Dow Jones futures trended higher overnight, along with S&P 500 futures and Nasdaq futures, after the Bank of Japan unexpectedly stayed the course. United Airlines and Moderna shares rose on the news. There could be a major job cut at Microsoft on Wednesday.
X
The stock market rally was relatively calm despite a solid drop in the Dow Jones.
Tesla (TSLA) continued its recovery from bear market lows, up 7.4% to 131.49. The shares moved slightly above the 21-day line, but remain well below the 50-day and especially the 200-day line. Tesla China’s EV registrations rebounded last week after recent big price cuts there. However, it may be some time before investors get a clear picture of the impact of Tesla’s global price cuts and demand. Tesla earnings for Q4 are due on January 25th.
A break of a few days would allow more supplies to be built up. This includes stocks that have rallied from early entries and could use handles.
rafters (CVX), Apex Pharma (VRTX) and TJX Cos. (TJX) are three stocks actionable now.
But overall, investors should be patient.
The Bank of Japan remains stable
The Bank of Japan left its monetary policy unchanged. The BoJ stuck to its policy of keeping interest rates and Japanese government debt close to 0%. In December, the BoJ effectively tightened, allowing the 10-year Japanese yield to rise to 0.5%. This fueled speculation that the Bank of Japan would end zero interest rates altogether.
The BoJ’s decision to stay the course rattled Dow futures, Treasury yields and the dollar.
key income
United Airlines (UAL) and Interactive Brokers (IBKR) reported Tuesday evening.
United Airlines’ profits significantly beat fourth-quarter prospects, while the airline also provided an upbeat guidance. UAL stock rose slightly after hours. Shares fell 0.9% to 51.20 on Tuesday after rising sharply over eight sessions.
Interactive Brokers earnings also beat views. IBKR stock rose slightly overnight. Shares slipped 2 cents to 77.19 on Tuesday, working off a double bottom basis at a buy point of 80.95. Friday’s move above the 50-day moving average offered an early entry but close to gains.
Karl Schwab (SCHW) and forwarding agency JB Hunt Transport Services (JBHT) are due early Wednesday. SCHW shares rose 0.6% to 83.49 on Tuesday, remaining in a buy zone. JBHT shares fell 0.3% between the 50-day and 200-day moving average to 176.29.
UAL shares are on the IBD 50. VRTX shares are on the IBD Big Cap 20.
Moderna RSV vaccine
Moderna reported strong results for its respiratory syncytial virus, or RSV, vaccine late Tuesday. The biotech’s RSV vaccine uses its mRNA technology. MRNA stock was up solidly in extended trading, signaling a strong bounce off around the 10-week moving average. Moderna’s RSV vaccine follows positive RSV results Pfizer (PFE) and GlaxoSmithKline (GSK).
Microsoft job cuts loom
In the meantime, Microsoft (MSFT) could announce fresh job cuts as early as Wednesday, Bloomberg reported, citing sources. The cuts could be “significantly higher” than previous layoffs. Sky News reported that software giant Dow Jones could cut up to 5% of its workforce, the equivalent of 11,000 jobs. Microsoft cut about 1,000 jobs in October.
MSFT shares rose 0.5% to 240.35 on Tuesday, its seventh straight rise and just below its 50-day moving average. Microsoft earnings are due on January 24th.
The video embedded in the article reviewed CVX stock, Eli Lilli (LLY) and MercadoLibre (MELI).
Dow Jones futures today
Dow Jones futures edged up versus fair value. S&P 500 futures were up 0.1% and Nasdaq 100 futures were up 0.2%.
The 10-year government bond yield fell 5 basis points to 3.48% on the Bank of Japan’s decision, after trading down 3.56% shortly before.
The dollar rose against the Japanese yen.
Crude oil prices rose 1%.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading 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, generally showing modest intraday fluctuations.
The Dow Jones Industrial Average fell 1.1% in trading on Tuesday, but that was largely due to this Goldman Sachs (GS) and traveler (TRV) weighing blue chips. The S&P 500 Index fell 0.2%, with Tesla shares and MorganStanley (MS) the top performers. The Nasdaq Composite rose 0.1%. Small-cap Russell 2000 fell 0.1%.
