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 started 2023 much like it ended last year, with flashes of strength on Tuesday followed by reversals in the major indexes and leading stocks.
Apple stock on Tuesday skidded to fresh bear market lows and dropped below a $2 trillion valuation on reports that Apple (AAPL) has cut orders for suppliers for its MacBook, AirPods and Apple Watch products.
Tesla (TSLA) plunged to bear market lows following record fourth-quarter deliveries that still missed lowered views, with concerns of even-bigger demand concerns 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 recent IPO Mobileye (MBLY) are three stocks worth watching. MBLY stock is on the IBD 50. Eli Lilly was Tuesday’s IBD Stock Of The Day.
The video embedded in the article discussed Tuesday’s market action and analyzed CAT stock, 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 advanced 0.6%.
Apple and Tesla rose slightly in premarket trading.
A UBS downgrade of Microsoft (MSFT) Mr Azure and Office concerns knicked the Dow software giant. UBS also gave Dow component Honeywell (HON) a double downgrade to sell. Yet another Dow component, Salesforce.com (CRM), rose modestly on a restructuring plan that will cut 10% of staff.
The 10-year Treasury yield tumbled 11 basis points to 3.68%.
Crude oil futures fell 3%. Natural gas steadied after huge sell-offs.
At 10 am ET 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. Chinese internet jumped, in part on signs that regulators are easing off Alibaba (BABY) and its Ant Group affiliate.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Tuesday
The stock market on Tuesday opened higher but quickly headed south before paring losses significantly in late afternoon trading.
The Dow Jones Industrial Average closed down just a fraction in Tuesday’s stock market trading. The S&P 500 index gave up 0.4%, with Tesla stock by far the worst performer. The Nasdaq composite shed 0.8%. The small-cap Russell 2000 gave up 0.6%.
US crude oil prices tumbled 4.2% to $76.93 a barrel, following three straight weekly gains. Natural gas prices plunged 10.9%, extending a major sell-off in recent weeks.
The 10-year Treasury yield slid 9 basis points to 3.79%, although off intraday low of 3.72%.
among the best ETFsthe Innovator IBD 50 ETF (FFTY) sank 1.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gave up 0.8%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.2%. The 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 (PEACE) was flat. US Global Jets ETF (JETS) descended 0.6%. SPDR S&P Homebuilders ETF (XHB) climbed 1.3%. The Energy Select SPDR ETF (XLE) skidded 3.5% and the Financial Select SPDR ETF (XLF) edged up 0.35%. The Health Care Select Sector SPDR Fund (XLV) dipped 0.3%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) lost 2.5%, not far from last week’s five-year low. ARK Genomics ETF (ARKG) shed 2.1%. Tesla stock is a major holding across Ark Invest’s ETFs.
Five Best Chinese Stocks To Watch Now
Apple stock fell 3.7% to $125.07 on Tuesday, breaking below last week’s bear market low to the worst levels since June 2021.
AAPL stock, which topped a $3 trillion intraday valuation at the start of 2022, has now dropped 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.
The giant Foxconn 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 dived 12.2% to 108.10, plunging 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 already crashed 37% in December and 65% for all of 2022.
Tesla deliveries hit a record high in Q4, but for a second straight quarter they were well short of lowered estimates and actual production. That was despite big year-end incentives, especially in China and the US, to boost sales.
The outlook may be grim for 2023, with new Tesla EV orders well below the current delivery pace.
Bernstein’s Toni Sacconaghi wrote Sunday “Tesla’s annual order run rate in Q4 including significant discounting was only ~1M units, and the company’s target is to sell close to 2M units in 2023, with no new models.”
With backlogs running low, Tesla may need price cuts or incentives well above the year-end offers just to maintain Q4’s delivery pace in 2023. But that could mean big hits to Tesla’s profit margins.
Tesla Vs. BYD: EV Giants Vie For Crown, But Which Is The Better Buy?
Stock Market Analysis
The stock market started 2023 strong — for 12 minutes. After that, the major indexes quickly retreated, although they came off intraday lows.
The Dow Jones reversed lower after briefly getting 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 getting close to its 21-day line.
Tesla stock and Apple were the big drags on the major indexes. But there was a broad-based retreat. Energy stocks were big losers with underlying prices.
A lot of interesting stocks opened higher but then reversed lower with the major indexes, such Mobileye, Celsius (CELH) and Medpace (MEDP).
Eli Lilly and Caterpillar, along with related defensive growth names, held up relatively well. LLY stock is testing its 50-day/10-week lines.
China-focused stocks, notably internets such as Pinduoduo (PDD) and Macau casino plays like Las Vegas Sands (LVS), bucked the trend, but they also came off highs.
The major indexes ultimately limited 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 in a rally attempt thanks to last Thursday’s gain, but that’s looking like a one-day bounce.
The market is in a correction, with the Nasdaq not that far from bear market lows. Even if the rally attempt gains momentum and stages a follow-through day over the next week or two, there would still be a number of technical hurdles to clear.
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What To Do Now
It’s not a good time to be taking new positions. It’s a market correction with the major indexes, sectors and individual sectors prone to reversals.
Don’t get tempted by momentary market bursts that push stocks into buy areas. For a few minutes Tuesday, a number of stocks flashed buy signals, but most quickly faded. Even though the major indexes ended with modest losses, an investor jumping into MBLY stock near Tuesday’s open could now be sitting with a 10% loss.
Bottom line: Don’t act like the market is in an uptrend until the market is actually in an uptrend.
Still, many good stocks continue to trade near buy points, while the market rally attempt could stage a follow-through in the coming days. So build up your watchlists and stay engaged.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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