Dow Jones futures open Monday night, along with S&P 500 futures and Nasdaq futures. Tesla (TSLA) and China EV manufacturers such as Nio, Li Auto and BYD will report year-end and 2022 deliveries over the New Year’s weekend.
Investors will look for a brighter equity market in 2023 after a “stay away” year, especially for growth. The Dow, S&P 500 and Nasdaq all had their biggest annual declines in 14 years. A stock market rally attempt is underway, but has a long way to go to prove itself.
The Dow Jones dipped below its 50-day moving average on Friday. The S&P 500 and especially the Nasdaq have some way to go to their 50-day lines, with several other key resistance areas along the way.
Celsius Holdings (CELH), Deere (FROM), BioMarin Pharmaceutical (BMRN), Exxon Mobil (XOM) and Medpace (MEDP) are five stocks near buy points. It’s a diverse list that reflects possible areas of market leadership in the new year.
The DE share and Medpace are on the IBD Leaderboard. Celsius stock, MEDP stock is at IBD 50. Deere and BMRN stock is at IBD Big Cap 20.
Deere was Friday’s IBD Stock Of The Day.
But whether these stocks work or not depends on the market trending higher. Right now it isn’t. Investors should be very careful.
The video embedded in the article discussed the recent market action in depth and discussed what investors should do when the stock market 2023 gets going. The video also analyzed CELH stock, Deere and BioMarin.
China’s economy is struggling
China’s economic activity is falling as the abrupt end to strict Covid rules spurs massive waves of infections. The official manufacturing index fell 1 point in December to 47, the government said on Saturday. The non-manufacturing PMI, which covers the services sector and construction, plunged 6.1 points to 41.6. Both are the lowest since February 2020, when Covid-19 first hit the country. Readings below 50 signal contraction.
China EV deliveries
Nine (NIO), Li Auto (LI) and XPeng (XPEV) is on tap to report December, fourth-quarter and full-year EV deliveries on Sunday, January 1. Li Auto said on Friday that December deliveries of the hybrid SUVs will top 20,000, breaking November’s record of 15,034. Nio recently lowered its delivery guidance for the fourth quarter, citing Covid-related issues. Guidance suggested December deliveries of 14,263-15,263 EVs, which would top November’s record of 14,178. Xpeng should see deliveries increase after several month-over-month declines, but the model lineup is struggling.
BYD is likely to report December sales on January 3, before the US market opens on Tuesday. The electric car and battery giant recently stated that Covid infections among workers reduced production by at least 2,000 vehicles per day. Full-year deliveries of all-electric BEVs and plug-in hybrids should be around 1.88 million, BYD said recently. This means December deliveries of around 247,000-250,000, which will still be a record.
The Nio share, Li Auto, Xpeng and BYD all had a tough 2022, as did other electric car manufacturers and growth stocks in general. They all bottomed in October or early November, but have pulled back in recent weeks.
Tesla vs. BYD: Which EV giant is the best buy?
Tesla EV deliveries
Tesla is expected to publish EV production and delivery figures for the fourth quarter on January 2. Analysts expect fourth-quarter Tesla deliveries to be 418,000, though consensus has fallen in recent days due to further weakness in China. Tesla offered big year-end incentives, especially in China and the US, to boost sales. It didn’t give a huge boost in China, but it did seem to clear inventory in the US
In 2023, Tesla will benefit from new US tax credits of up to $7,500, although the year-end cap of $7,500 for the Model 3 or Model Y — with Model S and X vehicles added on Dec. 30 — may have hit some of that demand . A $55,000 price cap on most Model Y vehicles could limit Tesla’s EV credit increase.
Meanwhile, China is ending EV subsidies. Coupled with a massive Covid wave, that could further reduce sales for electric car manufacturers there, including Tesla. Tesla may need significant new price cuts in China, where competition continues to heat up from BYD, Nio, Li Auto, Xpeng and others.
Over in Europe, several countries are in the process of cutting or ending EV subsidies, giving Tesla another headwind as the backlog there diminishes.
Tesla shares plunged 65% in 2022, by far the worst annual decline. Shares crashed 37% in December to their lowest levels since September 2022. The electric car giant rebounded from midweek market lows to end the week roughly flat. TSLA inventory volume has been very high in recent weeks.
Dow Jones Futures today
Dow Jones futures open at 6 PM ET on Monday, along with S&P 500 futures and Nasdaq 100 futures.
The US stock and bond markets will be closed on Monday 2 January for the New Year.
On Tuesday, investors will get the December ISM manufacturing index. Friday’s December jobs report looms large as the Federal Reserve looks for signs of a weakening labor market.
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
The stock market 2022 ends
The stock market fell into a correction on Wednesday, but a new rally attempt started on Thursday. The major indices fell on Friday, ending a slightly negative week.
