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.
Tesla (TSLA) announced major China price cuts for the Model 3 and Model Y in the wake of demand concerns and increased competition.
The stock market suffered solid losses Thursday on hotter-than-expected labor data, including jobless claims, ahead of the big employment report. The major indexes fell back from key levels.
Microsoft (MSFT) extended Wednesday’s big sell-off while Tesla (TSLA) gave up much of the previous day’s bounce. Meanwhile, UnitedHealth (UNH), Swan (CI) and other health insurers continued a 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 which way?
Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures climbed 0.3%. Nasdaq 100 futures advanced 0.3%.
The jobs report will be sure to swing Dow futures, Treasury yields and more before the open, setting the tone for Friday’s trading.
The Labor Department will release the December jobs report at 8:30 am ET.
Economists expect to see nonfarm payrolls rose by 200,000, cooling from November’s 263,000. That would be the weakest since December 2020, but still solid. The unemployment rate should hold steady at 3.7%. Average hourly earnings are expected to rise a strong 5% vs. a year earlier, although down slightly from November’s 5.1%.
Friday’s jobs report will follow several hot labor readings this week, from Wednesday’s still-high job openings to Thursday’s stronger-than-forecast ADP employment data and falling jobless claims.
The Federal Reserve wants to see slower hiring and wage growth to ease inflation pressures. Fed policymakers also have signaled repeatedly, including in Wednesday’s Fed minutes from the December meeting, worry that a stock and bond market rally could undermine their inflation fight.
Markets are still expecting the Fed to slow rate hikes again, to just a quarter-point move at the Feb. 1 policy meeting. But odds slipped to 61% from 69% on Wednesday.
Tesla China Price Cuts
Tesla announced big price cuts for the China market. Tesla cut the entry Model 3 price to 229,900 yuan ($33,454), down 13.5% from the 265,900 set in late October. The new base Model Y price is 259,900 ($37,819), down 10% from 288,900 from late October. Both are down about 18% from before the late October cut.
Tesla had extended year-end incentives worth 10,000 yuan at the start of 2023. So the effective cut isn’t quite as large as the sticker price suggests. Still, it’s a big reduction.
On Jan. 2, Tesla reported record fourth-quarter deliveries, but they fell well short of views, while inventories swelled. China demand lagged despite the October price cut and big year-end incentives.
One factor is increased incentives. The Tesla Model 3 is now much closer to the BYD (BYDDF) Seal, which starts at 225,800 yuan ($32,857). When the BYD Seal first launched, the Model 3’s China price was roughly $10,000 more.
How much of a sales boost will Tesla get, and how lasting will it be? How will rivals like BYD, No (NIO) and others respond? The China EV market is going to be fiercely competitive in 2023.
Tesla stock gave up 2.9%. That’s after bouncing 5.1% Wednesday from Tuesday’s 12% dive to bear market lows.
Ex-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 the WWE board, sources told the WSJ.
WWE stock jumped 11% in late trade, rebounding above the 50-day line and not far from the Nov. 28 peaks of 81.63. Shares rose 2.3% to 72.04 on Thursday, up 5.1% for the week so far as WWE stock bounces off its 50-day line.
Aehr earnings shot up 220% vs. a year earlier. Fiscal Q2 revenue rose 54% to $14.8 million for the chip testing firm with exposure to the EV market. AEHR stock surged 14% in overnight action. 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. That’s after the struggling housewares retailer issued a “going concern” warning early Thursday. BBBY stock tumbled 8% in overnight action after diving 30% in the regular session.
Stock Market Thursday
The stock market rally attempt retreated on falling jobless claims, closing near session lows.
The Dow Jones Industrial Average fell 1% on Thursday’s stock market trading. The S&P 500 index retreated 1.2%. The Nasdaq composite gave up 1.5%. The small-cap Russell 2000 shed 1.1%.
Microsoft stock lost 3%, a day after the Dow Jones tech giant tumbled 4.4% as UBS raised concerns about Azure cloud-computing growth.
UnitedHealth stock, a Dow component like Microsoft, lost 2.9% to the lowest close since June. Shares are down 7.6% to start 2023, plunging through the 200-day line. Cigna stock gave up 2% after tumbling below the 50-day line on Tuesday. CI stock is off 8.2% this week.
US crude oil prices rose 1.1% to $73.67 a barrel after plunging to start 2023. Natural gas futures dived 10.8% to a one-year low.
The 10-year Treasury yield edged up 1 basis points to 3.72%. The 10-year yield hit 3.78% Thursday morning following the jobless claims data, but hit resistance at the 50-day line. The two-year yield, more closely 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.
among the best ETFsthe Innovator IBD 50 ETF (FFTY) dipped 0.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged down 0.15%. The iShares Expanded Tech-Software Sector ETF (IGV) slumped 3.2%, with MSFT stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) gave up 1.8%.
SPDR S&P Metals & Mining ETF (XME) roses 0.5%. US Global Jets ETF (JETS) ascended 1.1%. 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) gave up 0.75%. The Health Care Select Sector SPDR Fund (XLV) fell 1%. UNH stock is XLV’s largest component, with Cigna also a notable holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) declined 2.4% and ARK Genomics ETF (ARKG) 0.9%. TSLA stock remains a top holding across Ark Invest’s ETFs. Cathie Wood’s Ark has ramped up Tesla holdings in the past few months.
Market Rally Analysis
After rising modestly up to key resistance levels on Wednesday, the major indexes fell back Thursday.
The Dow Jones, which nearly closed above its 21-day and 50-day moving averages on Wednesday, retreated Thursday. The S&P 500 and Russell 2000 backed off from their 21-day lines, while the Nasdaq also retreated.
Microsoft stock, Tesla and UnitedHealth were drags on the S&P 500, but losses were broad-based. The Invesco S&P 500 Equal Weight ETF (RSP) fell 1%, back below its 21-day, 50-day and 200-day lines after reclaiming them Wednesday.
The biotech, industrial, housing, medical product, infrastructure/building product and mining sectors, along with some retailers and energy names, continue to show relative strength, along with the suddenly rebounding Chinese stocks. Many flashed buy signals on Tuesday or Wednesday, but most pulled back or reversed lower.
A market rally attempt continues for the major indexes, but has not made much headway. Since the mid-December tumble from recent highs, the major indexes have been rangebound, hitting resistance on the upside but not breaking down either.
Friday’s jobs report could break this sideways action, trigger a decisive move above key levels — or below. But even that could be temporary.
What To Do Now
Get ready, get set … and wait.
If you’re staying engaged with the market and looking for promising setups, it’s hard not to jump into promising stocks as they flash buy signals. In a sustained market rally, that would often work out. But in the current choppy market environment, that simply hasn’t.
It’s possible that the December jobs report will trigger a big market rally. That could be a signal to make some purchases — in individual stocks or in sector/market ETFs — but not to ramp up exposure dramatically.
Despite the difficult market conditions, a lot of stocks are showing strength. So get your watchlists ready.
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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