Dow Jones futures rose modestly after hours, while S&P 500 futures and Nasdaq futures edged lower. Tesla Investor Day is underway while Salesforce.com, Snowflake and other software earnings headlined a busy overnight session.
The stock market rally suffered further damage Wednesday as the 10-year Treasury yield hit 4% intraday. Some leading stocks flashed buy signals on news. But the S&P 500 and Nasdaq headed lower.
Apple (AAPL) fell back below its 200-day line as International Data Corp. now sees global smartphone sales falling slightly again in 2023 vs. its prior forecast for a modest bounce.
Tesla Investor Day opened with expectations for major announcements. Despite speculation of a new EV being unveiled, Tesla (TSLA) executives said at the event that a next-generation platform or vehicle will come at a “later date.” CEO Elon Musk’s “Master Plan 3” involved the world making a huge push for clean energy.
Late into the event, CEO Elon Musk finally confirmed that Tesla will build a Mexico plan.
Tesla stock fell solidly overnight as Investor Day continued with few headlines.
Notable software makers Salesforce.com (CRM), Splunk (SPLK), Box (BOX), Okta (OKTA) and Snowflake (SNOW) reported late Wednesday. CRM stock and OKTA were big winners overnight, while SNOW stock, Box and Splunk retreated.
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Dow Jones futures rose 0.4% vs. fair value. CRM stock is a Dow component. S&P 500 futures lost a fraction and Nasdaq 100 futures fell 0.15%. TSLA stock is a big Nasdaq 100 component.
The 10-year Treasury yield rose 2 basis points to 4.01%, above the key 4% level.
The Labor Department will release weekly initial jobless claims data at 8:30 a.m. ET Thursday.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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Tesla Investor Day
Tesla Investor Day’s big presentations are taking place after Wednesday’s close at the Austin EV plant.
Musk began by emphasizing the need for a “sustainable future,” with his Master Plan 3 touting the world’s need to massively invest in clean energy. That plays into Tesla’s bid to expand its energy storage business.
The EV giant had said weeks ago that it would release more details about a next-generation EV platform at Tesla Investor Day, with a lot of speculation that Tesla would unveil a low-cost model and perhaps give some idea when production might begin.
But Tesla didn’t unveil any next-gen vehicle, saying that will come at a “later date.”
Instead, executives said Tesla aims to cut assembly costs by 50% in its next-generation vehicle platform and reduce the factory footprint by 40%.
Tesla says it aims to cut silicon carbide by 75% for their next-generation drive unit. That’s not good news for silicon carbide plays such as On Semiconductor (ON), Wolfspeed (WOLF) and Aehr Test Systems (AEHR). All three EV chip stocks fell late.
Tesla spoke about driver-assist systems, 4680 battery production and energy storage, but in relatively vague terms, with few numbers or specifics.
Tesla plans to offer unlimited home charging for EVs at $30 a night in a Texas pilot program.
During the Q&A segment, Musk said that “Giga Mexico” is coming. Mexico’s president had said Tuesday that Tesla would make the announcement on Investor Day.
Tesla said it will build the upcoming next-gen vehicle. But that could suggests that a hypothetical lower-cost EV wouldn’t arrive until 2025 or beyond. Even now, a cheaper Tesla would face competition from a slew of rivals, especially in China.
Tesla also had been expected to confirm a Model 3 upgrade. But that didn’t happen.
TSLA stock fell nearly 6% overnight on the Tesla Investor Day. Tesla stock retreated 1.4% to 202.77 in Wednesday’s regular session, holding above the 21-day line.
Shares arguably have a cup-with-handle pattern going back to early November (or a too-low handle in a base starting in September). That would suggest a 217.75 buy point. But investors should probably wait for TSLA stock to clear its 200-day line, currently just above 221.
CRM stock spiked 16% in late trade after Salesforce earnings topped views and the software giant gave bullish guidance and doubled its buyback to $20 billion. Salesforce stock rose 2.3% to 167.35 on Wednesday, extending a bounce from the 200-day line and moving above the 21-day line. CRM stock is now signaling a gap-up above a cup-with-handle buy point of 178.94.
SNOW stock fell 7% in extended action as Snowflake earnings beat Q4 views but the company guided low on Q1 and full-year revenue. The data analytics firm also announced a $2 billion share buyback plan. Snowflake stock gained 12 cents to 154.50, just between the 200-day and 21-day lines. Investors could view 178.80 as a buy point from a messy handle to a bottoming base.
SPLK stock declined 3% after hours as Splunk earnings comfortably beat, and the database and security software firm guided low on Q1 and full-year revenue. Splunk stock lost 2 cents to 102.48, holding the 21-day line in a cup-with-handle base, according to MarketSmith. The official buy point is 110.05.
