Dow Jones futures rose slightly early Friday, along with S&P 500 futures and Nasdaq futures. All eyes are on the December jobs report due before the opening.
X
Tesla (TSLA) announced deep China price cuts for the Model 3 and Model Y in wake of demand concerns and increased competition.
Online game World Wrestling Entertainment (WWE) and Aehr test system (AEHR) jumped in extended trading Thursday, while Bed Bath & Beyond (BBBY) continued to fall on new news.
The stock market suffered strong losses Thursday on warmer-than-expected jobs data, including jobless claims, ahead of the big jobs report. Major indexes fell to key levels.
Microsoft (MSFT) extended Wednesday’s big sell-off while Tesla (TSLA) gave up much of the previous day’s rebound. Meanwhile, UnitedHealth (UNH), Cigna (CI) and other health insurance companies continue to have a terrible start to the new year.
The video embedded in this article analyzes the market action and reviews United Therapeutics (UTHR), Trane Technologies (TT) and CI stock.
Investors should wait until there are clear signs of market strength before adding exposure. Friday’s jobs report could provide a catalyst, but in what way?
Dow Jones Futures Today
Dow Jones futures rose 0.3% against fair value. S&P 500 futures rose 0.3%. Nasdaq 100 futures advanced 0.3%.
The jobs report is sure to weigh on Dow futures, Treasury yields and more before the open, setting the tone for Friday’s trading.
Remember that overnight actions in Dow futures and elsewhere do not necessarily translate into actual trading in the next regular stock market session.
Labor Report
The Labor Department will release the December jobs report at 8:30 am ET.
Economists expect to see nonfarm payrolls increase by 200,000, cooling from 263,000 in November. That would be the weakest since December 2020, but still strong. The unemployment rate should be kept steady at 3.7%. Average hourly earnings are expected to rise a whopping 5% versus a year earlier, though slightly down from November at 5.1%.
Friday’s jobs report will follow several hot jobs readings this week, from Wednesday’s consistently high job openings to Thursday’s stronger-than-expected ADP jobs data and falling jobless claims.
The Federal Reserve wants to see slower hiring and wage growth to ease inflationary pressures. Fed policymakers have also signaled repeatedly, including in Wednesday’s Fed minutes from the December meeting, that a stock and bond market rally could undermine the inflation battle.
Markets are still waiting for the Fed to slow rate hikes again, in just one quarter move at the Feb. 1 policy meeting. But the chance slipped to 61% from 69% on Wednesday.
Tesla China price reduction
Tesla has announced major price cuts for the China market. Tesla cut the price of the entry model 3 to 229,900 yuan ($33,454), down 13.5% from the 265,900 set at the end of October. The new base model Y price is 259,900 ($37,819), down 10% from 288,900 from the end of October. Both are down about 18% before the end of October cut.
Tesla extended the year-end incentive worth 10,000 yuan in early 2023. So the effective cut is not quite as large as the sticker price suggests. Still, it’s a big reduction.
On January 2, Tesla reported record fourth-quarter deliveries, but fell well short of views, while inventories swelled. China’s demand has lagged despite October’s price cut and strong year-end stimulus.
One factor is increased incentives. The Tesla Model 3 is now the closest BYD (BYDDF) Seal, which starts at 225,800 Yuan ($32,857). When the BYD Seal was first launched, the price of the China Model 3 was about $10,000 more.
How much of a sales boost will Tesla get, and how long will it last? How will rivals such as BYD, Nio (NIO) and others respond? China’s EV market will be very competitive in 2023.
Tesla shares gave up 2.9%. This after rebounding 5.1% Wednesday from Tuesday’s 12% plunge brought the market low.
Corporate News
Former WWE CEO Vince McMahon, who retired last year after a sexual harassment scandal, plans to return and sell the entertainment company, The Wall Street Journal reported late Thursday. McMahon will appoint himself and two others to the WWE board, sources told the WSJ.
WWE stock jumped 11% in late trading, bouncing above the 50-day line and not far from the Nov. 28 peak of 81.63. Shares rose 2.3% to 72.04 on Thursday, up 5.1% for the week so far as WWE stock rebounded from its 50-day line.
Aehr’s salary went up 220% against a year before. Fiscal Q2 revenue increased 54% to $14.8 million for the chip testing company with exposure to the EV market. AEHR stock rose 14% overnight. Shares fell 3.55% to 17.27 on Thursday, round-tripping even an early entry. AEHR stock is down 14% to start 2023 after falling in the last five weeks of 2022.
