Dow Jones futures fell slightly after hours, along with S&P 500 futures and Nasdaq futures. United Airlines headlined overnight, while Moderna shares rose on RSV vaccine trial data. Microsoft job cuts and a shift in Bank of Japan policy could come Wednesday.
The stock market recovery had a relatively calm session, despite a solid fall for the Dow Jones.
Tesla ( TSLA ) continued its retreat from bear market lows, jumping 7.4% to 131.49. Shares moved slightly above the 21-day line, but are holding well below the 50-day and especially the 200-day line. Tesla China EV registrations jumped in the past week after recent big price cuts there. But it may take some time before investors get a clear picture of the impact of Tesla’s global price cuts and demand. Tesla earnings for the 4th quarter are due on January 25.
A pause of a few days would allow more shares to be set up. That includes stocks that rose from early entries and could use handles.
Chevron (CVX), Vertex Pharmaceuticals (VRTX) and TJX Cos. (TJX) are three stocks that can be traded now.
But in general, investors should be patient.
United Airlines (UAL) and Interactive brokers (IBKR) reported on Tuesday evening.
United Airlines earnings comfortably beat fourth-quarter views, while the airline also provided positive guidance. UAL shares rose modestly after hours. Shares fell 0.9% to 51.20 on Tuesday, but after rising sharply over eight sessions.
Interactive Brokers’ revenue also topped views. The IBKR share rose slightly overnight. Shares fell 2 cents to 77.19 on Tuesday, working on an 80.95 buy point from a double bottom base. Friday’s move above the 50-day line offered an early entry, but just before earnings.
Charles Schwab (SCHW) and trucking company JB Hunt Transport Services (JBHT) is due early Wednesday. SCHW shares rose 0.6% to 83.49 on Tuesday, staying in a buy zone. JBHT shares fell 0.3% to 176.29, between the 50-day and 200-day lines.
UAL stock is at the IBD 50. VRTX stock is at the IBD Big Cap 20.
Modern RSV vaccine
Late Tuesday, Moderna reported strong results for its respiratory syncytial virus, or RSV, vaccine. The biotech’s RSV vaccine uses its mRNA technology. MRNA stock rose solidly in extended trading, signaling a strong bounce from around the 10-week line. The Moderna RSV vaccine follows positive RSV results from Pfizer (PFE) and GlaxoSmithKline (GSK).
Microsoft Job Cuts Loom
Meanwhile, Microsoft (MSFT) could announce new job cuts as soon as Wednesday, Bloomberg reported, citing sources. The cuts may be “significantly higher” than in previous layoffs. Sky News reported that the Dow Jones software giant could cut up to 5% of staff, which would be 11,000 jobs. In October, Microsoft cut around 1,000 positions.
MSFT shares rose 0.5% to 240.35 on Tuesday, its seventh straight gain and just below the 50-day line. Microsoft earnings are due on January 24.
The video embedded in the article reviewed CVX stock, Eli Lilly (LLY) and Free market (MELI).
Dow Jones Futures today
Dow Jones futures fell 0.3% relative to fair value. S&P 500 futures fell 0.3% and Nasdaq 100 futures fell 0.3%.
Crude oil prices rose slightly.
The Bank of Japan could signal the end of its long-term policy of keeping official interest rates and Japanese government debt close to 0%. In December, the BoJ effectively increased by allowing the 10-year Japanese yield to rise to 0.5%.
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 had a mixed session on Tuesday, showing generally modest swings throughout the day.
The Dow Jones Industrial Average fell 1.1% in Tuesday’s trading, but that was largely due to Goldman Sachs (GS) and Travelers (TRV) weighs in on blue chips. The S&P 500 fell 0.2%, with Tesla shares and Morgan Stanley (MS) the top performers. The Nasdaq composite rose 0.1 percent. The small-cap Russell 2000 was down 0.1 percent.