BOX stock plunged 10% in overnight action as Box earnings topped with revenue in line, but the software storage firm guided low. Shares edged up 0.7% to 33.58 on Wednesday, moving off the 21-day line, extending a bounce off the 10-week line. Box stock has been working on a new flat base on top of a prior flat base. The relative strength line for BOX stock is at a multiyear high.
OKTA jumped 14% in late trade as the cybersecurity firm beat Q4 views and guided in line for fiscal 2024 revenue. Okta stock is set to gap back above its 200-day line, which now roughly coincides with a still-valid 74.28 bottoming-base buy point. Shares edged up 0.2% to 71.44 on Wednesday, holding the 50-day.
Stock Market Rally Wednesday
The stock market rally had a mixed session, but still had a generally negative bent.
The Dow Jones Industrial Average edged higher in Wednesday’s stock market trading. The S&P 500 index fell 0.5%. The Nasdaq composite sank 0.7%. The small-cap Russell 2000 rose 0.1%.
Apple stock, a Dow Jones, S&P 500 and Nasdaq component, fell 1.4% to 145.31, back below the 200-day line and hitting a one-month low. Microsoft (MSFT), Nvidia (NVDA) and Tesla stock also were big cap negatives on Wednesday.
The 10-year Treasury yield jumped 8 basis points to 3.99%, hitting 4% at various times during the day. U.S. manufacturing reports For February came in below views, still signaling modest contraction. But China manufacturing and service sector gauges rose strongly, signaling China’s economic reopening is gaining momentum.
Meanwhile, more Fed officials signaled support or openness to a 50-basis-point rate hike. Odds still favor quarter-point Fed rate hikes in March, May and June, with markets split on a fourth hike in July.
Despite the rising Treasury yields, the U.S. dollar fell Wednesday, as the strong China data fueled a risk-on appetite overseas.
Copper prices rose 1.7%.
U.S. crude oil prices climbed 0.8% to $77.69 a barrel.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.4%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.45%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 0.8%. CRM stock is a major IGV holding. The VanEck Vectors Semiconductor ETF (SMH) edged up 0.1%, with NVDA stock a core holding.
SPDR S&P Metals & Mining ETF (XME) popped just over 2% and the Global X U.S. Infrastructure Development ETF (PAVE) advanced 0.6%. U.S. Global Jets ETF (JETS) ascended 0.2%. SPDR S&P Homebuilders ETF (XHB) stepped down 0.8%. The Energy Select SPDR ETF (XLE) bounced 2% and the Financial Select SPDR ETF (XLF) dipped 0.1%. The Health Care Select Sector SPDR Fund (XLV) slipped 0.2%
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 2.3% and ARK Genomics ETF (ARKG) retreated 1.15%. Tesla stock is a top holding across Ark Invest’s ETFs.
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Market Rally Analysis
The stock market rally had a mixed Wednesday, closing off session lows. But the major indexes are struggling around key levels as the 10-year Treasury yield hit 4%.
The S&P 500 fell further from its 50-day line and nearly touched its 200-day Wednesday morning. The Nasdaq dropped back below its 200-day line, with the 50-day not far below that.
The Russell 2000 nudged higher despite resistance at the 21-day moving average for a third straight session.
The laggard Dow Jones hit its worst level since early November intraday, just above its 200-day, before it eked out out a gain.
After weak closes on Monday and Tuesday followed by Wednesday’s retreat, the major indexes are back to or below where they closed Friday.
Leading stocks offered reasons to be hopeful.
First Solar (FSLR) and Axon Enterprise (AXON) gapped out on earnings. Freeport-McMoRan (FCX), Wednesday’s IBD Stock Of The Day, flashed a buy signal as a key mine reopened and copper prices rebounded.
Most leaders continued to set up or hold up, with modest gains or losses. But can that continue if broader trends don’t improve?
The market rally is under pressure. The major indexes can’t afford to lose much more ground. On the upside, the S&P 500 has to regain its 50-day line, while the 21-day line is a key test for the S&P 500, Nasdaq and Russell 2000.
The 10-year Treasury yield’s direction will likely have a lot to do with the market rally’s fate. Friday’s ISM services index could be important, but the February jobs report won’t be until the following Friday.
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What To Do Now
Some gap-ups are working, but others are not. Leading stocks have been resilient in the pullback, with more flashing buy signals in recent days. But if the market continues to struggle, recent buy signals and breakouts would likely turn into fake-outs.
Investors should not be looking to raise their overall exposure until the S&P 500 and Nasdaq reclaim their 21-day lines. If you wait and the market does improve, some leading stocks will pass you by, but there will plenty of other buying opportunities.
So look for stocks that are actionable, but also stocks that are setting up bullishly.
On the flip side, if the market or your individual holdings deteriorate, you’ll want to move further to the sidelines.
Bottom line: Be prepared, stay engaged and be flexible.
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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