The Dow Jones Industrial Average fell 0.2% in last week’s trading. The S&P 500 index fell 0.1 percent. The Nasdaq composite fell 0.3 percent. The small-cap Russell 2000 lost a fraction.
For the full year, the Dow Jones fell 8.8%, the S&P 500 fell 19.4% and the Nasdaq fell 33.1%. It was their worst annual performance since 2008.
The 10-year Treasury yield jumped 13 basis points last week to 3.88% after gaining 27 basis points last week. The 10-year yield ended in 2021 at 1.51%.
U.S. crude oil futures rose 0.9% to $80.26 a barrel last week, the third straight weekly gain. Crude oil prices rose 6.7% for the year, but finished well off peaks above $130 a barrel.
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF ( IGV ) fell 0.3%. The VanEck Vectors Semiconductor ETF (SMH) rose 1%.
ARK Innovation ETF ( ARKK ) reflects more speculative stock stocks, rising 0.9% last week, but after hitting a new five-year low on Wednesday. ARK Genomics ETF (ARKG) was down 0.7%. TSLA stock is a large holding across Ark Invest’s ETFs. Cathie Wood’s Ark also owns a small position in BYD shares.
The SPDR S&P Metals & Mining ETF (XME) fell 1.9%% last week. The Global X US Infrastructure Development ETF ( PAVE ) lost 1.2%. The US Global Jets ETF (JETS) fell 0.9%. The SPDR S&P Homebuilders ETF (XHB) fell 0.8 percent. The Energy Select SPDR ETF (XLE) rose 0.5% and the Financial Select SPDR ETF (XLF) gained 0.7%. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.2%.
Top five Chinese stocks to watch now
The stock market 2023: 5 stocks to watch
BioMarin shares fell 0.8% to 103.49 last week, pulling back in the second half of December but holding support around its 21-day line. A strong rise from current levels could suggest an aggressive entry. But investors may want to wait for BMRN stock to build a new base, or find support at the 10-week line. BioMarin revenues are expected to triple by 2023.
Deere shares fell 1.9% to 428.76 in the past week, retreating to the 10-week moving average, with a flat base now on a weekly chart. The official buy point is 448.50. Investors can use a 10-week line bounce as an early entry for DE stock, perhaps after retracing the 21-day line.
CELH stock retreated from record highs in December, fell over the past four weeks, but rebounded from its 50-day line on Friday, closing at 104.04. Celsius stock could offer an early entry if it decisively clears the 21-day line, with a move above the December 27 high of 109.31 a specific trigger.
XOM shares climbed 1.5% last week to 110.30, just above a rising 50-day moving average. A move above the December 27 high of 110.47 would offer an early entry. Exxon stock has a flat base with a buy point at 114.76, according to MarketSmith analysis.
MEDP stock rose modestly Thursday from its 50-day moving average, breaking above a downtrend line in a recent consolidation. It gave an early entry into the consolidation. On Friday, as the major indexes retreated again, Medpace stock fell back to its 50-day but closed well.
Medpace’s move may still work, but it just goes to show how difficult it has been for stocks to make headway.
Stock market analysis
The stock market was down last week, even with Thursday’s strong rally, ending a tough year.
The major indices are out of the bear market in October, but well below their short-term peaks in December. A rally attempt is technically underway when the 2023 stock market starts, but it needs a follow-up day to confirm a new uptrend.
Even then, the market would face a number of technical hurdles, with the S&P 500, Nasdaq and Russell 2000 all well below their 50-day and 200-day lines. The Dow Jones, the relative leader in recent months, fell below its 50-day line to end 2022 but is above its 200-day.
Until there is clarity on the Fed rate endgame and the economy, the market may be bounded in choppy, sideways action.
The December jobs report Friday 6 January will be important. A significant slowdown in hiring and wage growth will reinforce expectations of a further decline in interest rate increases at the Fed, and increase hopes that peak interest rates are close. But robust or accelerating job and wage growth is likely to trigger a big selloff.
Time the market with IBD’s ETF market strategy
What to do now
On Friday’s year-end IBD Live, O’Neil Global Advisors portfolio manager Charles Harris said it was a “stay away” market in 2022. There will be great opportunities ahead, including in innovative companies and trends, but not yet.
A number of stocks are rallying nicely, including Deere, BioMarin and Medpace. The problem is that in recent months many stocks have set up, but these setups have generally not worked.
But investors should stay engaged and be ready to act. If there is a confirmed rally in early 2023, many stocks have the potential to quickly move solidly or sharply higher.
So work on your watch lists, but enjoy the long weekend. Come back to the new year refreshed and waiting for the next bull market.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
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