Dow Jones futures fell modestly Tuesday morning, along with S&P 500 futures and Nasdaq futures. Chinese economic data topped views while Tesla's China EV registrations got a boost after big price cuts there. Goldman Sachs fell short of Q4 forecasts.
The stock market rally picked up steam in the past week, with strong gains, clearing key levels. The S&P 500 briefly faced resistance at the 200-day line, but moved above that key level on Friday. A large number of leading stocks flashed buy points.
Investors can be adding exposure gradually as the market rally improves. While many top stocks are now extended, Wendy's, Exxon Mobil, Quanta Services, Celsius Holdings and Insulet are all actionable from early entries. Wendy's and PWR stock have new flat bases, joining XOM stock and Insulet. CELH stock needs another week to forge a proper base.
CELH stock is on SwingTrader and the IBD 50. Celsius, Insulet and Wendy's were the most recent three IBD Stock Of The Day selections.
Earnings, News
Goldman Sachs earnings came in well below fourth-quarter consensus, with revenue also missing. GS stock fell nearly 3% in premarket trade.
Morgan Stanley reported in-line Q4 EPS with revenue slightly topping. Shares rose slightly.
Meanwhile, Tesla rose modestly early Tuesday after weekly Chinese EV registration data showed an initial sales boost from big recent China price cuts. On Friday EV giant announced big price cuts in the U.S. and Europe as well. Tesla stock dipped Friday but rebounded for the week.
Still, the EV giant faces a painful transition as investors increasingly view Tesla as an automaker, not a tech company.
The video embedded in this article discussed the strong week for the market rally, and analyzed WEN stock, Quanta Services and Celsius.
Chinese Economic Data
Chinese economic data came in better than expected overnight. Q4 GDP rose 2.8% vs. a year earlier, topping forecasts for 1.8%. Full-year GDP climbed 3%, slightly above views.
December retail sales declined 1.8% vs. a year before, but far above targets for an 8.6% dive. Industrial production climbed 1.3% vs. estimates for a 0.2% uptick.
With China ending strict Covid rules, the country is facing a massive wave of infections. Chinese authorities disclosed nearly 60,000 Covid-related deaths in Chinese hospitals between Dec. 8-Jan. 12.
But the prospects for China's economy appear better going forward.
Dow Jones Futures Today
Dow Jones futures retreated 0.4% vs. fair value. Goldman Sachs and Travelers, which preannounced weak results, weighed slightly on blue chips.
S&P 500 futures fell 0.3%. Nasdaq 100 futures declined 0.5%, even with TSLA stock offering a boost.
The 10-year Treasury yield rose 7 basis points to 3.58%.
Crude oil futures rose slightly, to above $80 a barrel. Natural gas prices popped 9%. Copper futures sank more than 1%.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Bitcoin Price
The Bitcoin price briefly hit $21,430 on Monday, a two-month high. The leading cryptocurrency is currently trading around $21,300. Bitcoin didn't retake $17,000 until Jan. 8.
Bitcoin's rise coincides with the stock market rally, which is showing a return to more speculative investments. That includes growth stocks, especially speculative-type plays like the ARKK ETF. Some meme stocks had a big week, notably Bed Bath & Beyond. BBBY stock skyrocketed 179%, even though the retailer has signaled it's heading toward bankruptcy.
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 strong week, with the major indexes closing near session highs.
The Dow Jones Industrial Average rose 2% in last week's stock market trading. The S&P 500 index popped 2.7%. The Nasdaq composite leapt 4.8%. The small-cap Russell 2000 jumped 5.3%.
The 10-year Treasury yield fell 6 basis points to 3.51%, even with Friday's bounce. Markets strongly expect quarter-point Fed rate hikes in February and March, but then see policymakers on hold. Falling Treasury yields and brighter economic prospects elsewhere are pressuring the dollar, providing another boost to stocks and commodities.
U.S. crude oil futures jumped 8.3% to $79.86 a barrel last week. Copper prices jumped 7.65%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF rallied 4.4% last week, while the Innovator IBD Breakout Opportunities ETF climbed 2.1%. The iShares Expanded Tech-Software Sector ETF leapt 4.9%. The VanEck Vectors Semiconductor ETF soared 6.7%.
Reflecting more-speculative story stocks, ARK Innovation ETF spiked 14.7% last week and ARK Genomics ETF just over 16%. TSLA stock is a major holding across Ark Invest's ETFs. Cathie Wood's Ark has restocked its Tesla holdings in recent days and weeks.
SPDR S&P Metals & Mining ETF bounced 6.3% last week to a seven-month high. The Global X U.S. Infrastructure Development ETF rolled 4.2% higher. U.S. Global Jets ETF ascended 9.4%. SPDR S&P Homebuilders ETF gained 4.6%, despite weak KB Home earnings. The Energy Select SPDR ETF edged up 0.14%, with XOM stock a major component. The Financial Select SPDR ETF rose 2.1%. The Health Care Select Sector SPDR Fund edged down 0.2%.
Five Best Chinese Stocks To Watch Now
Stocks In Buy Areas
Wendy's stock staged a big upside reversal Friday, jumping 6% to 23.08 after hitting an intraday low of 21.36. WEN stock regained its 50-day line, moved above the 21-day and broke above a trendline. That offered an early entry in the new flat base. The official buy point is 23.88, according to MarketSmith analysis.
Wendy's on Friday reported a fourth-straight quarter of accelerating sales growth, doubled its dividend and announced a $500 million buyback.
