Dow Jones futures edged higher after hours, along with S&P 500 futures and Nasdaq futures, as Tesla ( TSLA ) rallied late as Elon Musk was bullish after mixed Q4 earnings. Service now (now) and Lam research (LRCX) also reported after the close. Dow Jones Giant Chevron (CVX) announced a huge buyback, with CVX stock flashing a potential buy signal.
Joint fares (URI), Steel Dynamics (STLD) and IBM (IBM) also reported, with Teradin (TER) also on tape tonight.
Stock market bulls stumbled on Wednesday morning Microsoft (MSFT) and Boeing (BA) were among the early earnings-related losers. Major indices tested or broke below key levels but ended lower at or near intraday highs for the fourth consecutive session. The main reason: Boeing turned slightly higher and MSFT stock fell.
URI stock is on the IBD Leaderboard Watchlist. United Rentals, Lam Research and STLD stocks are on the IBD Big Cap 20.
Dow Jones Futures Today
Dow Jones futures were above fair value, with CVX stock and IBM both blue chips. S&P 500 futures rose 0.15% and Nasdaq 100 futures rose 0.3%. Tesla stock, LRCX, NOW and STLD stocks are S&P 500 and Nasdaq 100 stalwarts.
Early Thursday, investors will get the first reading on fourth-quarter economic growth. The GDP report will also include the quarterly PCE price index, which provides a strong signal for December PCE inflation readings on Friday morning. Also on Thursday, durable goods orders, new home sales and jobless claims are on tap.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Tesla’s earnings slightly topped analyst views, which have fallen significantly over the past few weeks. Revenue just missed, according to FactSet. Tesla recognized $324 million in total self-driving revenue.
Automotive gross margin fell to 27.9% in Q3 and 25.9% from 30.6% a year ago. It was below consensus. Gross margins are expected to decline significantly in 2023 following the widespread price cuts worldwide earlier this month.
CEO Elon Musk was bullish on the conference call. He said that after the price cut, the orders are now double the production. But the question is how strong the demand will be in the coming weeks and months. Musk said the goal is for two million deliveries by 2023.
Tesla delivered 1,313,851 EVs in 2022, producing 1,369,611. Output has peaked in the last three quarters of the year delivered.
Tesla said the Cybertruck will begin production later this year. It said it will provide more details about the upcoming vehicle at its March 1 investor day. It could be a smaller, cheaper EV or an improved 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 echoes key features of Tesla’s unfinished plans from 2014.
TSLA stock jumped 5% in extended trading. The stock rose 0.4% to 144.43 in Wednesday’s regular session, reaching the 50-day/10-week line after bouncing off a bear-market low on Jan. 6.
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Chevron stock buyback
Chevron will buy back $75 billion of its CVX stock, the Dow Jones energy giant said late Tuesday. which represents 20% of the outstanding shares. Chevron will increase its quarterly dividend by 6% to $1.51 per share.
The oil major will report earnings early Friday.
CVX stock rose more than 2% to above 183, rebounding from the 50-day line. The shares have a 189.78 buy point from a shallow cup base. But investors can use a move above Monday’s high of 182.55 as an entry.
Other key earnings
ServiceNow earnings peaked when revenue was in line. The business software giant also gave bullish subscription revenue guidance. After paring early losses, the stock now fell modestly after hours. Shares rose 1.2% to 448.77 after undercutting their 200-day line intraday on Wednesday.
Lam Research’s earnings beat quarterly estimates. LRCX stock fell modestly in extended action. The stock closed up 0.2% at 448.40 on Wednesday. Lam Research stock is working on bottoming bases, most of which are above the 50-day and 200-day lines. The buy point is 504.65, but a move above Monday’s high would prompt a slightly lower entry.
Teradin’s earnings outlook tops out, but guidance also disappoints. TER stock fell late. Shares rose 0.4% to 103.44 on Wednesday, above the 200-day line.
LRCX and TER earnings followed ASML earnings ahead of Wednesday’s open KLA Corp. (KLAC) is late Thursday night.
