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Dow Jones Futures: Tesla Pops on Bullish Elon Musk, Chevron Sets $75 Billion Buyback; Market Rally shows this bullish characteristic again

Dow Jones futures rose slightly after hours, along with S&P 500 futures and Nasdaq futures, which Tesla ( TSLA ) rose late as Elon Musk was bullish after mixed Q4 earnings. ServiceNow (NOW) and Lamb Research (LRCX) also reported after the close. Dow Jones giant Chevron (CVX) announced a huge buyback, with CVX stock flashing a possible buy signal.




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United Rentals (URI), Steel dynamics (STLD) and IBM (IBM) also reported, with Teradyne (TER) also on tap this evening.

The stock market rally stumbled on Wednesday morning as Microsoft (MSFT) and Boeing (BA) was among the early earnings-related losers. The major indexes tested or breached key levels but recovered from lows to close at or near intraday highs for a fourth consecutive session. One key reason: Boeing turned slightly higher and MSFT shares pared losses.

URI stock is on the IBD Leaderboard watch list. United Rentals, Lam Research and STLD stocks are on the IBD Big Cap 20.

Dow Jones Futures Today

Dow Jones futures were up 0.1% against fair value, with CVX shares and IBM both blue chips. S&P 500 futures rose 0.15% and Nasdaq 100 futures rose 0.3%. Tesla shares, LRCX, NOW and STLD shares are S&P 500 and Nasdaq 100 staples.

Early Thursday, investors will get their first reading on economic growth in the fourth quarter. The GDP report will also include the quarterly PCE price index, providing a strong signal for December PCE inflation on Friday morning. Also on Thursday, orders for durable goods, sales of new homes and unemployment claims are in print.

Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.

Tesla earnings

Tesla’s earnings slightly topped analysts’ views, which had fallen significantly in the past few weeks. Revenue just missed, according to FactSet. Tesla recognized $324 million in full self-driving revenue.

The automotive industry’s gross margin fell to 25.9% from 27.9% in Q3 and 30.6% a year earlier. It was below consensus. Gross margins are expected to fall significantly in 2023 following extensive price cuts worldwide earlier this month.

CEO Elon Musk was upbeat on the conference call. He said orders were double production right now after the price cuts. But the question is how much demand will remain in the coming weeks and months. Musk said two million deliveries are the goal by 2023.

Tesla delivered 1,313,851 electric cars in 2022 and produced 1,369,611. Production topped deliveries with increasing volume in the past three quarters.

Tesla said the Cybertruck will begin production later this year. It said it will provide further details on an upcoming vehicle at the March 1 investor day. It could be a smaller, cheaper electric car or a renewed Model 3 with lower production costs.

Late Tuesday, Tesla said it would invest $3.6 billion in its Nevada gigafactory to mass-produce semi-autos and 4680 batteries. But much of the announcement reflected key features of Tesla’s unfulfilled 2014 plans.

TSLA stock rose more than 5% in extended trading. Shares rose 0.4% to 144.43 in Wednesday’s regular session, touching the 50-day/10-week lines after rebounding from the Jan. 6 bear market low.


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Chevron stock buyback

Chevron will buy back $75 billion of its CVX stock, the Dow Jones energy giant said late Tuesday. This corresponds to 20% of outstanding shares. Chevron will increase its quarterly dividend by 6% to $1.51 per share. stock.

The oil major will report earnings early Friday.

CVX stock rose more than 2% to above 183, rising from the 50-day line. Shares have a buy point at 189.78 from a low cup base. But investors could use a move above Monday’s high of 182.55 as an entry.

Other key earnings

ServiceNow earnings peaked while revenue was in line. The business software giant also provided bullish subscription revenue guidance. NU stock fell modestly after hours, after paring initial losses. Shares rose 1.2% to 448.77 on Wednesday after undercutting their 200-day line intraday.

Lam Research earnings beat quarterly forecasts. LRCX stock fell modestly for an extended period. The stock closed Wednesday up 0.2% at 448.40. Lam Research stock is working on a bottom base, with much of it above the 50-day and 200-day lines. The buy point is 504.65, but a move above Monday’s high would provide a slightly lower entry.

Teradyne’s earnings topped views, but guidance also disappointed. TER stock fell solidly of late. Shares rose 0.4% to 103.44 on Wednesday, holding above the 200-day line.

LRCX and TER earnings follow ASML earnings before Wednesday’s opening, with KLA Corp. (KLAC) due late Thursday.

