Dow Jones futures rose modestly early Wednesday, along with S&P 500 futures and Nasdaq futures. Tesla stock is bouncing, trying to halt its December freefall.
The stock market rally showed divergent action Tuesday, with the Dow edging higher, the Nasdaq slumping and S&P 500 somewhere in between.
Tesla (TSLA), Moderna (MRNA), Nvidia (NVDA) and Enphase Energy (ENPH) were notable losers, with Apple (AAPL) setting a new bear market low.
On the positive side, Dow Jones giant Caterpillar (CAT), Deere (DE), ATI (ATI), Freeport-McMoRan (FCX) and Schlumberger (SLB) are industrial, metal, mining and energy plays in or near buy points. Underlying commodity prices rose solidly Tuesday, helped by China continuing to roll back Covid restrictions.
Dow Jones Futures Today
Dow Jones futures advanced 0.3% vs. fair value. S&P 500 futures climbed 0.3% and Nasdaq 100 futures rose 0.3%. Tesla stock is giving a smart boost to S&P 500 and Nasdaq futures.
The 10-year Treasury yield declined 4 basis points to 3.81%.
Crude oil futures edged lower. Natural gas futures sink 6%.
Remember that overnight action 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 Rally
The stock market rally had a mixed session, with industrial and metal stocks holding up or rising while growth plays struggled.
The Dow Jones Industrial Average inched up 0.1% in Tuesday’s stock market trading. The S&P 500 index fell 0.4%, with Tesla stock the day’s worst performer, followed by Moderna and Nvidia. The Nasdaq composite declined 1.4%. The small-cap Russell 2000 gave up 0.7%.
Apple stock fell 1.4% to 130.03. Intraday, AAPL hit 128.76, just undercutting its bear market low.
Tesla stock plunged 11.4% to 109.01, its worst one-day loss in 11 months, amid a Shanghai plant shutdown, weak China sales data and other news. TSLA stock has now crashed 44% just this month to the lowest levels since August 2020. Volume has been very high all month, signaling institutional selling.
TSLA stock rose nearly 3% in active premarket trade after popping as much as 5%.
Nvidia stock slumped 7.1% to 141.21, breaking below its 50-day line. NVDA stock has tumbled 19% from its Dec. 13 intraday high of 187.90.
MRNA stock sank 9.5% to 180.17, tumbling below a 188.75 cup-with-handle buy point, according to MarketSmith analysis. Moderna blasted out of that base on Dec. 13 on bullish cancer vaccine trial data, soaring 20% that day and hitting 217.25 the following session. But MRNA stock has round-tripped a 15% gain and more.
ENPH stock tumbled 6.6% to 274.54, now well below the 50-day line after undercutting that level on Friday.
US crude oil prices fell 3 cents to $79.53 a barrel after topping $80 Tuesday morning.
The 10-year Treasury yield jumped 11 basis points to 3.86% after soaring 27 basis points last week.
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Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 0.6%. The VanEck Vectors Semiconductor ETF (SMH) slumped 1.8%. NVDA stock is a major SMH holding.
The SPDR S&P Metals & Mining ETF (XME) rose 0.8%. FCX stock and ATI are XME components. The Industrial Select Sector SPDR Fund ETF (XLI) edged up 0.3%, with Caterpillar and DE stock both top 10 holdings.
The US Global Jets ETF (JETS) descended 1.3%. SPDR S&P Homebuilders (XHB) dipped 0.3%. The Energy Select SPDR ETF (XLE) advanced 1.1%, with SLB stock a key component. The Financial Select SPDR ETF (XLF) was just below break-even. The Health Care Select Sector SPDR Fund (XLV) gave up 0.3%.
Reflecting stocks with more speculative stories, ARK Innovation ETF (ARKK) tumbled 4.15%, hitting a fresh five-year low. ARK Genomics (ARKG) slumped 3.8%, closing in on June’s bear market low. Tesla stock remains a major holding across Ark Invest’s ETFs.
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Stocks To Watch
Caterpillar stock rose 1.4% to 243.14, clearing a 239.95 buy point from a flat base right next to a deep cup base. Breakouts have struggled over the past year, but the 6%-deep base lowers the risk somewhat. The relative strength line is at its best level in nearly 10 years.
Deere stock edged down 0.2% to 436.15, still close to its 21-day line with the 10-week line catching up. DE stock has been trading tightly after a strong run. It’s on track to have a shallow flat base at the end of the week with a 448.50 buy point. A move above the Dec. 21 high of 444.51 would offer an early entry in Deere stock. The RS line for DE stock is at a record high.
ATI stock popped 3.8% to 31.45, rebounding from the 10-week line and hitting a trendline entry. The official buy point is 31.84 from a handle. The RS line for ATI is at a three-year high.
Freeport-McMoRan stock rose just over 2% to 38.88, bouncing from the 21-day and 10-week lines. That offers an early entry from a long, deep cup-with-handle base with a 41.26 buy point. FCX stock is not yet extended from its 50-day line, which has just crossed the 200-day
Schlumberger stock climbed 1% to 53.50, working on a 56.14 buy point from a short base. SLB stock has broken a trendline entry and is still close to its 21-day and 50-day lines.
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Market Rally Analysis
The stock market rally showed split, divergent action in Tuesday’s session.
The Dow Jones again found support at its 50-day line, but hit resistance at its 21-day line.
The S&P 500 lost a little more ground vs. a rising 50-day line.
The Invesco S&P 500 Equal Weight ETF (RSP) rose fractionally, briefly topping its 50-day line, with the impact of Tesla, Nvidia, Moderna and Enphase lessened.
The Nasdaq skidded Tuesday, approaching Thursday’s intraday lows. The composite flirted with a bear market closing low.
In addition to industrial, metal, mining and energy plays such as Caterpillar, Schlumberger and FCX stock, many medical plays are acting well. Housing stocks, from builders to materials to retailers, are also showing strength, along with some retailers. Chinese internets are rebounding as the economy opens up.
But growth stocks and tech generally look terrible.
An uptrend under pressure that is also a divergent market rally amid huge macroeconomic uncertainty is unstable and highly risky. And that’s before individual stock risk.
It’s possible that real economy names pull up techs in a 2023 stock market rally, especially if Federal Reserve and economic headwinds recede. Or tech and growth stocks could drag the broad market back towards bear lows. Or the major indexes could whipsaw sideways with significant sector rotation for an extended stretch.
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What To Do Now
The stock market rally is still hanging on. Parts of the market are doing well, as the uptrend shows increasing divergence.
A nimble investor could try buying, say, CAT stock, ATI or Schlumberger. But exposure should be light, and any new positions should be small. Investors also could play the sector or theme via ETFs such as XME, XLE, OIH or XLI.
There’s nothing wrong with taking no new positions, or even being entirely in cash.
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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