Steel Dynamics Earnings Top Views. STLD stock rose after hours. The stock closed up 2.2% at 110.41 on Wednesday. Steel Dynamics shares tried to clear a short consolidation last week with a 113.22 buy point but pulled back.
Nucor’s earnings are due Thursday morning. NUE stock closed up 1.7% at 156.67. Nucor stock is near a 160.03 cup-with-handle buy point.
United Rentals missed earnings when revenue was in line. But the heavy-equipment rental giant gave bullish guidance for 2023. URI stock rose strongly in overnight action. Shares fell 0.3% to 392.48 on Wednesday, on the edge of a buy zone from the 374.01 buy point in consolidation going back to late 2021. URI earnings and guidance could be key for heavy-equipment manufacturers such as Caterpillar (CAT).
IBM earnings are only looking at the top while revenue is beat. IBM stock fell modestly after hours. The stock fell 0.5% to 240.61 on Wednesday. IBM stock has formed a flat base with a 153.31 buy point after a strong two-month run, but is currently trading below the 50-day line.
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Stock market rally
The stock market rally started poorly but once again recovered and was little changed near the best levels of the day.
The Dow Jones Industrial Average was up a fraction in Wednesday’s stock market trading. The S&P 500 index ended just below break-even. The Nasdaq Composite fell 0.2%. The small-cap Russell 2000 climbed 0.3%.
US crude oil prices rose two cents to $80.15 a barrel. Natural gas fell 5.9% to its lowest level since June 2021.
The 10-year Treasury yield fell 1 basis point to 3.46%.
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) gained 0.2%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.3%. The iShares Expanded Tech-Software Sector ETF ( IGV ) ended down 0.2%, with Microsoft stock and now core components. VanEck Vectors Semiconductor ETF ( SMH ) rose 0.1%. LRCX stock is an SMH holding
Reflecting stocks with more speculative stories, the ARK Innovation ETF ( ARKK ) rose 0.1% and the ARK Genomics ETF ( ARKG ) rose 0.5%. Tesla stock is a major holding in Arc Invest’s ETF. Kathy Wood’s arc is loading.
The SPDR S&P Metals and Mining ETF (XME) rose 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) climbed 0.4%. The Energy Select SPDR ETF (XLE) settled just below break-even, and the Financials Select SPDR ETF (XLF) rose 0.8%. The Health Care Select Sector SPDR Fund ( XLV ) gained a fraction.
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Stock Market Rally Analysis
Stock market bulls sold off Wednesday morning, but bounced back well from lows. Major indices closed near highs for the fourth consecutive session.
The S&P 500 fell 1.7% intraday, breaking below its 200-day line and near its 50-day line intraday. But the benchmark index ended essentially flat.
The Nasdaq Composite and Russell 2000 bounced comfortably below their 50-day lines. The Dow Jones dipped below the 50-day line intraday, but once again closed above it.
Dow giants Microsoft and Boeing stalled at the open, but bounced back to finish little changed. Many cloud-related names that follow Microsoft’s guidelines minimize the damage.
Leading stocks generally showed healthy action including chip gear, travel, medical and housing stocks. It says something when one of the biggest complaints with leading stocks is that a slightly longer break or pullback in the previous week would prove useful.
A number of recent breakouts have pulled back below buy points but may still work, viz SLB (SLB), Impinge (PI) and Medpac (MEDP). Meanwhile, some other stocks extending from bottoming bases could forge handles in long rallies, such as Boeing and Shift4Payments (four).
Overall market bullish action was encouraging. The major indices still need to decisively clear 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, Feb. 1 with the announcement of the Fed meeting, will move markets beyond earnings.
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What to do now
Just because the major indexes and many leading stocks gained support on Wednesday doesn’t mean they will continue to do so. A few weeks from now, it may become clear that investors should increase exposure or head for an exit. But it is not clear anymore.
So be cautious about adding exposure and stick to loss-cutting rules.
Definitely work on your watchlists. Cast a wide net: Various sectors are showing strength, which is a bullish sign for a market rally.
Read The Big Picture daily to stay in tune with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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