not made much progress. Since mid-December falling from recent highs, the major indexes have been range-bound, hitting resistance on the upside, but also not breaking down.

Friday’s jobs report could break this sideways action, triggering a decisive move above key levels – or below. But even that can be temporary.


Time the market with IBD’s ETF market strategy


What to do now

Get ready, get ready…and wait.

If you stay engaged in the market and look for promising setups, it’s hard not to jump into promising stocks when they flash buy signals. In a sustained market rise, it would often work. But in the current choppy market environment, it simply hasn’t.

It is possible that the jobs report in December will trigger a major market rally. It may be a signal to make some purchases – in individual stocks or in sector/market ETFs – but not to increase exposure dramatically.

Despite difficult market conditions, many shares are showing strength. So get the watch lists ready.

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.

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