Steel Dynamics earnings topped views. STLD stock rose after hours. The stock closed Wednesday up 2.2% at 110.41. Steel Dynamics stock attempted a brief consolidation with a 113.22 buy point last week, but pulled back.

Nucor’s earnings are due Thursday morning. NUE stock closed up 1.7% at 156.67. Nucor stock is near a buy point at the 160.03 cup-with-handle.

United Rentals’ earnings missed while revenue was in line. But the heavy equipment rental giant gave bullish 2023 guidance. URI stock rose solidly in overnight action. Shares fell 0.3% to 392.48 on Wednesday, just on the edge of the buy zone from a 374.01 buy point in a consolidation going back to late 2021. URI earnings and guidance can be key for heavy equipment manufacturers such as Caterpillar (CAT).

IBM’s earnings just topped views, while revenue beat. IBM shares fell modestly after hours. The stock fell 0.5% to 240.61 on Wednesday. IBM stock has formed a flat base with a buy point at 153.31 after a strong two-month run, but is currently trading below the 50-day mark.


Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live


Stock market rally

The stock market rallied off to a poor start, but rebounded to close little changed, near the day’s best levels.

The Dow Jones Industrial Average rose a fraction in Wednesday’s stock market trading. The S&P 500 ended just below break-even. The Nasdaq index fell 0.2 per cent. The small-cap Russell 2000 rose 0.3%.

U.S. crude oil prices rose 2 cents to $80.15 a barrel. barrel. Natural gas fell 5.9% to its lowest close since June 2021.

The 10-year Treasury yield fell 1 basis point to 3.46%.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 0.2%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.3%. The iShares Expanded Tech-Software Sector ETF ( IGV ) ended down 0.2%, with Microsoft stock and NOW as main components. VanEck Vectors Semiconductor ETF (SMH) rose 0.1 percent. LRCX stock is an SMH holding

Reflecting stocks with more speculative stories, the ARK Innovation ETF ( ARKK ) rose 0.1% and the ARK Genomics ETF ( ARKG ) gained 0.5%. Tesla stock is a large holding across Ark Invest’s ETFs. Cathie Wood’s Ark is loading.

The SPDR S&P Metals & Mining ETF ( XME ) rose 1.25% and the Global X US Infrastructure Development ETF ( PAVE ) was flat. US Global Jets (JETS) rose 1.1 per cent. SPDR S&P Homebuilders (XHB) rose 0.4 percent. The Energy Select SPDR ETF (XLE) fell just below break-even and the Financial Select SPDR ETF (XLF) rose 0.8%. The Health Care Select Sector SPDR Fund (XLV) gained a fraction.


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Stock Market Rally Analysis

The stock market rally sold off Wednesday morning, but bounced back from the lows. The major indexes closed near highs for a fourth consecutive session.

The S&P 500 fell 1.7% intraday, undercut its 200-day line and is approaching its 50-day line intraday. But the benchmark index closed largely flat.

The Nasdaq composite and Russell 2000 bounced off lows, comfortably above their 50-day lines. The Dow Jones dipped below the 50-day line intraday, but closed above it again.

Dow giants Microsoft and Boeing slipped into the open but bounced back to finish little changed. Many cloud-related names that fell short of Microsoft’s guidance cut losses.

Leading stocks showed generally healthy action, including chip equipment, travel, medical and housing stocks. That’s saying something when one of the biggest complaints with leading stocks is that a slightly longer pause or pullback in the past week would have been helpful.

A number of recent breakouts have pulled back below buy points but could still work, such as SLB (SLB), Imp (PI) and Medpace (MEDP). Meanwhile, some other stocks that extended from bottom bases may be forging levers in long consolidations, such as Boeing and Shift4Payments (FOUR).

The overall market rally was encouraging. The key indices still need to clear their highs at the end of 2022, but they are moving towards these levels.

Earnings season remains active, with Tesla and ServiceNow weighing in overnight.

Several key economic reports on Thursday, Friday and next week, along with the Fed meeting announcement on February 1, will also move markets beyond earnings.


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What should I do now

Just because the major indexes and many leading stocks found support on Wednesday doesn’t mean they will continue to do so. A few weeks from now, it may seem obvious that investors should have increased exposure or be headed for exits. But it is not obvious now.

So be careful about adding exposure and stick to loss mitigation rules.

Definitely work on your watch lists. Cast a wide net: A number of sectors are showing strength, which in itself is a bullish sign of the market rally.

Read The Big Picture every day to stay in sync with 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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