Dow Jones futures rose slightly early Wednesday, along with S&P 500 futures and Nasdaq futures, after the Bank of Japan unexpectedly remained dovish. United Airlines rose and Moderna stock jumped on news. Big Microsoft job cuts could come today, with a bevy of economic data on tap.
The stock market rally had a relatively quiet session, despite a solid drop for the Dow Jones.
Tesla (TSLA) continued its rebound from bear-market lows, jumping 7.4% Tuesdasy to 131.49. Shares moved slightly above the 21-day line, but remain well below the 50-day and especially the 200-day line. Tesla China EV registrations bounced in the latest week following recent big price cuts there. But it may be some time before investors get a clear picture of the impact of Tesla’s global price cuts and demand. Tesla earnings for Q4 are due on Jan. 25.
TSLA stock rose solidly early Wednesday.
A pause for a few days would let more stocks set up. That includes stocks that rallied from early entries and could use handles.
But overall, investors should be patient.
Bank Of Japan Holds Steady
The Bank of Japan left its monetary policy unchanged. The BoJ maintained its policy of keeping rates and Japanese sovereign debt near 0%. In December, the BoJ effectively hiked, by letting the 10-year Japanese yield rise to 0.5%. That raised speculation that the Bank of Japan would end the zero-rate policy entirely.
The stay-the-course BoJ decision swung Dow futures, Treasury yields and the dollar.
United Airlines earnings comfortably beat Q4 views while the carrier also gave bullish guidance. UAL stock ascended modestly in premarket trade. Shares dipped 0.9% to 51.20 on Tuesday, but after running sharply higher over eight sessions.
Interactive Brokers earnings topped views as well. IBKR stock rose slightly in overnight action. Shares slipped 2 cents to 77.19 on Tuesday, working on an 80.95 buy point from a double-bottom base. Friday’s move over the 50-day line offered an early entry, but just before earnings.
Trucking firm J.B. Hunt Transport Services (JBHT) badly missed on Q4 earnings early Wednesday, with revenue also falling short. JBHT stock fell solidly early Wednesday, signaling a move below its 200-day line.
Charles Schwab (SCHW) also is due early Wednesday. SCHW stock inched up 0.6% to 83.49 on Tuesday, holding in a buy zone.
Moderna RSV Vaccine
Moderna late Tuesday reported strong results for respiratory syncytial virus, or RSV, vaccine. The biotech’s RSV vaccine uses its mRNA technology. MRNA stock jumped early Wednesday, signaling a strong bounce from around the 10-week line. The Moderna RSV vaccine follows positive RSV results from Pfizer (PFE) and GlaxoSmithKline (GSK).
Microsoft Job Cuts Loom
Meanwhile, Microsoft (MSFT) may announce new job cuts as soon as Wednesday, Bloomberg reported, citing sources. The cuts could be “significantly higher” than in prior layoffs. Sky News reported that the Dow Jones software giant could cut up to 5% of staff, which would be 11,000 jobs. In October, Microsoft cut about 1,000 positions.
MSFT stock rose 0.5% to 240.35 on Tuesday, its seventh straight advance and just below its 50-day line. Microsoft earnings are due Jan. 24.
Dow Jones Futures Today
Dow Jones futures were 0.1% above fair value. S&P 500 futures climbed 0.3% and Nasdaq 100 futures rose 0.35%. Futures were slightly lower Tuesday night before the BoJ announcement.
The 10-year Treasury yield fell 5 basis points to 3.48%. Yields reversed lower on the Bank of Japan decision.
The dollar gained vs. the Japanese yen, but fell overall.
Crude oil prices rose 2%, along with copper prices, amid optimism over China’s economic reopening. Natural gas futures tumbled 5%.
At 8:30 a.m. ET, investors will get December retail sales and the December producer price index. At 9:15 a.m., December industrial production will be released. At 10 a.m. ET, the NAHB homebuilder sentiment index will be out.
Stock Market Rally
The stock market rally had a mixed session Tuesday, generally showing modest intraday swings.
