Dow Jones futures rise with key data due after market hits resistance to start 2023
Dow Jones futures rose slightly early Wednesday, along with S&P 500 futures and Nasdaq futures, with key economic data in print. Treasury yields and crude oil fell.
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The stock market started 2023 much like it ended last year, with flashes of strength on Tuesday followed by reversals in the major indexes and leading stocks.
Apple shares hit new bear market lows on Tuesday, falling below a $2 trillion valuation on reports that apple (AAPL) has cut orders for suppliers for its MacBook, AirPod and Apple Watch products.
Tesla ( TSLA ) plunged to bear market lows after record fourth-quarter shipments that still missed reduced views, with concerns of even greater demand concerns in 2023.
Investors should wait for clear signs of a sustained recovery in the stock market before making new purchases.
The LLY stock, the Dow Jones giant larva (CAT) and recent IPO Mobileye (MBLY) are three stocks worth watching. MBLY stock is on the IBD 50. Eli Lilly was Tuesday’s IBD Stock Of The Day.
The video embedded in the article discussed Tuesday’s market action and analyzed CAT stock, Eli Lilly and Mobileye.
Dow Jones Futures today
Dow Jones futures rose 0.2% relative to fair value. S&P 500 futures rose 0.2% and Nasdaq 100 futures rose 0.4%.
Apple and Tesla rose slightly in pre-market trading.
A UBS downgrade of Microsoft (MSFT) on Azure and Office concerns beat the Dow software giant. UBS also provided a Dow component Honeywell (HON) a double downgrade to sell. Yet another Dow component, Salesforce.com (CRM), stepped up modestly on a restructuring plan that will cut 10% of its staff.
The 10-year government yield fell 10 basis points to 3.69%.
Crude oil futures fell more than 3%. Natural gas tried to stabilize after large sales.
At 10 a.m. ET Wednesday, investors will get the December ISM manufacturing index as well as job vacancies from the November JOLTS survey. Fed minutes from the policy meeting in December must be delivered at 2 p.m. ET. These are precursors to Friday’s jobs report in December.
Hong Kong’s Hang Seng rose 3.2%, continuing to bounce on hopes that Covid infections have picked up. Chinese internet jumped, partly on signs that regulators are easing up Ali Baba (BABA) and its Ant Group affiliate.
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 Tuesday
On Tuesday, the stock market opened higher, but quickly headed south before paring losses significantly in late afternoon trading.
The Dow Jones Industrial Average closed just a fraction of Tuesday’s trading. The S&P 500 index gave up 0.4%, with Tesla shares by far the worst performers. The Nasdaq composite fell 0.8 percent. The small-cap Russell 2000 gave up 0.6%.
US crude oil prices fell 4.2% to $76.93 a barrel, after three straight weekly gains. Natural gas prices fell 10.9%, extending a major selloff in recent weeks.
The 10-year Treasury yield fell 9 basis points to 3.79%, but off an intraday low of 3.72%.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 1.1%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) gave up 0.8%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 0.2%. The VanEck Vectors Semiconductor ETF ( SMH ) retreated 0.8%.
The SPDR S&P Metals & Mining ETF ( XME ) fell 1.4% and the Global X US Infrastructure Development ETF ( PAVE ) was flat. The US Global Jets ETF (JETS) fell 0.6%. The SPDR S&P Homebuilders ETF (XHB) rose 1.3%. The Energy Select SPDR ETF (XLE) skidded 3.5% and the Financial Select SPDR ETF (XLF) rose 0.35%. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.3%.
Reflecting more speculative stock stocks, the ARK Innovation ETF ( ARKK ) lost 2.5%, not far from last week’s five-year low. ARK Genomics ETF (ARKG) was down 2.1%. Tesla stock is a large holding across Ark Invest’s ETFs. Cathie Wood’s ARK has bought a lot of TSLA stock over the past three months, as the electric car giant plunged.
Top five Chinese stocks to watch now
Apple stock
Apple shares fell 3.7% to 125.07 on Tuesday, breaking during last week’s bear market to their worst levels since June 2021.
AAPL stock, which topped a $3 trillion intraday valuation at the start of 2022, has now fallen below $2 trillion for the first time since March 2021. Apple stock closed Tuesday with a market capitalization of $1.988 trillion. It remains the most valuable company in the world.
A giant Foxconn iPhone factory in China is back up to 90% capacity, Bloomberg reported. But Apple is cutting orders for AirPods, MacBooks and Apple Watch products.
AAPL shares rose early Wednesday, even as Wedbush cut its price target to 175 from 200.
Tesla shares
Tesla shares plunged 12.2% to 108.10, plunging below last week’s market lows and hitting their worst levels since August 2020. It was the electric car giant’s worst one-day loss in more than two years. TSLA stock already crashed 37% in December and 65% in all of 2022.
Tesla deliveries reached a record high in Q4, but for the second quarter in a row they were far from reduced estimates and actual production. This was despite major incentives at the turn of the year, especially in China and the USA, to increase sales.
The outlook could be bleak for 2023, with new Tesla EV orders well below current delivery rates.
Bernstein’s Toni Sacconaghi wrote on Sunday “Tesla’s Q4 annual order run rate including significant discounts was just ~1M units, and the company’s goal is to sell close to 2M units in 2023, excluding new models.”
With little backlog, Tesla may need price cuts or incentives well above year-end offerings just to maintain Q4’s delivery pace in 2023. But that could mean big hits to Tesla’s profit margins.
Tesla vs. BID: EV Giants Vie For Crown, But Which Is The Better Buy?
Stock market analysis
The stock market started 2023 strongly – for 12 minutes. After that, the major indexes pulled back quickly, even though they were coming off intraday lows.
The Dow Jones reversed lower after briefly breaking above the 50-day and 21-day lines. The S&P 500 and Russell 2000 reversed lower from the 21-day line.
The Nasdaq reversed after coming close to its 21-day line.
The Tesla share and Apple were the big moves on the major indices. But it was a wide refuge. Energy stocks were big losers with underlying prices.
Many interesting stocks opened higher but then turned lower with the major indexes, such as Mobileye, Celsius (CELH) and Medpace (MEDP).
Eli Lilly and Caterpillar, along with related defensive growth names, held up relatively well. LLY stock is testing its 50-day/10-week lines.
China-focused stocks, especially internet such as Pinduo duo (PDD) and Macau casino play as Las Vegas Sands (LVS), bucked the trend, but they also came from heights.
The major indexes finally limited losses, but the reversals from key technical levels were not encouraging. Many stocks fell hard, and did not come back. The stock market is trying to rally thanks to last Thursday’s rally, but it looks like a one-day rally.
The market is in a correction, with the Nasdaq index not too far off market lows. Even if the rally attempt picks up speed and conducts a follow-up day in the next week or two, there will still be a number of technical hurdles to clear.
Time the market with IBD’s ETF market strategy
What to do now
It is not a good time to take new positions. There is a market correction with the major indices, sectors and individual sectors prone to reversal.
Don’t be tempted by instant market breakouts that push stocks into buy zones. For a few minutes on Tuesday, a number of stocks flashed buy signals, but they quickly disappeared. Although the major indexes ended with modest losses, an investor jumping into MBLY stock near Tuesday’s open could now be sitting on a 10% loss.
Bottom line: Don’t act like the market is in an uptrend until the market is actually in an uptrend.
Nevertheless, many good stocks continue to trade close to buy points, while the market rally attempt may carry out a follow-up in the coming days. So build your watchlists 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.
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