XOM stock rose 2.4% to 113.16 last week, its fifth straight weekly gain. Shares are slightly below the official 114.76 buy point, and they wouldn't seem extended from the 50-day line with that move. But investors already could enter Exxon stock.
PWR stock jumped 6.7% to 148.50 last week, rebounding back above the 50-day line, offering an early entry. Shares also reclaimed a prior 144.41 buy point that's no longer valid.
CELH stock popped Wednesday above the 50-day and 21-day line, breaking a downtrend, offering multiple reasons for an early entry. Shares held support at the 21-day, then peeked higher Friday. Celsius stock is actionable now after soaring 13.2% for the week.
Insulet stock rose 4.65% in the past week to 305.89, rebounding from the 21-day and 50-day lines. Shares are actionable now. But investors could wait for a break of a trendline, currently slightly above Friday's high of 309.44.
Tesla China EV Sales
Tesla China EV registrations rose to 12,654 for in the week of Jan. 9-15, up from just 2,110 in the prior week. That latest bump reflects some benefit from big Jan. 6 price cuts in China, which also included cuts in other key Asian markets.
But will the cuts provide a lasting boost to China sales? The upcoming Lunar New Year holiday will likely curb spending and Tesla shutting down production again for several days, it may be several weeks to get a sense of that.
Also Tuesday, XPeng cut prices on most of its models. XPeng's lineup, much of it aging, is in the same general price range as the Model 3 and Y.
XPeng EV registrations were just 1,817. Li Auto and Nio, more premium EV startups, sold 4,527 and 2,974, respectively. EV and battery giant BYD sold 40,420.
Tesla Stock
TSLA stock rose nearly 3% early Tuesday.
Tesla stock rallied 8.3% to 122.40 last week, continuing a bounce from the Jan. 6 bear market low of 101.81. Shares edged down 0.9% Friday, well off intraday lows despite Tesla announcing sweeping price cuts in the U.S. and Europe. That came a week after Tesla slashed prices in China.
The latest price cuts should fuel sales, especially in the U.S., with more Tesla EV variants eligible for a $7,500 tax credit. That means a huge price cut for U.S. consumers. But Tesla's prized margins are likely to take a hit.
Still, orders significantly lagged deliveries in late 2022, so Tesla needs a big boost in new demand just to maintain the current delivery pace in 2023.
Already-fierce competition in China will intensify in 2023, with Tesla's price reductions perhaps triggering a wave of margin-killing cuts. Europe is increasingly crowded, as well. Even the U.S. EV market will be more competitive in a year, with the tumble in used-car prices already a big drag on new-vehicle prices.
Tesla, Auto Stock?
But setting aside Tesla's EV sales, TSLA stock has a bigger problem. Investors increasingly view the EV giant as an automaker, not a tech company. Tesla's current price-earnings ratio of 33 is not too steep for a tech growth company. But it's unusually high for an automaker. Auto industry advantages and margins tend to erode relatively quickly, which may be happening to Tesla right now.
TSLA stock may deserve a high valuation for an automaker, reflecting the EV giant's still-robust EPS and sales growth. But even so, that would suggest a much-lower valuation than it's boasted up until recently.
General Motors, Ford and Chrysler-and-Fiat parent Stellantis all have P-E ratios in the single digits. Toyota is at 10.
Tesla Vs. BYD: EV Giants Vie For Crown, But Which Is The Better Buy?
Market Rally Analysis
The stock market rally had an encouraging week, building on strong Jan. 6 gains. The major indexes rose solidly, regaining key levels. A large number of leading stocks flashed buy signals during the week, with most holding or extending gains.
The S&P 500 index moved above its 50-day moving average and came up to its 200-day line. The benchmark index hit resistance at that key level on Thursday-Friday, but ultimately powered above it.
The Dow Jones, Russell 2000 and S&P MidCap 400 are above all their moving averages and closing in on their December short-term highs.
The Nasdaq reclaimed its 50-day moving average and moved above the 11,000 level. The laggard index had been close to its bear market lows at the start of the year.
On Friday, stocks opened solidly lower, as earnings initially hit airlines, health insurers and bank stocks, Tesla price cuts slammed auto stocks and an analyst downgrade hit big defense contractors.
Even without the negative headlines, the market arguably was due for a pullback after the strong gains and with the S&P 500 at the 200-day line.
Yet the market quickly bounced back and closed higher.
Industrials, the broad housing sector, many medicals as well as some retailers and restaurants are showing strength.
Tech names are still scarce among leading stocks, though they are trying to come back. The SMH chip ETF cleared its 200-day line this past week, while the IGV software ETF and ARKK are above their 50-day average.
The S&P 500 still needs to decisively clear the 200-day line. The December highs loom large for all the main indexes.
While the stock market appears to be less concerned about the Federal Reserve, with a path toward a rate hike pause, earnings season will take center stage.
Time The Market With IBD's ETF Market Strategy
What To Do Now
Investors can be making new buys as stocks continue to improve. But do so gradually. While the market rally has shown strength and resilience in recent days, a pullback would not be a surprise for the major indexes, key sectors or individual stocks.
Earnings season will intensify for the next few weeks, creating the potential for major swings. Exxon and Tesla stock will report within the next three weeks, along with tech giants Apple, Microsoft, Amazon.com and Google parent Alphabet.
So don't get too concentrated into a particular sector, even if it's performing well. Strive for a diversity of leading stocks.
Bulk up your watchlists. Look for stocks that are actionable, setting up, or potentially actionable if they pause or pull back. Broad strength, at least outside of tech, should offer a number of opportunities.
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.
