Dow Jones futures were little changed early Friday, along with S&P 500 futures and Nasdaq futures. All eyes are on the December jobs report due before the opening.
Tesla (TSLA) announced major price cuts in China for the Model 3 and Model Y as a result of concerns about demand and increased competition. Tesla shares fell sharply, signaling a test of the bear market on Tuesday.
The stock market suffered heavy losses on Thursday due to hotter-than-expected labor data, including jobless claims, ahead of the big jobs report. The major indices declined from key levels.
Microsoft (MSFT) extended Wednesday’s big selloff until Tesla (TSLA) gave up much of the previous day’s rebound. Meanwhile, UnitedHealth (UNH), Cygna (CI) and other health insurers continued their terrible start to the new year.
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 were up 0.1% at fair value. S&P 500 futures were flat. Nasdaq 100 futures fell 0.2%, with TSLA shares acting as a drag.
The jobs report is sure to move Dow futures, Treasury yields and more ahead of the open, setting the tone for Friday’s trade.
The Labor Department will release the December jobs report at 8:30 a.m. ET.
Economists expect to see nonfarm payrolls rose 200,000, cooling from 263,000 in November. That would be the weakest since December 2020, but still stable. The unemployment rate should remain stable at 3.7%. Average hourly earnings are expected to rise a strong 5% from a year earlier, though down slightly from November’s 5.1%.
Friday’s jobs report will follow several hot labor readings this week, from Wednesday’s still-high vacancy rate to Thursday’s stronger-than-expected ADP employment data and declining 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 meeting minutes from the December meeting, that they are concerned that a rally in stocks and bonds could undermine their fight against inflation.
Markets still expect the Fed to again slow rate hikes to just a quarter point at the Feb. 1 policy meeting. However, the odds fell to 61% from 69% on Wednesday.
Tesla China cuts prices
Tesla shares fell 6% in premarket trading, signaling a move below Tuesday’s bear market of 104.64.
Overnight, Tesla announced major price cuts for the Chinese market. Tesla cut the starting price of the Model 3 to 229,900 yuan ($33,454), down 13.5% from the 265,900 set at the end of October. The new base price of the Model Y is 259,900 ($37,819), down 10% from 288,900 since the end of October. Both are down about 18% from before the cut in late October.
Tesla had extended year-end incentives worth 10,000 yuan in early 2023. So the effective reduction isn’t as big as the sticker price suggests. Still, that’s a big discount.
On Jan. 2, Tesla reported record fourth-quarter deliveries, but they fell well short of views as inventories swelled. Demand in China lagged despite price cuts in October and big stimulus at the end of the year.
One factor is increased incentives. The Tesla Model 3 is now much closer to BYD (I WILL) Seal, which starts at 225,800 yuan ($32,857). When the BYD Seal was first released, the Model 3 cost about $10,000 more in China.
How much sales growth will Tesla get and how long will it last? How competitors like BYD, Nio (NIO) and others answer? China’s EV market will be fiercely competitive in 2023.
Nio and XPeng (XPEV) are not profitable while Li Auto (LI) has not always been profitable, so a price war would be painful. All three were also sold early Friday. BYD, which is profitable, was not yet publicly traded in the US. BYD shares fell 2.6 percent in Hong Kong trading.
Former WWE CEO Vince McMahon, who retired last year following a sexual harassment scandal, plans to return and sell the entertainment company, The Wall Street Journal reported late Thursday. McMahon will name himself and two others to WWE’s board, sources told the WSJ.
WWE shares jumped 11% in premarket trading, bouncing above the 50-day line and not far off 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 profits soared 220% compared to a year earlier. Revenue for the fiscal quarter rose 54% to $14.8 million for the chip testing firm with exposure to the electric vehicle market. AEHR shares jumped 16% overnight.
Shares fell 3.55% to 17.27 on Thursday, overcoming even an early entry. Shares of AEHR are down 14% through the start of 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. It comes after the struggling home goods retailer issued a “going concern” warning early on Thursday. BBBY shares tumbled 13% overnight after falling 30% on Thursday.
