Dow Jones Futures: Tesla Pops On Bullish Elon Musk; Market Rally Shows This Bullish Trait Again

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Dow Jones futures were little changed after hours, as were S&P 500 futures and Nasdaq futures, as Tesla (TSLA) rose late as Elon Musk was upbeat after mixed Q4 results. Serve now (Now and Lamb research (LRCX) also reported after the close. Dow Jones giant Chevron (CVX) announced a massive buyback, with CVX shares flashing a potential buy signal.




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United Rental (URI), Steel dynamics (STLD) and IBM (IBM) also reported, with Teradyn (TER) also on tap tonight.

The stock market rally was a bit disappointing on Wednesday morning Microsoft (MSFT) and Boeing (BA) were among the first profit-related losers. The major indices tested or undercut key levels, but bounced off lows and closed at or near intraday highs for a fourth session in a row. One key reason: Boeing returned slightly higher and MSFT stock pared losses.

URI stocks are on the IBD Leaderboard watchlist. United Rentals, Lam Research and STLD shares are listed on the IBD Big Cap 20.

Dow Jones Futures Today

Dow Jones futures were little changed from fair value, with CVX stock and IBM both blue chips. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.3%. Tesla stock, LRCX, NOW and STLD stock are S&P 500 and Nasdaq 100 stalwarts.

Early Thursday, investors will receive information about economic growth in the fourth quarter for the first time. The GDP report will also include the quarterly PCE price index, giving a strong signal for December PCE inflation reading on Friday morning. There are also orders for durable goods, sales of new homes and unemployment claims on Thursday.

Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.

Tesla earnings

Tesla’s earnings were slightly ahead of analysts’ estimates, having fallen significantly in recent weeks. According to FactSet, sales just missed. Tesla recognized $324 million in fully self-driving revenue, sparking the EPS blow.

The gross margin of the auto industry fell from 27.9% in the third quarter to 25.9% and 30.6% a year earlier. That was below consensus. Gross margins are expected to decline significantly in 2023 following major price cuts globally earlier this month.

CEO Elon Musk was optimistic about the conference call. He said the orders were now double production after the price cuts. But the question is how strong demand will remain in the coming weeks and months.

Tesla officially expects production of 1.8 million vehicles, but Musk said two million deliveries is the internal goal. Tesla produced 1,369,611 vehicles in 2022 and delivered 1,313,851. Output has increasingly outstripped deliveries over the past three quarters.

Musk said Cybertruck production will begin by the summer, but “volume production” may not occur until 2024. Tesla will provide more details on an upcoming vehicle at its investor day on March 1. That could be a smaller, cheaper EV. That could open up a big new market for Tesla, including in new markets, but would face a host of existing rivals.

Late Tuesday night, 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 echoed key features of Tesla’s unfulfilled 2014 plans.

TSLA stock rose 5.5% in extended trading. Shares rose 0.4% to 144.43 during Wednesday’s regular session, reaching the 50-day/10-week lines after rising from bear market lows on Jan. 6.


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Chevron Share Buyback

Chevron will buy back $75 billion of its CVX shares, energy giant Dow Jones said late Tuesday. That represents 20% of the outstanding shares. Chevron increases its quarterly dividend by 6% to $1.51 per share.

The oil company will report figures early on Friday.

CVX stock rose more than 2% to above 183 and recovered from the 50-day line. Shares have a buy point of 189.78 from a shallow cup base. But investors could use a step above Monday’s high of 182.55 as an entry point.

Other major income

ServiceNow revenues outperformed while revenue was in line. The enterprise software giant also gave an indication of its subscription revenue. NOW shares fell modestly overnight, after paring initial losses. Shares rose 1.2% to 448.77 on Wednesday after undercutting their 200-day line intraday.

Lam Research revenues beat quarterly forecasts, but chip equipment provided a weak outlook and announced job cuts. LRCX stock fell slightly in extended action. Shares closed 0.2% higher on Wednesday to 448.40. Lam Research’s stock is working to bottom, much of it above the 50-day and 200-day lines. The buy point is 504.65, but a move above Monday’s high would offer a slightly lower entry.

Teradyne’s earnings exceeded ratings, but expectations also disappointed. TER stock fell solid late. Shares rose 0.4% to 103.44 on Wednesday and remained above the 200-day mark.

LRCX and TER earnings follow ASML earnings ahead of Wednesday’s open KLA Corp. (KLAC) expected late Thursday.

