Dow Jones futures rose modestly early Wednesday, along with S&P 500 futures and Nasdaq futures, with key economic data on tap. Treasury yields and crude oil fell.
The stock market began 2023 much as it ended last year, with flashes of strength on Tuesday and reversals in the leading indices and leading stocks.
Apple stock on Tuesday slid to market lows and fell below $2 trillion on reports that Apple (AAPL) cut orders to suppliers of its MacBook, AirPod and Apple Watch products.
Tesla (TSLA) fell in the market after record fourth-quarter deliveries that still fell short of lowered expectations, and concerns about even greater demand in 2023.
Investors should wait for clear signs of a sustained stock market rally before making new purchases.
LLY stock, Dow Jones giant Caterpillar (CAT) and a recent IPO Mobile (MBLY) three stocks are worth a look. MBLY stock is on the IBD 50. Eli Lilly was the IBD Stock of the Day on Tuesday.
The video embedded in the article discussed Tuesday’s market action and analyzed the stock of CAT, Eli Lilly and Mobileye.
Dow Jones futures today
Dow Jones futures rose 0.25% vs. fair value. S&P 500 futures climbed 0.3% and Nasdaq 100 futures rose 0.6%.
Apple and Tesla rose slightly in premarket trading.
Downgrade to UBS Microsoft (MSFT) on concerns Azure and Office kicked software giant Dow. UBS also gave a Dow component The well of honey (HON) double downgrade for sale. Yet another Dow component, Salesforce.com (CRM), a modest increase in a restructuring plan that will cut 10% of staff.
The 10-year Treasury yield fell 11 basis points to 3.68%.
Crude oil futures fell 3%. Natural gas rallied after a massive selloff.
At 10 am ET on Wednesday, investors will get the December ISM manufacturing index as well as job openings from the November JOLTS survey. Fed minutes from the December policy meeting are due at 2 pm ET. Those are precursors to Friday’s December jobs report.
Hong Kong’s Hang Seng rose 3.2%, continuing to bounce on hopes that Covid infections have picked up. China’s internet jumps, partly on signs that regulators are easing Alibaba (BABA) and its affiliates of the Ant Group.
Remember that overnight activity in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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Stock Market Tuesday
The stock market opened higher on Tuesday but quickly headed south before paring losses significantly in late afternoon trading.
The Dow Jones Industrial Average closed down just a fraction in stock market trading on Tuesday. The S&P 500 index gave up 0.4%, and Tesla stock was by far the worst performer. The Nasdaq composite will lose 0.8%. 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%, adding to a large selloff in recent weeks.
The 10-year Treasury yield slipped 9 basis points to 3.79%, although it touched an intraday low of 3.72%.
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 Advanced Technology Software Sector ETF ( IGV ) rose 0.2%. VanEck Vectors Semiconductor ETF (SMH) retreated 0.8%.
SPDR S&P Metals & Mining ETF (XME) slipped 1.4% and the Global X US Infrastructure Development ETF (PAVE) was flat. US Global Jets ETF (JETS) was down 0.6%. SPDR S&P Homebuilders ETF (XHB) rose 1.3%. The Energy Select SPDR ETF (XLE) slipped 3.5% and the Financial Select SPDR ETF (XLF) gained 0.35%. The Health Care Selective SPDR Fund (XLV) was down 0.3%.
Reflecting a more speculative story stocks, ARK Innovation ETF (ARKK) lost 2.5%, not far from last week’s five-year low. ARK Genomics ETF (ARKG) will lose 2.1%. Tesla stock is a large holding across Ark Invest’s ETFs.
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Apple stock fell 3.7% to $125.07 on Tuesday, breaking below last week’s bear market low to its worst levels since June 2021.
AAPL stock, which surpassed a $3 trillion valuation in early 2022, has now fallen below $2 trillion for the first time since March 2021. Apple stock closed Tuesday with a market cap of $1.988 trillion. That’s still the most valuable company in the world.
Foxconn’s giant iPhone factory in China is back up to 90% capacity, Bloomberg reported. But Apple is cutting orders for AirPods, MacBooks and Apple Watch products, according to a report.
Tesla stock plunged 12.2% to 108.10, falling below last week’s bear market low, hitting its worst levels since August 2020. It was the EV giant’s worst one-day loss in more than two years . TSLA stock has already fallen 37% in December and 65% for all of 2022.
Tesla deliveries reached an all-time high in Q4, but for the second straight quarter they fell well short of lowered estimates and actual production. That was despite big end-of-year incentives, particularly in China and the United States, to boost sales.
The outlook may be bleak for 2023, with new Tesla EV orders well below the current delivery pace.
Bernstein’s Toni Sacconaghi wrote on Sunday “Tesla’s annual order fulfillment rate in Q4 including significant discounting was only ~1M units, and the company’s goal is to sell close to 2M units in 2023, with no new models.”
With backlogs running low, Tesla may need price cuts or incentives much higher than year-end offerings just to maintain the pace of Q4 deliveries in 2023. But that could mean big hits to margins Tesla profits.
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Stock Market Analysis
The stock market started 2023 strong – for 12 minutes. After that, the major indexes recovered quickly, although the intraday lows were reduced.
The Dow Jones reversed lower after briefly going above its 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.
Tesla and Apple stock were the big draws on the major indexes. But there was a broad-based recession. Energy stocks and underlying prices were big losers.
Many interesting stocks opened higher but then reversed 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 fairly well. LLY stock is testing its 50 day/10 week lines.
Stocks that are focused on China, especially internet like Sentence (PDD) and Casino Macau plays as Sand Las Vegas (LVS), bucked the trend, but they also reached peaks.
The major indexes finally pared their losses, but the reversals from key technical levels were not encouraging. Many stocks fell hard, and did not bounce back. The stock market is trying to rally thanks to last Thursday’s gain, but that looks like a one-day bounce.
The market is correcting, with the Nasdaq not far from bear market lows. Even if the momentum rally attempt succeeds and sets a follow-up day over the next week or two, there would still be some technical hurdles to clear.
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What To Do Now
It is not a good time to take a new job. It is a market correction and the major indices, sectors and individual sectors tend to reverse.
Don’t be tempted by the immediate burst in the market that pushes stocks into overbought zones. For a few minutes on Tuesday, some stocks covered buy signals, but most faded quickly. While the major indexes finished with small losses, an investor who jumped into MBLY stock near Tuesday’s open could be sitting on a 10% loss.
Bottom line: Don’t act like the market is in an uptrend until the market really is in an uptrend.
However, many good stocks continue to trade near buy points, and the market rally attempt could continue in the coming days. So put together your watch lists and stay engaged.
Read The Big Picture every day to stay in tune with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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