Dow Jones futures rose slightly early Thursday, while S&P 500 futures and Nasdaq futures retreated as Treasury yields pushed above 4%. Tesla Investor Day failed to impress as Salesforce.com, Snowflake and other software earnings led to a busy overnight session.
The stock rally suffered further damage on Wednesday when the 10-year government yield reached 4% intraday. Some leading stocks flashed buy signals on the news. But the S&P 500 and Nasdaq led lower.
apple (AAPL) fell back below its 200-day line as International Data Corp. now sees global smartphone sales falling slightly again in 2023 compared to earlier forecasts for a modest setback.
Tesla Investor Day opened with expectations of major announcements. Despite speculation about a new EV being unveiled, Tesla (TSLA) executives said at the event that a next-generation platform or vehicle will arrive at a “later date.” CEO Elon Musk’s “Master Plan 3” involved the world making a big push for clean energy.
Late into the event, CEO Elon Musk confirmed that Tesla will build a Mexico plan.
Tesla stock fell solidly overnight as Investor Day had few headlines. But several EV-related chips fell on Tesla comments, including Aehr test systems (AEHR), On semiconductor (ON) and STMicroelectronics (STM).
Well-known software manufacturers Salesforce.com (CRM), Splunk (SPLK), Box (BOX), Octa (OKTA) and Snowflake (SNOW) reported late Wednesday. CRM stocks and OKTA were big overnight winners, while SNOW stocks, Box and Splunk retreated.
Dow Jones Futures today
Dow Jones futures rose 0.15% against fair value. The CRM stock is a Dow component. S&P 500 futures retreated 0.45% and Nasdaq 100 futures fell 0.6%. TSLA stock is a major Nasdaq 100 component.
The 10-year government yield rose 5 basis points to 4.04%, above the key level of 4%.
Crude oil futures rose slightly. Copper prices fell 2%.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
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Tesla’s investor day
Tesla Investor Day took place on Wednesday evening.
The EV giant had said weeks ago that it would release more details about a next-generation EV platform at Tesla Investor Day, with much speculation that Tesla would reveal a low-cost model and perhaps give an idea of when production might begin.
Executives said Tesla aims to cut assembly costs by 50% in its next-generation vehicle platform and reduce its factory footprint by 40%.
But Tesla did not reveal any next-generation vehicle, saying it will arrive at a “later date.”
During the Q&A segment, Musk confirmed that “Giga Mexico” is coming. Mexico’s president said Tuesday that Tesla would make the announcement on investor day.
Tesla said the Mexico plant will build the upcoming next-generation vehicle. But it suggests that a hypothetical cheap electric car won’t arrive until 2025 or beyond. Even now, a cheaper Tesla will face competition from a number of rivals, especially in China.
Tesla says it aims to cut silicon carbide by 75% for its next-generation powertrain. That’s not good news for silicon carbide plays like On Semiconductor, Wolfspeed (WOLF), STMicroelectronics and Aehr Test Systems. All four EV chip stocks fell early Thursday.
Meanwhile, Tesla plans to cut out rare earths from its electric motors. MP materials (MP) tumbled over that news. Musk downplayed getting into lithium mining. Sigma lithium (SGML), which had recently soared on a report that Tesla may make a bid, fell solidly early Thursday.
Many of Tesla’s plans, from Mexico to internal operations, could also help minimize the EV giant’s reliance on China.
TSLA stock fell more than 6% early Thursday after Tesla Investor Day. Tesla shares retreated 1.4% to 202.77 on Wednesday, holding above the 21-day line.
Stocks arguably have a cup-with-handles pattern going back to early November. This indicates a buy point of 217.75. But investors should probably wait for TSLA stock to clear its 200-day line, currently around 221.
CRM stock rose 15% in premarket trading after Salesforce earnings topped views and the software giant gave bullish guidance and doubled its buyback to $20 billion. Salesforce shares 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 at 178.94.
SNOW shares fell 7% in prolonged activity as Snowflake revenue beat Q4 views, but the data analytics firm guided low on Q1 and full-year revenue. Snowflake also announced a $2 billion share buyback plan.
SPLK shares fell 4% early Thursday as Splunk earnings beat, and the database and security software company guided low on Q1 and full-year revenue. Splunk shares lost 2 cents Wednesday to 102.48, holding the 21-day cup-with-handle, according to MarketSmith. The buy point is 110.05.
BOX stock plunged 10% overnight as Box topped earnings views but guided low. The software storage company has been working on a new flat base on top of a previous flat base. The relative strength line for BOX stocks is at a multi-year high.
OKTA jumped 16% in premarket action as the cybersecurity firm beat fourth-quarter views and guided in line with fiscal 2024 earnings. Okta stock is set to retrace above its 200-day, which now roughly coincides with a still-valid buy point at 74 , 28. Shares rose 0.2% to 71.44 on Wednesday, holding the 50-day high.
Stock market rally on Wednesday
The stock market rise had a mixed session, but with a generally negative bent.
The Dow Jones Industrial Average rose in Wednesday’s trading. The S&P 500 index fell 0.5 percent. The Nasdaq composite fell 0.7 percent. The small-cap Russell 2000 rose 0.1%.
Apple shares, a Dow Jones, S&P 500 and Nasdaq component, fell 1.4% to 145.31, back below the 200-day mark and hitting a one-month low. Microsoft (MSFT), Nvidia (NVDA) and Tesla shares were also negative with major capital markets on Wednesday.
The 10-year Treasury yield jumped 8 basis points to 3.99%, reaching 4% at various times. US manufacturing reports for February came in below the readings, signaling still modest decline. But China’s manufacturing and service sector gauges jumped.
Copper prices rose 1.7 per cent.
US crude oil prices rose 0.8% to $77.69 a barrel.
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Market rally analysis
The stock market rally had a mixed Wednesday, ending at the session’s lowest level. But the major indices are struggling around key levels.
The S&P 500 fell further from its 50-day line and neared the 200-day mark Wednesday morning. The Nasdaq fell back below its 200-day line, with the 50-day not far below it.
The Russell 2000 pushed higher despite resistance at the 21-day line for a third straight session.
The lagging Dow Jones hit its worst level since early November intraday, before paring a gain.
Leading stocks gave reasons to be hopeful.
First Solar (FSLR) and Axon Enterprise (AXON) gapped over earnings. Freeport-McMoRan (FCX), Wednesday’s IBD Stock Of The Day, gave a buy signal as a key mine reopened and copper prices rebounded.
Most managers continued to set up or hold on. But can it continue if broader trends don’t improve?
The market recovery is under pressure. The major indexes cannot afford to lose much more ground. On the upside, the S&P 500 needs to regain its 50-day line, while the 21-day line is a key test for the S&P 500, Nasdaq and Russell 2000.
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What to do now
Leading stocks have been resilient in the pullback, with several flashing buy signals in recent days. But if the market continues to struggle, recent buy signals and breakouts are likely to turn into false selloffs.
Investors should not be looking to increase exposure until the S&P 500 and Nasdaq retrace their 21-day lines. If you wait and the market improves, some leading stocks will pass you by initially, but there will be many other opportunities.
So look for stocks that are capable of action, but also those that are establishing themselves.
On the flip side, if the market or your individual holdings deteriorate, you’ll want to go further to the sidelines.
Be prepared, stay engaged and be flexible.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
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