Dow Jones futures turned slightly higher after hours, along with S&P 500 futures and Nasdaq futures, which Tesla ( TSLA ) rose late as Elon Musk was bullish after mixed Q4 earnings. Service Now (NOW) and Lamb Research (LRCX) also reported after the close. The Dow Jones giant Chevron (CVX) announced a massive buyback, with CVX shares flashing a possible buy signal.
United Rentals (URI), Steel dynamics (STLD) and IBM (IBM) also reported, with Teradyne (TER) in print tonight too.
The stock market rise stumbled on Wednesday morning as Microsoft (MSFT) and Boeing (BA) was among the early income-related losers. The major indexes tested or breached key levels, but recovered well from lows, closing at or near intraday highs for a fourth straight session. One important reason: Boeing turned slightly higher and MSFT shares pared losses.
URI stock is on the IBD Leaderboard Watch List. United Rentals, Lam Research and STLD stocks are on the IBD Big Cap 20.
Dow Jones Futures today
Dow Jones futures were just above fair value, with CVX shares and IBM both blue chips. S&P 500 futures rose 0.15% and Nasdaq 100 futures rose 0.3%. Tesla shares, LRCX, NOW and STLD shares are S&P 500 and Nasdaq 100 stalwarts.
Early Thursday, investors will get their first reading on economic growth in the fourth quarter. The GDP report will also include the quarterly PCE price index, providing a strong signal for December PCE inflation on Friday morning. Also on Thursday, orders for durable goods, sales of new homes and claims for unemployment are in print.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Tesla earnings slightly topped analyst views, which had declined significantly in recent weeks. The revenue was not reported, according to FactSet. Tesla received $324 million in revenue from Full Self-Driving.
The gross margin for the automotive industry fell to 25.9% from 27.9% in the third quarter and 30.6% a year earlier. It was below consensus. Gross margins are expected to fall significantly in 2023 following extensive price cuts worldwide earlier this month.
CEO Elon Musk was upbeat on the conference call. He said orders were double production right now after the price cuts. But the question is how strong demand will remain in the coming weeks and months. Musk said two million deliveries are the goal for 2023.
Tesla delivered 1,313,851 electric cars in 2022, and produced 1,369,611. Production topped deliveries with an increasing amount in the past three quarters.
Tesla said the Cybertruck will begin production later this year. It said it will provide further details on an upcoming vehicle at its March 1 investor day. It could be a smaller, cheaper electric car or a renewed Model 3 with lower production costs.
Late Tuesday, Tesla said it would invest $3.6 billion in its Nevada gigafactory to mass-produce semis and 4680 batteries. But much of the announcement repeated key features of Tesla’s unfulfilled plans from 2014.
TSLA shares rose 5% in extended trading. Shares rose 0.4% to 144.43 in Wednesday’s regular session, touching the 50-day/10-week lines after rising from the Jan. 6 market low.
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Chevron stock buyback
Chevron will buy back $75 billion of CVX stock, energy giant Dow Jones said late Tuesday. This corresponds to 20% of outstanding shares. Chevron will increase its quarterly dividend by 6% to $1.51 per share.
The oil major will report earnings early Friday.
CVX shares rose more than 2% to above 183, rebounding from the 50-day line. Shares have a buy point of 189.78 from a shallow cup base. But investors can use a move above Monday’s high of 182.55 as an entry.
Other key revenues
ServiceNow revenue peaked while revenue was flat. The business software giant also gave bullish guidance on subscription revenue. NOW, the stock fell modestly after hours, after paring initial losses. Shares rose 1.2% to 448.77 on Wednesday after breaking below their 200-day line intraday.
Lam Research earnings beat quarterly forecasts. LRCX shares fell modestly in extended action. Shares closed up 0.2% at 448.40 on Wednesday. Lam Research stock is working on a bottom base, with much of it above the 50-day and 200-day lines. The buy point is 504.65, but a move above Monday’s high will result in a slightly lower entry.
Teradyne earnings topped views, but guidance also disappointed. The TER share fell solidly of late. Shares rose 0.4% to 103.44 on Wednesday, holding above the 200-day mark.
LRCX and TER earnings follow ASML earnings before Wednesday’s opening, with KLA Corp. (KLAC) due late Thursday.
