Dow Jones futures edged higher Sunday night, along with S&P 500 futures and Nasdaq futures.
X
The stock market rally picked up steam last week, with strong gains, clearing key levels. LS&P 500 briefly faced resistance at the 200-day line, but moved above that key level on Friday. A large number of major stocks flashed buy points.
Investors can gradually increase exposure as the market rally improves. While many major stocks are now extended, Wendy’s (WEN), Exxon Mobil (XOM), Quanta Services (PWR), Celsius Holdings (CELH) and Insult (PODD) are all actionable from early entries. Wendy’s and PWR stock have new flat bases, joining XOM and Insulet stock. CELH stock needs another week to create a proper base.
CELH stock is on SwingTrader and the IBD 50. Celsius, Insulet and Wendy’s were the three most recent IBD Stock Of The Day selections.
Meanwhile, Tesla (TSLA) on Friday announced major price cuts in the United States and Europe, a week after price cuts in China and key Asian markets.
Tesla stock closed modestly lower but rebounded solidly for the week. But the EV giant faces a painful transition as investors increasingly view Tesla as an automaker, not a technology company.
The video embedded in this article discussed the strong week for the market rally, and analyzed the stock WEN, Quanta Services and Celsius.
Dow Jones Futures Today
Dow Jones futures rose 0.2% against fair value. S&P 500 futures rose 0.15%. Nasdaq 100 futures advanced 0.1%.
US stock and bond markets are closed on Monday for the Martin Luther King Jr. holiday, but other exchanges around the world will be open.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Bitcoin price
The price of Bitcoin briefly reached $21,415 on Sunday night, the highest level in two months. The major cryptocurrency is currently trading around $21,100. Bitcoin was just under $17,000 as recently as January 8th.
The rise of Bitcoin coincides with the rally of the stock market, which is showing a return to more speculative investments. This includes growth stocks, especially speculative plays like the ARKK ETF. Some meme stocks had a big week, notably Bed Bath & Beyond (BBBY). BBBY stock is up 179%, despite the retailer indicating it is headed for bankruptcy.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally had a strong week, with major indexes closing near session highs.
The Dow Jones Industrial Average rose 2% in last week’s stock trade. The S&P 500 index fell 2.7%. The Nasdaq composite rose 4.8%. The small-cap Russell 2000 jumped 5.3%.
The 10-year Treasury yield fell 6 basis points to 3.51%, even with Friday’s bounce. Markets strongly expect Fed rate hikes in February and March, but then see policymakers on hold. Falling Treasury yields and a brighter economic outlook elsewhere are putting pressure on the dollar, providing another boost to stocks and commodities.
US crude oil futures jumped 8.3% to $79.86 a barrel last week. Copper prices jumped 7.65%.
ETFs
Among the growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 4.4% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 2.1%. The iShares Expanded Tech-Software Sector ETF (IGV) jumped 4.9%. The VanEck Vectors Semiconductor ETF (SMH) rose 6.7%.
Reflecting historically more speculative stocks, ARK Innovation ETF (ARKK) is up 14.7% last week and ARK Genomics ETF (ARKG) is up just over 16%. TSLA stock is a major holding in Ark Invest’s ETFs. Cathie Wood’s Ark has repositioned its Tesla holdings in recent days and weeks.
The SPDR S&P Metals & Mining ETF (XME) rebounded 6.3% last week to a seven-month high. The Global X US Infrastructure Development ETF (PAVE) climbed 4.2% higher. The US Global Jet ETF (JETS) rose 9.4%. SPDR S&P Homebuilders ETF (XHB) gained 4.6%, despite weakness KB Home (KBH) earnings. The Energy Select SPDR ETF (XLE) rose 0.14%, with stock XOM a key component. The Financial Select SPDR ETF ( XLF ) rose 2.1%. The Healthcare Select Sector SPDR Fund ( XLV ) was down 0.2%.
Five Best Chinese Stocks To Watch Now
Stores In Shopping Areas
Wendy’s stock staged a major reversal Friday, jumping 6% to 23.08 after hitting an intraday low of 21.36. WEN stock regained its 50-day line, moved above the 21-day and broke above a trend line. That offered early entry into the new flat base. The official buy point is 23.88, according to MarketSmith analysis.
Wendy’s on Friday reported a fourth straight quarter of accelerating sales growth, doubled its dividend and announced a $500 million buyback.
XOM stock rose 2.4% to 113.16 last week, its fifth weekly gain. Shares are slightly below the official buy point of 114.76, and do not appear to be extended from the 50-day line by that move. But investors can already get into Exxon stock.
PWR stock jumped 6.7% to 148.50 last week, rebounding back above the 50-day line, offering early entry. Shares also recovered a 144.41 buy point from earlier which is no longer valid.
