Dow Jones futures and S&P 500 futures rose modestly early Thursday, while Nasdaq futures were solidly higher. Tesla jumped as Elon Musk was bullish following mixed Q4 earnings. ServiceNow and Lam Research also reported after the close. Dow Jones giant Chevron announced a mammoth buyback, with CVX stock flashing a possible buy signal.
United Rentals, Steel Dynamics, Teradyne and IBM were among the many other companies reporting overnight.
The stock market rally stumbled Wednesday morning as Microsoft and Boeing were among the early earnings-related losers. The major indexes tested or undercut key levels but came well off lows, closing at or near intraday highs for a fourth straight session. A key reason: Boeing reversed slightly higher and MSFT stock slashed losses.
URI stock is on IBD Leaderboard. United Rentals, Lam Research and STLD stock are on the IBD Big Cap 20.
Dow Jones Futures Today
Dow Jones futures were 0.2% above fair value, with CVX stock and IBM both blue chips. S&P 500 futures climbed 0.5% and Nasdaq 100 futures popped 0.9%. Tesla stock, LRCX, NOW and STLD stock are S&P 500 and Nasdaq 100 stalwarts.
The 10-year Treasury yield edged up 3 basis points to 3.49%.
Crude oil futures rose more than 1%. Natural gas continued to plunge.
Early Thursday, investors will get their first read on fourth-quarter economic growth. The GDP report will also include the quarterly PCE price index, providing a strong signal for the December PCE inflation reading on Friday morning. Also Thursday, durable goods orders, new-home sales and jobless claims are on tap.
Hong Kong's Hang Seng index rallied 2.4% Thursday after being closed three days for Lunar New Year celebrations. The Shanghai exchange is closed all week.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Tesla Earnings
Tesla earnings slightly topped analyst views, which had come down significantly in the past few weeks. Revenue just missed, according to FactSet, though it beat some other estimates. Tesla recognized $324 million in Full Self-Driving revenue, which drove the EPS beat.
Automotive gross margin fell to 25.9% from 27.9% in Q3 and 30.6% a year earlier. That was below consensus. Gross margins are expected to fall significantly in 2023 following sweeping price cuts worldwide earlier this month.
CEO Elon Musk was bullish on the conference call. He said orders were double production right now following the price cuts. But the question is how strong demand will remain in the coming weeks and months.
Tesla officially expects production of 1.8 million vehicles, but Musk said two million is the internal goal. Tesla produced 1,369,611 vehicles in 2022, delivering 1,313,851. Output topped deliveries by an increasing amount in the past three quarters.
Tesla confirmed it doesn't plan to further expand capacity at its massive Shanghai facility, which suspended production at the end of 2022 due to insufficient demand.
Musk said Cybertruck output will begin by the summer, but "volume production" may not happen until 2024. Tesla will provide further details about an upcoming vehicle at its March 1 investor day. That could be a smaller, cheaper EV. That could open up a big new segment for Tesla, but would face a large number of existing rivals.
Late Tuesday, Tesla said it would invest $3.6 billion at its Nevada gigafactory to mass-produce Semi vehicles and 4680 batteries. But much of the announcement echoed key features of Tesla's unfulfilled plans from 2014.
TSLA stock jumped nearly 8% in extended trade, signaling a move above its 50-day and 10-week lines. Shares edged up 0.4% to 144.43 on Wednesday, after soaring from bear-market lows on Jan. 6.
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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. That represents 20% of shares outstanding. Chevron will boost its quarterly dividend by 6% to $1.51 a share.
The oil major will report earnings early Friday.
CVX stock rose more than 3% in premarket trade to above 185, rebounding from the 50-day line. Shares have a 189.78 buy point from a shallow cup base. But investors could use a move above Monday's high of 182.55 as an entry.
Other Key Earnings
ServiceNow earnings topped while revenue was in line. The business software giant also gave bullish subscription revenue guidance. NOW stock fell slightly early Thursday, 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, but the chip-equipment gave weak guidance and announced job cuts. LRCX stock declined slightly in extended action. Shares closed up 0.2% to 448.40 on Wednesday. Lam Research stock is working on a bottoming base, with much of that above the 50-day and 200-day lines. The buy point is 504.65, but a move above Monday's high would offer a slightly lower entry.