Steel Dynamics earnings topped views. STLD stock rose after hours. Shares closed up 2.2% to 110.41 on Wednesday. Steel Dynamics stock tried to manage a brief consolidation with a buy point at 113.22 last week, but pulled back.
Nucor earnings are due Thursday morning. NUE shares closed up 1.7% at 156.67. Nucor stock is near a buy point at 160.03 cup with handle.
United Rentals lost revenue while revenue was in line. But the heavy equipment rental giant gave bullish guidance for 2023. URI stock rose solidly overnight. Shares fell 0.3% on Wednesday to 392.48, just at the edge of the buy zone from a 374.01 buy point in a consolidation going back to late 2021. URI earnings and guidance could be key for heavy equipment makers that e.g. larva (CAT).
IBM earnings topped views as earnings beat. IBM shares fell modestly after hours. Shares fell 0.5% to 240.61 on Wednesday. IBM stock has formed a flat base with a buy point at 153.31 after a strong two-month run, but is currently trading below the 50-day mark.
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Stock market rally
The stock rally got off to a bad start, but improved once again to close little changed, near the day’s best levels.
The Dow Jones Industrial Average rose a fraction in Wednesday’s trading. The S&P 500 index ended just below break-even. The Nasdaq composite fell 0.2 percent. The small-cap Russell 2000 climbed 0.3%.
US crude oil prices rose 2 cents to $80.15 a barrel. Natural gas fell 5.9% to its lowest close since June 2021.
The 10-year government yield fell 1 basis point to 3.46%.
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 0.2%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.3%. The iShares Expanded Tech-Software Sector ETF (IGV) ended down 0.2%, with Microsoft shares and NOW as the main components. VanEck Vectors Semiconductor ETF ( SMH ) rose 0.1%. The LRCX share is an SMH holding
Reflecting stocks with more speculative stories, the ARK Innovation ETF ( ARKK ) rose 0.1% and the ARK Genomics ETF ( ARKG ) rose 0.5%. Tesla stock is a large holding across Ark Invest’s ETFs. Cathie Wood’s sheet has uploaded.
The SPDR S&P Metals & Mining ETF ( XME ) climbed 1.25%, and the Global X US Infrastructure Development ETF ( PAVE ) was flat. US Global Jets (JETS) rose 1.1%. SPDR S&P Homebuilders (XHB) climbed 0.4%. The Energy Select SPDR ETF (XLE) settled just below break-even, and the Financial Select SPDR ETF (XLF) rose 0.8%. The Health Care Select Sector SPDR Fund (XLV) received a fraction.
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Stock market rally analysis
The stock market rally sold out on Wednesday morning, but bounced back well after lows. The major indexes closed near highs for a fourth consecutive session.
The S&P 500 fell 1.7% intraday, below its 200-day line and nearing the 50-day line intraday. But the benchmark closed essentially flat.
The Nasdaq Composite and Russell 2000 bounced off lows, comfortably above the 50-day lines. The Dow Jones dipped below its 50-day line intraday, but closed above it again.
Dow giants Microsoft and Boeing skidded at the open but bounced back to finish little changed. Many cloud-related names that fell on Microsoft’s guidance pared losses.
Leading stocks generally showed healthy action, including chip equipment, travel, medical and housing stocks. It says something when one of the biggest complaints with leading stocks is that a slightly longer pause or pullback in the last week would have been helpful.
A number of recent breakouts have retreated below buy points but may still work, such as SLB (SLB), Imp (PI) and Medpace (MEDP). Meanwhile, some other stocks that extended from bottom bases may be forging handles in long consolidations, such as Boeing and Shift4Payments (FOUR).
The overall market rally action was encouraging. The key indices still have to clear their highs from late 2022, but they are moving towards these levels.
Earnings season remains active, with Tesla and ServiceNow weighing in overnight.
Several key economic reports on Thursday, Friday and next week, along with the announcement of the Fed meeting on February 1, will also move markets in addition to earnings.
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What to do now
Just because the major indexes and many leading stocks found support on Wednesday doesn’t mean they will continue to do so. In a few weeks it may seem obvious that investors should have increased exposure or be on the way to exits. But it is not obvious now.
So be careful about adding exposure and stick to loss mitigation rules.
Definitely work on your watchlists. Cast a wide net: A number of sectors are showing strength, which in itself is a bullish sign of the market recovery.
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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