Dow Jones futures rose early Wednesday, along with S&P 500 futures and Nasdaq futures, led by Nike (NKE) and FedEx (FDX) earnings leading charge.
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The stock market rally snapped a four-day losing streak. Maybe Wednesday will provide more of a bounce. But the S&P 500 and Nasdaq are still some way below their 50-day moving averages.
Meanwhile, Apple ( AAPL ) flirted with hitting its market low on Tuesday, a day after Amazon.com (AMZN).
Tesla ( TSLA ) continued its decline, Tuesday, round-tripping all its gains since the August 2020 stock split. Tesla stock rose early Wednesday after Elon Musk vowed again to find a new CEO at Twitter. Tesla is reportedly looking at new layoffs.
In addition, oil field services come into play Schlumberger (SLB), Halliburton (HAL) and ProFrac (ACDC) showed strength, with Schlumberger stock and ACDC stock flashing early buy points Tuesday.
The video embedded in the article discusses Tuesday’s market action and analyzes the stock of SLB, Halliburton and ProFrac.
Nike, FedEx Profits
Dow Jones giants Nike and FedEx reported earnings on Tuesday, also offering some insight into the holiday shopping season.
Nike’s earnings and sales topped estimates, but inventories rose 43% compared to a year earlier. Margins fell due to markdowns. NKE stock spiked 11% in premarket trade, signaling a move back above the 200-day line. Shares rose 0.2% to 103.21 on Tuesday.
FedEx earnings topped views, but profit fell short. FDX stock rose 5% in extended trading. Shares closed up 2.6% to 164.35, below the 50-day line.
Dow Jones Futures Today
Dow Jones futures rose 0.7% versus fair value, with NKE stock offering more. S&P 500 futures advanced 0.4%. Nasdaq 100 futures rally 0.2%.
Crude oil futures rose 2%.
Remember that overnight action in the Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD’s experts as they analyze stock market rally action on IBD Live
Stock Market Rally
The stock market rally erased opening losses and closed slightly higher.
The Dow Jones Industrial Average rose 0.3% in stock market trading on Tuesday. The S&P 500 index rose 0.1%, with Tesla stock the index’s worst performer. The Nasdaq composite rose 1 point. The small-cap Russell 2000 advanced 0.5%.
Apple stock fell as low as 129.89, within 1% of its June bear-market low of 129.04. Shares rebounded to close up 7 cents at 132.30. Amazon stock edged up 0.3% after a brief bearish dip on Monday.
US crude oil prices rose 1.2% to $76.09 per barrel. Natural gas prices fell 9% after falling more than 11% on Monday.
The 10-year Treasury yield rose 10 basis points to 3.68%, after popping 10 basis points on Monday. The Bank of Japan on Tuesday turned slightly hawkish, allowing Japan’s 10-year yield to rise as much as 0.5%.
The 2-year yield, which is more closely tied to Fed policy, was essentially flat at 4.27%.
On Friday, investors will get the PCE inflation report for November, with economists expecting another sharp decline in overall and core inflation.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 0.5%. VanEck Vectors Semiconductor ETF (SMH) fell 0.6%.
Reflecting more speculative stocks in the story, the ARK Innovation ETF ( ARKK ) fell 0.2%, hitting a fresh five-year low. The ARK Genomics ETF ( ARKG ) rose 0.8%. Tesla is a major holding in Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) gained 2.6% and the Global X US Infrastructure Development ETF (PAVE) rose 0.4%. The US Global Jets ETF (JETS) advanced 0.4%. The SPDR S&P Homebuilders ETF (XHB) yielded 0.55%. The Energy Select SPDR ETF (XLE) returned 1.5% and the Financial Select SPDR ETF (XLF) rose 0.4%. The Health Care Select Sector SPDR Fund (XLV) closed fractionally lower.