Bed Bath & Beyond plans to file for bankruptcy in the coming weeks, The Wall Street Journal reported late Thursday. This after the struggling home goods retailer issued a “going concern” warning early Thursday. BBBY stock fell 8% overnight after plunging 30% in the regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Thursday
The stock market’s attempted rally retreated on falling jobless claims, closing near session lows.
The Dow Jones Industrial Average fell 1% in Thursday’s stock market trading. The S&P 500 index retreated 1.2%. The Nasdaq composite yielded 1.5%. The small-cap Russell 2000 shed 1.1%.
Microsoft shares lost 3%, a day after the Dow Jones tech giant fell 4.4% as UBS raised concerns about the growth of Azure cloud-computing.
Shares of UnitedHealth, a Dow component like Microsoft, lost 2.9% to the lowest close since June. Shares are down 7.6% to start 2023, dipping to the 200-day line. Cigna stock gave up 2% after falling below the 50-day line on Tuesday. CI stock is off 8.2% this week.
U.S. crude oil prices rose 1.1% to $73.67 a barrel after dipping to start 2023. Natural gas futures plunged 10.8% to a one-year low.
The 10-year Treasury yield rose 1 basis point to 3.72%. The 10-year yield hit 3.78% Thursday morning after the jobless claims data, but hit resistance at the 50-day line. The two-year yield, better tied to Fed policy, rose 6 basis points to 4.45%. The 3-month Treasury rate jumped 11 basis points to 4.62%. The highly inverted yield curve is sending a recession signal.
Tesla vs. BYD: EV giants are fighting for the crown, but which is the best buy?
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) sank 0.2%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) was down 0.15%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 3.2%, with MSFT shares a big holdout. VanEck Vectors Semiconductor ETF (SMH) yielded 1.8%.
The SPDR S&P Metals & Mining ETF ( XME ) rose 0.5%. The US Global Jets ETF (JETS) rose 1.1%. The SPDR S&P Homebuilders ETF ( XHB ) sank 0.75%. The Energy Select SPDR ETF (XLE) advanced 1.8% and the Financial Select SPDR ETF (XLF) yielded 0.75%. The Healthcare Sector SPDR Fund ( XLV ) fell 1%. UNH stock is XLV’s largest component, with Cigna also a notable hold.
Reflecting more speculative stock history, the ARK Innovation ETF (ARKK) declined 2.4% and the ARK Genomics ETF (ARKG) 0.9%. TSLA stock remains a top holding through Ark Invest’s ETFs. Box’s Cathie Wood has increased Tesla assets in the past few months.
The five best Chinese stocks to watch right now
Market gathering analysis
After rising modestly to key resistance levels on Wednesday, the major indexes fell back on Thursday.
The Dow Jones, which nearly closed above its 21-day and 50-day moving averages on Wednesday, retreated on Thursday. The S&P 500 and Russell 2000 retreated from their 21-day lines, while the Nasdaq retreated.
Microsoft stock, Tesla and UnitedHealth dragged on the S&P 500, but losses were based on large. The Invesco S&P 500 Equal Weight ETF ( RSP ) fell 1%, back below the 21-day, 50-day and 200-day lines after claiming them on Wednesday.
Biotech, industrial, housing, medical products, infrastructure/construction products and the mining sectors, as well as some retailers and energy names, continue to show relative strength, along with the sudden rebound of Chinese stocks. Many flash buy signals on Tuesday or Wednesday, but most pull back or reverse lower.
An attempt to rally the market continues for the major indices, but it is not making much progress. Since mid-December fell from the last high, the major indexes were rangebound, hitting resistance on the top, but they did not break either.
Friday’s jobs report could break this stock aside, triggering a decisive move above key levels — or below. But even that could be temporary.
Market Timing and IBD’s ETF Market Strategy
What To Do Now
Ready, prepared…and wait.
If you’re staying engaged with the market and looking for promising setups, it’s hard not to jump into promising actions while flashing buy signals. In a sustained market rally, that would often work out. But in the current choppy market environment, that simply does not exist.
It is likely that the December jobs report will trigger a major market rally. That could be a signal to do some buying – in individual stocks or in sector/market ETFs – but not to increase exposure dramatically.
Despite the difficult market conditions, a lot of stocks show strength. So prepare your watch list.
Read the Big Picture every day to stay connected with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter @IBD_ECarson for the latest stock market news and more.
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