Steel Dynamics revenue exceeded views. STLD stock rose after hours. Shares closed 2.2% higher on Wednesday to 110.41. Steel Dynamics shares attempted a short consolidation last week with a buy point of 113.22, but pulled back.

Nucor earnings are expected Thursday morning. NUE stock closed 1.7% higher to 156.67. Nucor shares are near a buy point of 160.03 cups with handle.

United Rentals’ profits missed while sales were in line. But the heavy equipment rental giant gave an optimistic outlook for 2023. URI shares surged in overnight action. Shares fell 0.3% on Wednesday to 392.48, just edging the buy zone from a buy point of 374.01 in a consolidation stretching back to the end of 2021. URI earnings and guidance could be critical for manufacturers of heavy equipment such as Caterpillar (CAT).

IBM revenue just exceeded views, while revenue was better. IBM shares fell modestly after hours. The stock fell 0.5% to 240.61 on Wednesday. IBM shares have formed a flat base with a buy point of 153.31 after a strong two-month run, but are currently trading below the 50-day line.


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Stock market rally

The stock market rally started badly, but improved again to close little changed, close to the best levels of the day.

The Dow Jones Industrial Average rose slightly during Wednesday’s stock trading. The S&P 500 index ended just below break-even. The Nasdaq composite fell 0.2%. The small-cap Russell 2000 rose 0.3%.

US crude oil prices rose 2 cents to $80.15 a barrel. Natural gas plunged 5.9% to its lowest point since June 2021.

The 10-year Treasury yield fell 1 basis point to 3.46%.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) was up 0.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) was down 0.3%. The iShares Expanded Tech-Software Sector ETF (IGV) ended 0.2% lower, with Microsoft stock and NOW as key components. The VanEck Vectors Semiconductor ETF (SMH) rose 0.1%. LRCX Shares is an SMH holding company

Reflecting stocks with more speculative narratives, the ARK Innovation ETF (ARKK) was up 0.1% and the ARK Genomics ETF (ARKG) was up 0.5%. Tesla stock is a major stock in Ark Invest’s ETFs. Cathie Wood’s Ark is loading.

The SPDR S&P Metals & Mining ETF (XME) climbed 1.25% and the Global X US Infrastructure Development ETF (PAVE) remained flat. US Global Jets (JETS) were up 1.1%. SPDR S&P Homebuilders (XHB) climbed 0.4%. The Energy Select SPDR ETF (XLE) came in just short of break-even and the Financial Select SPDR ETF (XLF) rose 0.8%. The Care Select Sector SPDR Fund (XLV) won a fraction.


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Stock Market Rally Analysis

The stock market rally went off Wednesday morning, but recovered well from lows. Major indices closed near highs for the fourth consecutive session.

The S&P 500 fell 1.7% intraday, undercutting its 200-day line and approaching its 50-day line intraday. But the benchmark index essentially closed flat.

The Nasdaq composite and the Russell 2000 bounced off lows, comfortably above their 50-day lines. The Dow Jones fell below the 50-day line intraday, but closed above it again.

Dow giants Microsoft and Boeing slipped into the clearing, but bounced back to end up little changed. Many cloud-related names tumbling on Microsoft guidance have slashed losses.

Leading stocks showed generally healthy action, including chip gear, travel, medical and housing stocks. It’s saying something if one of the biggest complaints with leading stocks is that a slightly longer pause or pullback over the past week would have been helpful.

A number of recent outbreaks have dropped below the buy points, but can still work, such as SLB (SLB), Impinj (PI) and Medtempo (MEDP). Meanwhile, some other stocks that have expanded from bottom bases can forge handles in long consolidations, such as Boeing and Shift4Payments (FOUR).

The overall market rally action was encouraging. The major indices have yet to decisively clear their late 2022 highs, but they are moving toward those levels.

Earnings season remains active, with Tesla and ServiceNow weighing in overnight trading.

Several major economic reports on Thursday, Friday and next week, along with the announcement of the February 1 Fed meeting, will move markets in addition to earnings.


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What to do now

Just because major indices and many leading stocks found support on Wednesday doesn’t mean they will continue to do so. In a few weeks, it may seem obvious that investors need to ramp up their exposure or head for the exits. But that is not obvious now.

So be careful about adding exposure and abide by loss limitation rules.

Definitely work on your watchlists. Cast a wide net: several sectors are showing strength, which in itself is a positive sign for the market rally.

Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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