The Dow Jones Industrial Average slumped 1.1% in Tuesday’s stock market trading, but that was largely due to Goldman Sachs (GS) and Travelers (TRV) weighing on blue chips. The S&P 500 index dipped 0.2%, with Tesla stock and Morgan Stanley (MS) the top performers. The Nasdaq composite advanced 0.1%. The small-cap Russell 2000 edged down 0.1%.
U.S. crude oil prices edged up 0.4% to $80.18 a barrel, closing above $80 for the first time in two weeks. Crude futures hit $81.23 intraday.
The 10-year Treasury yield rose 2 basis points to 3.53%.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.3%, with Microsoft stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.6%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) popped 2.9% and ARK Genomics ETF (ARKG) 1.8%, both extending gains from the 50-day line and moving toward their 200-day averages. TSLA stock remains a top holding across Ark Invest’s ETFs, with Cathie Wood adding a lot more shares in recent weeks.
SPDR S&P Metals & Mining ETF (XME) fell 1%. U.S. Global Jets ETF (JETS) edged up 0.4%, with UAL stock a big holding. SPDR S&P Homebuilders ETF (XHB) declined 0.8%. The Energy Select SPDR ETF (XLE) tilted up 0.2%, with CVX stock a major holding. The Financial Select SPDR ETF (XLF) retreated 0.7%. The Health Care Select Sector SPDR Fund (XLV) slipped 0.5%.
Stocks In Buy Zones
Chevron climbed advanced 1.65% to 180.49, moving above the 50-day line and a short-term high of 180.23. CVX stock has a 189.78 flat-base buy point, according to MarketSmith analysis.
VRTX stock popped 3.7% to 311.58, rebounding above the 50-day line in above-average trade. That offers an early entry for Vertex, which has a 324.85 flat-base buy point. VRTX stock also has retaken a prior buy point of 306.05. The biotech hit a record 324.75 on Dec. 8, but then tumbled to the 200-day line by year-end. Vertex stock rebounded from there last week. Investors could wait to see if shares pause around the 50-day line.
TJX stock closed up 2 cents to 81.55, rebounding intraday from a test of an 81.29 flat-base buy point cleared on Jan. 6. Since then shares have been consolidating in the buy zone. The 5%-deep flat base is just above a long, 31%-deep cup consolidation.
Market Rally Analysis
The stock market rally had a relatively quiet session after last week’s big gains.
The S&P 500 briefly retook the 4,000 level and pulled back, but only holding above the 200-day.
The Russell 2000, which ran past its 50-day and 200-day lines last week, backed off after coming within 1% of its November highs.
The Nasdaq composite is holding above its 50-day line, with the December highs and 200-day line the big resistance areas on the horizon. A lot of Tuesday’s strength came from Tesla, chips and beaten-down cloud software names.
The Dow Jones fell solidly, largely on GS stock and Travelers. The blue-chip index is comfortably above its moving averages, with only its December highs to watch.
The market rally still looks healthy. A number of trends, including the Nasdaq advance-decline line and new highs vs. lows, have improved in the past several sessions.
A pause or modest pullback here would be normal or even healthy. The S&P 500 decisively breaking below the 200-day line, perhaps undercutting the 50-day, would be more worrisome. On the upside, the late 2022 highs are the next key level.
While Chevron, TJX and Vertex and a few other names are arguably actionable, there’s not a lot to buy right now. A few stocks that looked promising Tuesday morning, such as Monster Beverage (MNST), wilted by the close.
Many stocks already moved up over the past several sessions, such as Medpace (MEDP) and MercadoLibre. A pause would let many of these names form handles or shelves. Meanwhile, other stocks are coming into the picture.
What To Do Now
Patience is important. With the market ready possibly pausing and not many stocks flashing buy signals, resist the temptation to buy extended stocks. If this uptrend works, you’ll have safer opportunities ahead. That include recently hot stocks if the form handles or touch support levels.
Definitely run your screens of leading stocks to find those that are showing promising action.
If the market offers more stocks flashing buying signals, you can exposure gradually over time. In addition to a variety of economic and Fed crosscurrents, earnings season is underway, with the upcoming two weeks likely the heaviest releases.
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.
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