US crude prices edged up 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 bond yield rose 2 basis points to 3.53%.
ETFs
Among growth ETFs, innovator IBD 50 ETF (FFTY) fell 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) was modestly up 0.3%, with Microsoft shares a key holding. The VanEck Vectors Semiconductor ETF (SMH) is up 0.6%.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) was up 2.9% and ARK Genomics ETF (ARKG) was up 1.8%. Both extended gains from the 50-day moving average and approached their 200-day moving average. TSLA stock remains a top pick among Ark Invest’s ETFs, with Cathie Wood adding many more stocks in recent weeks.
SPDR S&P Metals & Mining ETF (XME) fell 1%. The US Global Jets ETF (JETS) was up 0.4%, with UAL stock a big hold. The SPDR S&P Homebuilders ETF (XHB) fell 0.8%. The Energy Select SPDR ETF (XLE) was up 0.2% with CVX stock taking a key position. The Financial Select SPDR ETF (XLF) is down 0.7%. The Health Care Select Sector SPDR Fund (XLV) fell 0.5%.
The five best Chinese stocks to watch right now
Stocks in buy zones
Chevron rose 1.65% to 180.49 and moved above the 50-day moving average and a short-term high of 180.23. CVX stock has a flat buy point of 189.78, according to MarketSmith analysis.
VRTX shares rose 3.7% to 311.58 and rallied above the 50-day moving average in above-average trading. This provides an early entry for Vertex, which has a flat buy point at 324.85. VRTX stock has also regained a previous buy point of 306.05. The biotech hit a record high of 324.75 on Dec. 8, but then plunged to the 200-day moving average by year-end. From there, Vertex stock rallied last week. Investors could wait and see if shares pause around the 50-day moving average.
TJX stock closed up 2 cents at 81.55 and on the day rebounded from a test of a flat buy point of 81.29 which was cleared on Jan 6th. Since then, stocks have consolidated in the buy zone. The 5% deep shallow base is just above a long 31% deep cup consolidation.
Analysis of the market rally
The stock market rally was relatively calm after last week’s big gains.
The S&P 500 briefly revisited the 4,000 mark and retreated, but only held above the 200-day mark.
The Russell 2000, which surpassed its 50-day and 200-day moving averages last week, fell after falling within 1% of its November highs.
The Nasdaq Composite is holding above its 50-day MA with the December highs and the 200-day MA being the major areas of resistance on the horizon. Much of Tuesday’s strength came from Tesla, chips and seedy cloud software names.
The Dow Jones fell solidly, mainly due to GS shares and Travelers. The blue chip index is comfortably above its moving averages with only December highs to watch for.
The market rally still looks healthy. A number of trends including the Nasdaq Advance Decline line and new highs vs lows have improved in recent sessions.
A pause or modest pullback would be normal or even healthy here. The S&P 500 decisively breaking below the 200-day and possibly undercutting the 50-day would be of more concern. On the upside, the late 2022 highs are the next key level.
While Chevron, TJX, and Vertex, and a few other names are entirely viable, there’s not much to buy right now. A few stocks that looked promising Tuesday morning, such as monster drink (MNST), withered by the close.
Many stocks are already up in recent sessions, such as Medpace (MEDP) and MercadoLibre. A pause would make many of these names form handles or shelves. Meanwhile, other stocks are coming into play.
Time the market with IBD’s ETF market strategy
What now
Patience is important. When the market may be paused and not many stocks are giving buy signals, resist the temptation to buy extended stocks. If this uptrend works, you have safer opportunities ahead. This includes recently hot stocks when the form hits handles or support levels.
Be sure to run your screens of the leading stocks to find those showing promising action.
As the market offers more stocks flashing buy signals, you can invest gradually over time. In addition to a variety of economic and Fed headwinds, the earnings season is underway with the next two weeks likely to be the heaviest releases.
Read The Big Picture every day to keep up to date with 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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