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Stocks Near Buy Points
Oil services companies rallied, even with crude prices near a one-year low, perhaps in anticipation of stronger prices in 2023. Exxon Mobil (XOM) and Chevron (CVX) recently released their capital spending plans for next year, suggesting strong demand for services companies such as Halliburton, Schlumberger, ProFrac and others.
SLB stock rose 3.9% to 51.76, returning above the 50-day and 21-day moving averages and potentially breaking a tight downward-sloping trendline, making a case for early entry. Schlumberger stock is back in a still valid buy zone from the deep base of the cup. SLB stock is set to make a new base with a 56.14 buy point later this week.
Fellow oil services giant Halliburton broke above its 21-day line, rising 3.8% to 37.42, still close to its 50-day line. HAL stock has a 40.09 buy point from a 47% deep cup with handle base, according to MarketSmith analysis. It has no obvious early entry. The handle will be long enough to be its own base after this week.
ProFrac stock jumped 6.9% to 23.23, back above its 50-day and 21-day lines and breaking a recent downtrend, as did SLB stock. That can serve as an early entry. ACDC stock should have a new consolidation with 27.10 buy point after this week. ProFrac stock went public at 18 a share. It has three bases since then, with breakouts not working for a long time.
Tesla Stock
Tesla stock dived 8.1% to 137.80, hitting another two-year low. The EV giant’s shares are down 67% from their peak in November 2021 and just 29% in December.
Tesla stock has now round-tripped its progress since the August 2020 5-for-1 stock split. (TSLA stock split 3-for-1 in August 2022 as well.)
Tesla’s sales in China slowed for the second week in a row, according to weekly registration data. That’s despite ever-increasing year-end incentives, which are set to expire on Jan. 1 along with China’s EV subsidies.
Elon Musk’s Twitter saga has raised concerns of major damage to the Tesla brand. Many of TSLA’s long-time bulls have been increasingly critical of Musk.
Evercore and Daiwa Capital Markets on Tuesday cut their price targets on TSLA stock, both cited Twitter. Oppenheimer downgraded Tesla on Monday.
Tesla stock failed to rally on Monday despite Elon Musk saying he would step down as CEO of Twitter after Twitter users voted on that issue.
Shares continued to fall on Tuesday even as major indexes and many leading stocks tried to make a stand. Heavy trading volume over the past few weeks suggests that major institutions are unloading or shorting TSLA stocks.
On Tuesday, Musk said he would step down as Twitter chief as soon as he found a successor and that he would run the software and server team.
Tesla has implemented a hiring freeze and will begin a new wave of layoffs in early 2023, Electrek reported, citing sources.
Tesla stock rose 1% early Wednesday.
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Market Rally Analysis
After a sharp sell-off from the December 13 high, the stock market rally ended their losing streak, almost.
The major indexes look oversold and could be “due” for a bounce. They got one, though it wasn’t much.
The Dow Jones found support at the 50-day line, but other key indexes did not make any notable technical moves.
The stock market rally remains under pressure.
AAPL stock has bounced back from near the bottom of the bear market, but that doesn’t mean it will continue to do so.
Many top stocks have found support at key levels. But whether they will hold a strong rebound depends on the overall market.
Energy names may be a partial exception, given how they trade with the underlying price of crude oil or natural gas. Oil services companies like SLB stock and coal producers like Consolidated Energy are doing better today.
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What To Do Now
This is not a good time to buy stocks. While the major indexes held their ground and some leading stocks did not fall, the market rally was still weak.
The S&P 500 regained the 50-day line as a minimum sign of strength, with the 200-day and December highs being more tests.
Even as the market rebounds, Tesla’s continued meltdown on Tuesday shows that not all stocks will follow suit.
If you feel compelled to play this market, take pilot positions and prepare to take quick profits and cut losses short.
Keep looking for stocks that hold and find support at key levels. Stocks with strong resilience during weak markets will be the leaders of the next upswing.
Read the Big Picture every day to stay in tune 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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