Dow Jones Futures: S&P 500 regains key level, but be cautious; Tesla doubles American discount
Dow Jones futures rose slightly after hours, along with S&P 500 futures and Nasdaq futures. Micron technology (MU) and Tesla (TSLA) was in focus overnight.
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The stock market recovery made solid progress on Tuesday, with Nike (NKE) undulating and FedEx (FDX) leads the way on earnings, also strengthening some peers and related stocks.
The S&P 500 rose to just above the 50-day line, a positive sign but not a decisive one.
apple ( AAPL ) managed to rise modestly, extending a bounce from just above bear market lows on Tuesday. Tesla ( TSLA ) failed to post a gain, closing slightly lower. Tesla is said to have doubled its delivery discount at the turn of the year in the US
Investors should be cautious. The market rally remains under pressure, and has had a nasty habit of retreating after showing strength.
Meanwhile, First Solar (FSLR), Medpace (MEDP), Aehr test systems (AEHR), Imp (PI) and Schlumberger ( SLB ) are leading stocks that remain close to their 50-day or 10-week moving averages.
MEDP stock was added to the IBD Leaderboard on Wednesday, with PI stock on the Leaderboard watch list. The SLB share and KLA Corp. is on the IBD Big Cap 20.
Micron revenue
Micron reported a bigger-than-expected loss, while first-quarter revenue fell 47%. The memory chip giant guided slightly lower for the current Q2.
Micron said it will continue to cut capital expenditures. That’s not good news for memory-prone chip makers Materials used (AMAT), Lamb Research (LRCX) and CLOTHES (CLICK)
MU shares fell 2% in extended trading. The shares had risen 1% to 51.19 in Wednesday’s regular session.
Meanwhile, AMAT shares and Lam Research fell 2% overnight while KLAC shares fell less than 1%.
Disk drive manufacturers Western Digital (WDC), Seagate technology (STX) fell 2.2% and 1.5% respectively.
Dow Jones Futures today
Dow Jones futures rose 0.2% relative to fair value. S&P 500 futures rose 0.3% and Nasdaq 100 futures rose 0.35%.
The 10-year government yield fell 3 basis points to 3.65%.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
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Stock market rally
The stock market rallied again on Wednesday, quickly climbing well over 1% and largely holding those gains until the end.
The Dow Jones Industrial Average rose 1.6% in Wednesday’s trading. The S&P 500 rose 1.5% with Dow Jones giant Nike as the best S&P 500 performer for the day. The Nasdaq composite also rose 1.5%. The small-cap Russell 2000 returned 1.7%.
Apple shares rose 2.4% to 135.45 on Wednesday, still well below its moving average. On Tuesday, AAPL stock hit 129.89, just above the June bear market low of 129.04.
The US crude oil price rose 2.7% to $78.29 a barrel.
The 10-year government interest rate was unchanged at 3.68%.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 2.2%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) was 1.6% higher. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.2%. The VanEck Vectors Semiconductor ETF ( SMH ) climbed 2.2%. Micron stock is a notable SMH holding, along with chip stocks AMAT, LRCX, and KLAC.
Reflecting more speculative storied stocks, the ARK Innovation ETF ( ARKK ) climbed 1.7% and the ARK Genomics ETF ( ARKG ) 2.2%. Tesla stock is a large holding across Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) gained 2.6% and the Global X US Infrastructure Development ETF (PAVE) gained 1.7%. The US Global Jets ETF (JETS) rose 1.3%. The SPDR S&P Homebuilders ETF (XHB) rose 1.9%. The Energy Select SPDR ETF (XLE) and the Financial Select SPDR ETF (XLF) rose 1.55%. The Health Care Select Sector SPDR Fund ( XLV ) gained 1.3%.
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Tesla delivery discount
Tesla has begun offering $7,500 to take U.S. delivery of a Model 3 or Model Y before the end of the year, Electrek reported late Wednesday. That’s up from $3,750 at the start of December, with 10,000 free Supercharger miles too. Tesla is trying to increase delivery figures for the fourth quarter.
Many potential buyers may be delaying delivery until January 1, when new US tax credits of up to $7,500 will kick in. Tesla’s sales in the US could also suffer a negative impact from Elon Musk’s Twitter actions and politically charged tweeting.
Tesla stock tried to rally on Wednesday, but failed to end its losing streak on a strong market day. TSLA shares fell 0.2% Wednesday to 137.57, hitting another bear low. Shares are down 8.4% so far this week and 29% in December.
Stocks to watch
First Solar shares rose 3.5% to 162.06 after falling to 150.25 intraday, finding support just above the 50-day mark. FSLR stock is now 5.7% above the 10-week line and right at near-term highs. The solar manager can work on a new base, but needs a few more weeks.
MEDP shares rose 3.4% to 210.59, rebounding from the 50-day line and reclaiming its 21-day line. Investors can buy Medpace shares now, or wait for a trendline breakout starting on November 15. MEDP stock has a buy point at 235.82 from a 16% deep consolidation next to a 45% deep cup base.
PI shares climbed 2.3% to 117.15, continuing to bounce off the 10-week line, but only 4% above that level. That the RFID chip play is actionable from that pullback after an earnings breakdown in late October.
AEHR climbed 1.3% to 22.80, bouncing off its 50-day line. A move above the 21-day line would offer an entry into the volatile stock. The EV-exposed chip testing firm delivers booming revenue growth.
SLB shares rose 3% to 53.31, continuing Tuesday’s bounce from the 50-day and 21-day lines. Now clearly breaking a trend line in a brief consolidation, Schlumberger stock remains active here.
Market rally analysis
OK, now the stock market boom has picked up. After taking out gains on Tuesday, the major indexes had a strong session on Wednesday.
The Dow Jones, driven by Nike, continued to rebound from its 50-day line.
The S&P 500 and the S&P MidCap 400 just regained their 50-day moving averages, but only by a hair. The S&P 500 needs to be decided above the 50-day mark, and that would only be a first step for the market rally.
The Nasdaq and Russell 2000 remain below their 50-day averages.
Several leading stocks found support or rebounded from key levels, including First Solar and Aehr Test Systems. Some are flashing buy signals, but in a shaky market.
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What to do now
After last week’s ugly downside reversal week and Monday’s loss, the last couple of days were positive, but don’t get excited.
The market exposure must remain low. The uptrend remains under pressure with the S&P 500 right at a key level, with several other obstacles ahead.
Although the market is rallying to recover much of last week’s losses, there is still a risk that this is another trap to lure investors into right before a pullback.
So while a few stocks flashed buy signals, investors should be cautious about taking on new positions. Yes, if the major indexes continue to rally, fresh buying in the last couple of days is likely to work. But if the S&P 500 falls to Tuesday’s low or worse, these new purchases will likely fail.
If you are trying to play the current market, keep your positions small and take at least partial profits quickly. Broad market ETFs can be a way to try your hand at a mini-rally without the individual stock risk.
But many stocks are rising. So investors should be ready to act, update 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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