Dow Jones futures turned slightly higher after the close, along with S&P 500 futures and Nasdaq futures, as Tesla (TSLA), service now (Now and Lam Research (LRCX) titled the key gains after the close. Dow Jones giant rafters (CVX) announced a mammoth buyback, with CVX stock signaling a possible buy signal.
United Rents (URI), steel dynamics (STLD) and IBM (IBM) also reported, with Teradine (TER) also on tap tonight.
The stock market rally faltered on Wednesday morning Microsoft (MSFT) and Boeing (BA) were among the early yield losers. The major indices tested or undercut key levels but came off sharply from lows to close at or near intraday highs for the fourth straight day. A key reason: Boeing reversed slightly higher and MSFT stock pared losses.
URI stocks are on the IBD Leaderboard watch list. United Rentals, Lam Research and STLD stocks are in the IBD Big Cap 20.
Dow Jones futures today
Dow Jones futures were just above fair value, with CVX stock and IBM both blue chips. S&P 500 futures were up 0.1% and Nasdaq 100 futures were up 0.3%. Tesla shares, LRCX, NOW and STLD shares are S&P 500 and Nasdaq 100 stocks.
Investors will get their first statement on fourth-quarter economic growth early Thursday. The GDP report will also include the quarterly PCE price index, which will provide a strong signal for December PCE inflation on Friday morning. Durable goods orders, new home sales and jobless claims are also on the agenda for Thursday.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.
Tesla earnings slightly topped analyst opinion, which had fallen significantly in recent weeks. According to FactSet, sales are just missing. Tesla booked $324 million in fully autonomous driving revenue.
Auto gross margin fell to 25.9% from 27.9% in the third quarter and 30.6% a year ago. That too was below consensus. Gross margins are expected to fall significantly in 2023 after sweeping price cuts around the world earlier this month.
CEO Elon Musk was optimistic on the conference call. He said that orders after the price cuts are double the production at the moment. The question, however, is how strong demand will remain in the coming weeks and months. Musk said two million shipments is the goal for 2023.
Tesla delivered 1,313,851 electric vehicles and produced 1,369,611 in 2022. In the past three quarters, production has increasingly exceeded deliveries.
Tesla said the Cybertruck will begin production later this year. Further details on an upcoming vehicle will be announced at Investor Day on March 1st. That could be a smaller, cheaper electric vehicle or a revised Model 3 with lower production costs.
Late Tuesday, Tesla said it would invest $3.6 billion in its Nevada Gigafactory to mass-produce semi-vehicles and 4680 batteries. But much of the announcement reflected key features of Tesla’s unfulfilled plans from 2014.
TSLA shares plummeted 4% in extended trading. Shares rose 0.4% in Wednesday’s regular session to 144.43, hitting the 50-day/10-week moving matrices after bouncing off bear market lows on Jan. 6.
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Chevron share buyback
Chevron will buy back $75 billion worth of its CVX stock, energy giant Dow Jones said late Tuesday. This corresponds to 20% of the outstanding shares. Chevron will increase its quarterly dividend by 6% to $1.51 per share.
The oil major is due to announce its results early Friday.
CVX stock rose more than 2% to above 183 and rebounded off the 50-day moving average. Stocks have a buy point of 189.78 from a flat cup base. But investors could use a move above Monday’s high of 182.55 as an entry point.
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ServiceNow’s revenue was surpassed while revenue remained flat. The enterprise software giant also gave a bullish subscription revenue forecast. NOW stock fell slightly after hours, having erased initial losses. Shares rose 1.2% to 448.77 on Wednesday after falling below its 200-day moving average during the course of the day.
Lam Research’s earnings beat quarterly forecasts. LRCX stock fell slightly on prolonged action. Shares closed down 0.2% at 448.40 on Wednesday. Lam Research stock is bottoming out with much of it above the 50-day and 200-day moving averages. The buy point stands at 504.65 but a move above Monday’s high would offer a slightly lower entry.
Teradyne’s earnings beat prospects, but forecasts also disappointed. TER stock fell solidly late. Shares rose 0.4% to 103.44 on Wednesday and held above the 200-day moving average.
LRCX and TER earnings track ASML earnings ahead of Wednesday’s open KLA Corp. (KLAC) due late Thursday.
Steel Dynamics earnings beat views. STLD stock rose after hours. Shares closed up 2.2% at 110.41 on Wednesday. Steel Dynamics stock tried to clear a short consolidation with a buy point of 113.22 last week but pulled back.
