Dow Jones futures fell Monday morning, along with S&P 500 futures and Nasdaq futures, signaling a pullback after big gains in recent days.
The stock market rally cleared some major resistance last week. The major indexes had solid gains, responding bullishly to uneven earnings reports and economic data. Leading stocks acted well, with breakouts and buy points continuing to work.
Since the Jan. 6 follow-through day, the market rally has shown robust gains. In fact, the advance suggests this uptrend could be a "moneymaker" or even a "life-changing" rally, according to one noted growth investor.
So investors should be taking advantage of the opportunities. But do so carefully. The market rally is around key levels, while it's another big week for news.
Apple, Google parent Alphabet, Amazon.com, Facebook parent Meta Platforms are all on tap, as well as hundreds of other companies. Apple stock and these other tech titans are rebounding strongly, but have a lot of repair work. Still, their earnings and guidance will be key for the market rally as well as many other tech stocks.
The Federal Reserve holds its policy meeting this coming week, with another rate hike expected on Feb. 1. The big question is when Fed chief Jerome Powell and his colleagues call a halt to further rate increases.
Tesla skyrocketed on mixed earnings as CEO Elon Musk was bullish about the future. TSLA stock soared from its Jan. 6 bear market low, but isn't yet offering a buy point.
Meanwhile, Tesla archrival BYD, Snowflake, Shift4Payments and Etsy are four aggressive stocks in or near potential buy areas. But handle them with care.
ETSY stock is on SwingTrader. FOUR stock is on the IBD 50.
Dow Jones Futures Today
Dow Jones futures fell 0.55% vs. fair value. S&P 500 futures declined 0.8%. Nasdaq 100 futures tumbled 1.1%.
The 10-year Treasury yield climbed 3 basis points to 3.55%.
Hong Kong's Hang Seng index tumbled 2.7% on Monday after a strong start to 2023. Many U.S.-listed Chinese companies tumbled before the open, including Alibaba. But Baidu rose amid reports that it will soon launch an AI chatbot like OpenAI's ChatGPT.
Remember that overnight action in Dow futures and elsewhere doesn't 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 Rally
The stock market rally had strong gains across the board this past week.
The Dow Jones Industrial Average climbed 1.8% in last week's stock market trading. The S&P 500 index jumped 2.5%. The Nasdaq composite leapt 4.3%. The small-cap Russell 2000 rose 2.4%.
U.S. crude oil futures fell 2.4% to $79.68 a barrel during the week, reversing from a recent high of $82.48 intraday Friday.
The 10-year Treasury yield rose 3 basis points to 3.52%.
The Federal Reserve is expected to raise rates by just a quarter point on Feb. 1, after a half-point move in December and four straight hikes of 75 basis points before that. Markets overwhelmingly expect another quarter-point hike in late March, to a 4.75%-5% range. But investors are now betting that policymakers will hold steady.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF advanced 2.5% last week. The iShares Expanded Tech-Software Sector ETF popped 4.5%. The VanEck Vectors Semiconductor ETF rallied 5.2% to a five-month high.
Reflecting more-speculative story stocks, ARK Innovation ETF soared 10.7% last week and ARK Genomics ETF jumped 5%. Tesla stock is a major holding across Ark Invest's ETFs, with Cathie Wood's Ark loading up on shares in recent months. Ark also owns a small stake in BYD.
SPDR S&P Metals & Mining ETF climbed 2.1% last week to an eight-month high. The Global X U.S. Infrastructure Development ETF climbed 3.3%. U.S. Global Jets ETF edged up 0.3%. SPDR S&P Homebuilders ETF stepped up 3.3%. The Energy Select SPDR ETF climbed 0.8%, its seventh straight weekly gain. The Financial Select SPDR ETF advanced 2.55%. The Health Care Select Sector SPDR Fund fell 0.8%, a fifth straight weekly decline.
Five Best Chinese Stocks To Watch Now
Megacap Earnings
Meta Platform earnings are due Wednesday night. META stock rallied for a fifth straight week, leaping 8.9% to just below its 200-day line.
Apple earnings are due Thursday night. It'll likely be a rough quarter, with iPhone production delays taking a toll. But AAPL stock jumped 5.85% last week, closing in on its 200-day line.
Google earnings are also late Thursday. GOOGL stock shrugged off a new Justice Department antitrust suit to ultimately climb 1.4%. But it's still some distance from its 200-day.
Amazon earnings also are slated after Thursday's closing bell. AMZN stock tested 50-day line support on Wednesday morning but roared higher for a 5.1% weekly gain. Shares are still well below their 200-day line.
Tesla Stock
Tesla stock surged 33% last week, rocketing above its 50-day line. Since its Jan. 6 bear-market low of 101.84, TSLA stock has erupted for a 75% gain.
On Wednesday night, Tesla earnings slightly beat lowered analyst views, while revenue was roughly in line. But shares spiked as Elon Musk was bullish on demand following price cuts and predicted production of up to 2 million vehicles.