Teradyne earnings topped views, but guidance also disappointed. TER stock fell modestly before Thursday's open. Shares nudged up 0.4% to 103.44 on Wednesday, holding above the 200-day line.
LRCX and TER earnings follow ASML earnings before Wednesday's open, with KLA Corp. due late Thursday.
Steel Dynamics earnings topped views. STLD stock edged up after hours. Shares closed up 2.2% to 110.41 on Wednesday. Steel Dynamics stock tried to clear a short consolidation with a 113.22 buy point last week but pulled back.
Nucor earnings are due Thursday morning. NUE stock closed up 1.7% to 156.67. Nucor stock is near a 160.03 cup-with-handle buy point.
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 dipped 0.3% on Wednesday to 392.48, just at the edge of buy zone from a 374.01 buy point in a consolidation going back to late 2021. URI earnings and guidance could be key for heavy-equipment makers such as Caterpillar.
IBM earnings just topped views while revenue beat. The tech giant will cut jobs. IBM stock fell modestly after hours. Shares dipped 0.5% to 240.61 on Wednesday. IBM stock has formed a flat base with a 153.31 buy point after a strong two-month run, but is currently trading below the 50-day line.
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Stock Market Rally
The stock market rally started off poorly but once again improved to close little changed, near the best levels of the day.
The Dow Jones Industrial Average rose a fraction in Wednesday's stock market trading. The S&P 500 index ended just below break-even. The Nasdaq composite fell 0.2%. The small-cap Russell 2000 climbed 0.3%.
U.S. crude oil prices rose 2 cents to $80.15 a barrel. Natural gas tumbled 5.9% to its lowest close since June 2021.
The 10-year Treasury yield inched down 1 basis point to 3.46%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF edged up 0.2%, while the Innovator IBD Breakout Opportunities ETF dipped 0.3%. The iShares Expanded Tech-Software Sector ETF ended down 0.2%, with Microsoft stock and NOW being major components. The VanEck Vectors Semiconductor ETF inched up 0.1%. LRCX stock is an SMH holding
Reflecting stocks with more speculative stories, the ARK Innovation ETF edged up 0.1% and ARK Genomics ETF rose 0.5%. Tesla stock is a major holding across Ark Invest's ETFs. Cathie Wood's Ark has been loading up.
The SPDR S&P Metals & Mining ETF climbed 1.25%, and the Global X U.S. Infrastructure Development ETF was flat. U.S. Global Jets ascended 1.1%. SPDR S&P Homebuilders climbed 0.4%. The Energy Select SPDR ETF settled just below break-even, and the Financial Select SPDR ETF rose 0.8%. The Health Care Select Sector SPDR Fund gained a fraction.
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Stock Market Rally Analysis
The stock market rally sold off Wednesday morning, but rebounded well off lows. The major indexes closed near highs for a fourth straight session.
The S&P 500 fell 1.7% intraday, undercutting its 200-day line and nearing its 50-day line intraday. But the benchmark index closed essentially flat.
The Nasdaq composite and Russell 2000 bounced off lows, comfortably above their 50-day lines. The Dow Jones sank below the 50-day line intraday, but closed above it once again.
Dow giants Microsoft and Boeing skidded at the open, but bounced back to finish little changed. Many cloud-related names that tumbled on Microsoft guidance slashed losses.
Leading stocks generally showed healthy action, including chip gear, travel, medical and housing stocks. It'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 useful.
A number of recent breakouts have pulled back below buy points but could still work, such as SLB, Impinj and Medpace. Meanwhile, some other stocks that were extended from bottoming bases may be forging handles in long consolidations, such as Boeing and Shift4Payments.
The overall market rally action was encouraging. The key indexes still need to decisively clear their late-2022 highs, but they are moving toward those levels.
Earnings season remains active, with Tesla and ServiceNow weighing in overnight trade.
Several key economic reports Thursday, Friday and next week, along with the Feb. 1 Fed meeting announcement, will also move markets in addition to earnings.
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What To Do Now
Just because the major indexes and many leading stocks found support on Wednesday doesn't mean they'll continue to do so. A few weeks from now, it may look obvious that investors should have ramped-up exposure or be heading to the exits. But it's not obvious now.
So be cautious about adding exposure and stick to loss-cutting rules.
Definitely work on your watchlists. Cast a wide net: A variety of sectors are showing strength, which itself is a bullish sign for the market rally.
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.