CELH stock broke above the 50-day and 21-day lines on Wednesday, breaking a downtrend, offering multiple reasons for an early entry. Shares held support on the 21st, then peeked higher on Friday. Celsius stock is actionable now after rising 13.2% for the week.
Insulate stock rose 4.65% in the last week to 305.89, rebounding from the 21-day and 50-day lines. Shares are actionable now. But investors can expect a trend line break, currently just above Friday’s high of 309.44.
Tesla Stock Downshifts To Auto?
Tesla stock rose 8.3% to 122.40 last week, continuing a bounce from the Jan. 6 market low of 101.81. Shares fell 0.9% on Friday, hitting an intraday low despite Tesla announcing major price cuts in the US and Europe. This came a week after Tesla cut prices in China and key Asian markets.
The price cut should boost sales, especially in the United States, with more Tesla EV variants eligible for a $7,500 tax credit. This means a huge price cut for American consumers. But Tesla’s prized margins will likely take a hit.
On Tuesday, investors will get weekly China EV registrations, which should show a big jump in Tesla sales, as well as any possible impact on rivals. But will Tesla have a lasting boost, especially in China and Europe? Orders fell significantly behind deliveries in late 2022, so Tesla needs a big boost in new demand just to maintain the current delivery pace in 2023.
The already fierce competition in China will intensify in 2023, with Tesla’s price cuts perhaps leading to a wave of margin-killing cuts. Europe is increasingly crowded, too. Even the US electric vehicle market will be more competitive in a year, with falling used car prices already a big drag on new vehicle prices.
But Tesla’s EV sales aside, TSLA stock has a bigger problem. Investors increasingly view the EV giant as an automaker, not a technology company. Tesla’s current price-to-earnings ratio of 33 isn’t too steep for a technology growth company. But it is unusually high for a carmaker. The advantages and margins of the auto industry tend to decrease relatively quickly, which may be happening to Tesla right now.
TSLA stock may deserve a high valuation for a car manufacturer, reflecting the EV giant’s still-robust EPS and sales growth. But even so, this suggests a much lower valuation than it boasted until recently.
General Motors (GM), Ford (F) and parent Chrysler-and-Fiat Stellantis (STLA) all have PE ratios in the single digits. Toyota (TM) is in the 10th.
Tesla vs. BYD: EV Giants Vie For Crown, But Which Is The Better Buy?
Market Rally Analysis
The stock market rally had an encouraging week, building on strong gains on January 6th. The main indices rose steadily, regaining key levels. A large number of major stocks flashed buy signals during the week, with most holding or extending gains.
The S&P 500 index moved above the 50-day moving average and reached its 200-day line. The benchmark index hit resistance at that key level between Thursday and Friday, but ultimately powered above it.
The Dow Jones, Russell 2000 and S&P MidCap 400 are above their moving averages and are closing in on their short-term December highs.
The Nasdaq reclaimed the 50-day moving average and moved above the 11,000 level. The laggard index was near bear market lows at the start of the year.
On Friday, stocks opened firmly lower, as gains initially hit airlines, health insurers and bank stocks, the decline in of Tesla hit auto stocks and an analyst downgrade hit major defense contractors.
Even without the negative news, the market was perhaps due for a pullback after the strong earnings and with the S&P 500 in the 200 day line.
However the market quickly recovered and closed higher.
Industrials, the broad housing sector, many pharmaceuticals as well as some retailers and restaurants are showing strength.
Technology names are still scarce among the major stocks, although they are trying to make a comeback. The SMH chip ETF cleared its 200-day line this past week, while the IGV ETF and ARKK software are above their 50-day moving averages.
LS&P 500 has yet to decisively clear the 200-day line. December highs are big for all major indexes.
While the stock market appears to be less concerned about the Federal Reserve, with a path toward a rate hike pause, earnings season will take center stage.
Time The Market With IBD’s ETF Market Strategy
What To Do Now
Investors may be making new purchases as stocks continue to improve. But do so gradually. While the market’s rally has shown strength and resilience in recent days, a pullback would not be surprising for major indices, major sectors or individual stocks.
Earnings season will intensify for the coming weeks, creating the potential for major changes. Exxon and Tesla stock will report within the next three weeks, along with the tech giants Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN) and parent Google Alphabet (GOOGL).
So do not concentrate too much in a particular sector, even if it is performing well. Strive for a diversity of key stocks.
Add your watch lists. Look for stocks that are actionable, stopping, or potentially actionable if they stop or pull back. Broad health, at least outside of technology, should offer a number of opportunities.
Read The Big Picture daily to stay in sync with market direction and key stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MAY ALSO LIKE:
Why This IBD Tool Simplifies Searching For Top Stocks
The Best Growing Stocks To Buy And Look For
IBD Digital: Unlock IBD’s Premium Stock Lists, Tools And Analysis Today
This Hot Sector Boasting A $1 Trillion Government Tailwind