Will revived Tesla demand be sustained? It may be several weeks before there's a clear picture. By Tuesday morning, investors should get some weekly China EV registration data for Tesla and other automakers. However, Tesla Shanghai was closed this past week for the Chinese New Year holiday, which likely also affected demand. Later in the week, investors will get January sales data from BYD, Nio, Li Auto and XPeng, but not Tesla.
On Monday, BYD said full-year net profit up 425%-458% in local currency terms. That implied Q4 net profit of 6.7 billion yuan-7.7 billion yuan ($990 million-$1.17 billion), up 1,013%-1,179% in local currency.
The city of Shanghai is reintroducing a 10,000 yuan ($1,500) for residents who scrap or transfer vehicles in exchange for a purely electric vehicle. It'll start from Feb. 1 to the end of the year. Shanghai is a big market for Tesla. There have been signals that China's government, at the national or regional level, will introduce, renew or expand EV subsidies.
Meanwhile, the SEC is now probing Musk's role in crafting Tesla's self-driving claims, Bloomberg reported Saturday. It's part of an ongoing investigation into the company's statements on Autopilot, according to a source. That follows fresh evidence that a 2016 Tesla video claiming to show fully autonomous driving was indeed fraudulent, with Musk directly overseeing the effort.
Tesla Vs. BYD: EV Giants Vie For Crown, But Which Is The Better Buy?
Stocks Near Buy Points
BYD stock leapt 9.3% last week to a five-month high. The China EV and battery giant retook its 200-day line, closing the week 5.5% above that key level. Shares are building the right side of a very deep cup base, but investors could still buy BYDDF stock as an aggressive entry off the 200-day line. Investors also could wait to see if BYD stock forges a handle or even a short base within the long consolidation. January sales data looms late this coming week. BYD also could soon offer preliminary Q4 figures, which should show triple-digit earnings growth yet again.
FOUR stock found support at the 21-day line, rebounding to edge up 0.4% to 63.69 for the week. That formed a three-weeks-tight pattern with a 65.89 buy point. Investors also could view the recent pause as a handle to a consolidation going back to April 2022. Still, a few weeks of sideways action that lets the 50-day/10-week line catch up might be ideal. FOUR stock has more than doubled since bottoming in July.
SNOW stock surged 10% last week, rising above its 200-day line on Friday for the first time in nearly a year. Investors could use that as a very aggressive entry. Snowflake revenue remains strong, though slowing. The data analytics software firm continues to report GAAP losses, but it's now profitable on an adjusted basis.
Etsy stock has the most conventional entry. Shares rose 4.5% to 137.80 last week, finding support at the 10-day line. On a daily chart, ETSY stock is near a 142.63 buy point in a shallow cup base formed above the 200-day line. On a weekly basis, it's in buy range from a 137.01 cup-with-handle entry, according to MarketSmith analysis. Etsy earnings aren't due until late February, but Amazon results could move the arts-and-crafts e-commerce firm.
Market Rally Analysis
The stock market rally ticked off a lot of boxes this past week.
The major indexes tested support midweek and passed with flying colors. By Friday's close, the Nasdaq composite had rallied above its 200-day moving average and its December highs. The Russell 2000 also nudged above its late 2022 peaks intraday Friday. The S&P 500, now decisively above its 200-day line, is on the cusp of topping its December highs. The Dow Jones, now the laggard, is doing fine as well.
The indexes faded into Friday's close, paring daily gains. But that's after finishing near intraday highs for six straight sessions. Strong closes are a hallmark of bull markets.
The action has come amid a barrage of earnings and guidance that was often weak or lackluster, along with mixed economic data. But it's not the news, it's the reaction to the news.
Meanwhile, leading stocks continue to act well. While Tesla has skyrocketed and this column highlighted aggressive names such as Etsy and SNOW stock, this is a broad-based advance. Energy, steelmakers, housing-related groups, retailers, financials, auto parts, travel, trucking and more are showing strength sector-wide and in individual stocks.
Investors are turning more bullish in part because they see brighter, clearer prospects for the economy. China and Europe are shoring up global growth while inflation is cooling. The Fed is close to being finished raising rates.
Still, earnings season remains intense. While Apple stock, Google, Amazon and Meta don't have buy points, their reports — and hundreds of others — could still roil the market. The Fed may be more hawkish than expected. Big economic reports, including Friday's January jobs report, also will be important.
A 'Life Changer' Market Rally?
Still, the 2023 market rally's strong start is a very bullish signal.
Eric Krull, co-author of "The Lifecycle Trade," noted on Friday's IBD Live that the Nasdaq composite had risen 8.9% from the close of the Jan. 6 follow-through day to Thursday's close. That 15-day gain is unusually high. Krull says that "moneymaker" rallies typically see a 5.5% gain over a similar span. For "life changer" rallies, the average advance is nearly 8%.
Time The Market With IBD's ETF Market Strategy
What To Do Now
You don't want life to pass you by, or life-changing rallies, so you should be taking advantage of the current market uptrend. The strong advance in the major indexes and leading stocks shows a real character change from the choppy October-December uptrend.
So work on your watchlists, looking for stocks setting up or actionable now. Pay attention to earnings dates.
Adding exposure gradually, not buying extended stocks and not getting concentrated in a particular holding or sector are still important.
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.