Stock market Thursday
The stock market’s attempted rally fizzled out as jobless claims fell, closing near the session’s bottom.
The Dow Jones Industrial Average fell 1% on Thursday Exchange Trading. The S&P 500 declined 1.2%. The Nasdaq Composite gave up 1.5%. The small-cap Russell 2000 lost 1.1%.
Microsoft shares lost 3 percent, a day after the tech giant Dow Jones plunged 4.4 percent, as UBS raised concerns about the growth of Azure cloud computing.
Shares of UnitedHealth, a Dow component like Microsoft, lost 2.9% to their lowest close since June. Shares are down 7.6% in early 2023, breaking through the 200-day line. Shares of Cigna gave up 2% after falling below the 50-day line on Tuesday. CI shares are down 8.2% this week.
U.S. crude oil prices rose 1.1 percent to $73.67 a barrel after dipping lower at the start of 2023. Natural gas futures fell 10.8 percent to a one-year low.
The 10-year Treasury yield rose 1 basis point to 3.72%. The 10-year yield hit 3.78% on Thursday morning after the jobless claims data, but hit resistance at the 50-day line. The two-year yield, more closely linked to Fed policy, rose 6 basis points to 4.45%. The 3-month government bond yield jumped 11 basis points to 4.62%. A highly inverted yield curve signals a recession.
Avg the best ETFsInnovator IBD 50 ETF (FFTY) fell 0.2%, while the Innovator IBD Breakout Opportunities ETF (BOOTH) decreased by 0.15%. iShares Expanded Tech-Software Sector ETF (IGV) fell 3.2%, with MSFT shares the main holding. VanEck Vectors Semiconductor ETF (SMH) gave up 1.8%.
SPDR S&P Metals & Mining ETF (XME) grew by 0.5%. US Global Jets ETF (STREAMS) rose 1.1%. SPDR S&P Homebuilders ETF (XHB) sank 0.75%. Energy Select SPDR ETF (XLE) advanced 1.8% and the Financial Select SPDR ETF (45) gave up 0.75%. Select Healthcare Sector SPDR Fund (XLV) fell by 1%. UNH stock is XLV’s largest component, with Cigna also a notable holding.
Reflecting the more speculative stocks of history, the ARK Innovation ETF (ARKK) fell 2.4%, and the ARK Genomics ETF (ARKG) 0.9%. TSLA stock remains the top performer in Ark Invest’s ETF. Cathy Wood’s coffin has increased Tesla holdings over the past few months.
Market Rally Analysis
After a modest rally to key resistance levels on Wednesday, the major indexes were lower 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 also retreated.
Shares of Microsoft, Tesla and UnitedHealth bumped the S&P 500, but losses were broad. Invesco S&P 500 Equal Weight ETF (RSP) fell 1%, back below its 21-day, 50-day and 200-day lines after reclaiming them on Wednesday.
The biotech, industrials, housing, medical, infrastructure/construction and mining sectors, along with some retail and energy names, continued to show relative strength, along with suddenly recovering Chinese stocks. Lots of flashing buy signals on Tuesday or Wednesday, but most pulled back or turned down.
The attempt to rally the market for the major indices continues, but has not made much progress. After the mid-December decline from recent highs, the major indexes were range-bound, hitting resistance on the upside but also not collapsing.
Friday’s jobs report could break this sideways action, prompting a decisive move above key levels — or below. But even that may be temporary.
What should we do now
Get ready, tune in … and wait.
If you’re still engaged with the market and looking for promising setups, it’s hard not to jump on promising stocks as they light up buy signals. In a sustained market rally, this would often happen. But in the current volatile market environment, this is simply not the case.
It is possible that the December jobs report will trigger a big rally in the market. This may be a signal to make some purchases – in individual stocks or in sector/market ETFs – but not to increase exposure sharply.
Despite difficult market conditions, many stocks are showing strength. So get your watch lists ready.
Read it The big picture every day to stay in sync with market direction and leading stocks and sectors.
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