U.S. crude oil prices rose 0.4% to $80.18 a barrel, closing above $80 for the first time in two weeks. Crude oil futures hit $81.23 intraday.
The 10-year government yield rose 2 basis points to 3.53%.
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 0.2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 0.3%, with Microsoft stock a large holding. VanEck Vectors Semiconductor ETF ( SMH ) climbed 0.6%.
Reflecting more speculative history stocks, the ARK Innovation ETF (ARKK) 2.9% and the ARK Genomics ETF (ARKG) 1.8% both extend gains from the 50-day line and move toward the 200-day average. TSLA stock remains a top holding across Ark Invest’s ETFs, with Cathie Wood adding many more shares in recent weeks.
The SPDR S&P Metals & Mining ETF ( XME ) fell 1%. The US Global Jets ETF (JETS) rose 0.4%, with UAL shares a large holding. The SPDR S&P Homebuilders ETF ( XHB ) fell 0.8%. The Energy Select SPDR ETF (XLE) edged up 0.2%, with the CVX stock a large holding. The Financial Select SPDR ETF ( XLF ) retreated 0.7%. The Health Care Select Sector SPDR Fund (XLV) fell 0.5 percent.
Top five Chinese stocks to watch now
Shares in buying zones
Chevron advanced 1.65% to 180.49, moving above the 50-day line and a near-term high of 180.23. CVX stock has a buy point of 189.78, according to MarketSmith analysis.
VRTX shares fell 3.7% to 311.58, rising above the 50-day line in above-average trading. That provides an early entry for Vertex, which has a 324.85 flat-base buy point. The VRTX share has also retaken a previous buy point of 306.05. The biotech hit a record high of 324.75 on Dec. 8, but then fell to the 200-day line at the turn of the year. Vertex stock bounced back from there last week. Investors can wait to see if the stock stalls around the 50-day line.
TJX shares closed up 2 cents at 81.55, rebounding intraday from a test of an 81.29 flat-base buy point made on Jan. 6. Since then, the shares have consolidated in the buy zone. The 5% deep flat base is just above a long, 31% deep cup consolidation.
Market rally analysis
The stock market rise had a relatively quiet session after last week’s big rises.
The S&P 500 briefly retook the 4,000 level and retreated, but only held above the 200-day.
The Russell 2000, which broke past its 50-day and 200-day lines last week, retreated after coming within 1% of its November highs.
The Nasdaq Composite is holding above its 50-day line, with the December highs and 200-day line the major resistance areas on the horizon. Much of Tuesday’s strength came from Tesla, chips and downbeat cloud software names.
The Dow Jones fell solidly, mainly on the GS share and Travelers. The blue-chip index is comfortably above its moving averages, with only the December highs to look at.
The market recovery still looks healthy. A variety of trends, including the Nasdaq’s advance-decline and new highs vs. low, has improved over the past several sessions.
A pause or modest withdrawal here would be normal or even healthy. The S&P 500 decisively breaking below the 200-day mark, perhaps subtending the 50-day, would be more worrisome. On the upside, the late 2022 highs are the next key level.
While Chevron, TJX and Vertex and a few other names are arguably tradable, there isn’t much to buy right now. A few stocks that looked promising on Tuesday morning, such as Monster Drink (MNST), withered at the end.
Many shares have already moved up during the last several sessions, such as Medpace (MEDP) and MercadoLibre. A pause would allow many of these names to form handles or shelves. Meanwhile, other stocks enter the picture.
Time the market with IBD’s ETF market strategy
What to do now
Patience is important. With the market poised for a possible break and not many stocks flashing buy signals, resist the temptation to buy extended stocks. If this uptrend works, you will have safer opportunities going forward. This includes recently hot stocks if the chart is handling or touching support levels.
Definitely run your screens of leading stocks to find those showing promising action.
If the market offers several stocks flashing buy signals, you can exposure gradually over time. In addition to a number of economic and Fed cross-currents, earnings season is underway, with the next two weeks likely to see the heaviest releases.
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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