Nucor earnings are due Thursday morning. NUE shares closed up 1.7% at 156.67. Nucor stock is near a 160.03 cup with handle buy point.
United Rentals revenue was lost while revenue remained modest. But the heavy equipment rental giant gave an upbeat forecast for 2023. URI stock rose solidly overnight. Shares fell 0.3% on Wednesday to 392.48, just on the edge of the buy zone from a buy point of 374.01 in a consolidation stretching back to late 2021. URI gains and predictions could be useful for heavy equipment manufacturers such as Caterpillar (CAT).
IBM revenue just surpassed views while revenue surpassed. IBM stock fell slightly after hours. Shares fell 0.5% on Wednesday to 240.61. IBM stock has formed a flat base with a buy point of 153.31 after a strong two-month run, but is currently trading below the 50-day moving average.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
stock market rally
The stock market rally started poorly but improved again to close little changed near the day’s best levels.
The Dow Jones Industrial Average rose a fraction in trading on Wednesday. The S&P 500 Index closed just below breakeven. The Nasdaq Composite fell 0.2%. Small-cap Russell 2000 was up 0.3%.
US crude prices rose 2 cents to $80.15 a barrel. Natural gas fell 5.9% to its lowest close since June 2021.
The 10-year government bond yield fell 1 basis point to 3.46%.
Among growth ETFs, Innovator IBD 50 ETF (FFTY) was up 0.2%, while Innovator IBD Breakout Opportunities ETF (BOUT) was down 0.3%. The iShares Expanded Tech-Software Sector ETF (IGV) ended down 0.2%, with Microsoft shares and NOW being the top contributors. The VanEck Vectors Semiconductor ETF (SMH) is up 0.1%. The LRCX share is an SMH holding
Mirroring stocks with more speculative histories, ARK Innovation ETF (ARKK) was up 0.1% and ARK Genomics ETF (ARKG) was up 0.5%. Tesla stock is a key position in Ark Invest’s ETFs. Cathie Wood’s Ark has loaded.
The SPDR S&P Metals & Mining ETF (XME) was up 1.25% and the Global X US Infrastructure Development ETF (PAVE) was flat. US Global Jets (JETS) rose 1.1%. SPDR S&P Homebuilders (XHB) rose 0.4%. The Energy Select SPDR ETF (XLE) settled just below breakeven and the Financial Select SPDR ETF (XLF) was up 0.8%. The Health Care Select Sector SPDR Fund (XLV) was up slightly.
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Analysis of the stock market rally
The stock market rally sold off Wednesday morning but recovered sharply from lows. Major indices closed near highs for the fourth consecutive month.
The S&P 500 fell 1.7% for the day, undercutting its 200-day moving average and approaching its 50-day moving average for the day. But the benchmark index ended essentially unchanged.
The Nasdaq Composite and Russell 2000 rebounded from lows and were comfortably above their 50-day moving averages. The Dow Jones fell below the 50-day line during the day, but closed again above it.
Dow giants Microsoft and Boeing both slipped at the open but rallied to finish little changed. Many cloud-related names that fell due to Microsoft’s leadership have drastically reduced losses.
Leading stocks generally performed well, including chip gear, travel, medical and home stocks. It’s saying something when one of the biggest complaints about leading stocks is that a slightly longer pause or pullback over the past week would have been useful.
A number of recent breakouts have slipped back below the buy points but could still work, such as: SLB (SLB), impinj (PI) and Medpace (MEDP). Meanwhile, some other stocks that extended from the bottom formation could forge the handles in long consolidations such as: B. Boeing and Shift4Payments (FOUR).
The overall market rally was encouraging. Key indices have yet to decisively surpass their late 2022 highs, but they are moving towards those levels.
Earnings season remains active with Tesla and ServiceNow weighing on overnight trading.
Several key economic reports on Thursday, Friday and next week as well as the announcement of the February 1st Fed meeting will move markets alongside gains.
Time the market with IBD’s ETF market strategy
Just because the major indices and many leading stocks found support on Wednesday doesn’t mean they will continue to do so. In a few weeks, it might seem obvious that investors should increase exposure or switch to exits. But it’s not obvious now.
So be careful when adding exposure and stick to the loss limitation rules.
Be sure to work on your watch lists. Casting the Net: A variety of sectors are showing strength, which in itself is a bullish sign for the market rally.
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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