Dow Jones futures will open on Sunday evening along with S&P 500 futures and Nasdaq futures. Investors will be eyeing a big week of earnings this week Tesla (TSLA), Microsoft (MSFT) and boeing (B. A).
The stock market rally retreated in the middle of the week, with major indices falling below key moving averages. But they mounted a comeback on Friday, especially in Nasdaq and tech stocks. The Nasdaq, which was a laggard in 2022, is expected to lead the big-cap indexes in 2023 as tech growth names return.
The recent pullback gave many stocks a breather, forging handles or other fresh buying opportunities.
Investors should pay close attention, but be cautious about new positions. The market rally is around the important levels. Earnings season can shake up indexes and specific sectors as well as individual stocks.
Hundreds of companies will report this coming week. Here are 10 earnings reports to watch closely: Tesla, Microsoft, Boeing, service now (Now), purlin (CVX), Visa (v) and master card (MA), as well as chip-gear giants asml (asml), Lam Research (LRCX) and KLA Corporation (KLAC).
These reports will provide insight into their respective industries, and can have a major impact on the overall market. Tesla stock and Microsoft still have a lot of repair work to do, while Boeing has been stretched. NOW stock may be on the verge of an aggressive early entry. CVX stock, Visa and Mastercard are all close buys. So are LRCX and KLA, while ASML is a bit out of reach.
KLAC stock is on the IBD Big Cap 20. Microsoft stock and ASML are on IBD long-term leaders.
Microsoft, Boeing, Chevron and Visa stocks are all Dow Jones components.
The video embedded in this article reviews and analyzes an important market week Etsy (ETSY), LRCX Stock and ServiceNow.
dow jones futures today
Dow Jones futures opened at 6 p.m. ET Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere does not translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in Stock Market Rally on IBD Live
stock market rally
The stock market rally reversed on Wednesday, and fell further on Thursday, but ended relatively well.
The Dow Jones Industrial Average fell 2.7% in last week’s stock market trading. The S&P 500 index dropped 0.7%. The Nasdaq Composite climbed 0.55%. The small-cap Russell 2000 declined 1.1%.
The 10-year Treasury yield fell 3 basis points to 3.48% on Friday. The yield hit a four-month low of 3.37% during the week.
The crude oil futures contract for expiry in February rose 1.8% last week to $81.31 a barrel. The March contract, the new near-month crude contract, ended at $81.64.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 1% last week. The iShares Extended Tech-Software Sector ETF (IGV) rose 1.45%, with both MSFT stock and ServiceNow holdings significant. VanEck Vectors Semiconductor ETF (SMH) climbed 0.7%. ASML stock is a major holding along with LRCX, KLAC and TER.
Reflecting more speculative story stocks, the ARK Innovations ETF (ARKK) climbed 1.4% last week and the ARK Genomics ETF (ARKG) fell 1%. TSLA stock continues to be a major holding in Arc Invest’s ETF. Indeed, the Cathy Woods arch reloaded its Tesla stock holdings in recent months.
The SPDR S&P Metals & Mining ETF (XME) fell 0.5% after two big weekly gains. The Global X US Infrastructure Development ETF (PAVE) fell nearly 3%. The US Global Jets ETF (JETS) is up just 0.35%, but it’s on course for a strong 2023. The SPDR S&P Homebuilders ETF (XHB) fell 2.4%.
The Energy Select SPDR ETF (XLE) climbed 0.7%, its sixth consecutive weekly gain. Chevron stock is a major component. The Financial Select SPDR ETF (XLF) sank 2.1%. The Health Care Select Sector SPDR Fund (XLV) fell 1.1%, its sixth decline in seven weeks.
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Tesla’s earnings are due on Wednesday night. Investors expect earnings to rise 34% and revenue to rise 39%. This will be the first quarter in years that revenue growth outpaced profits, an early sign of margin pressure.
The focus will likely be on outlook, especially in view of the big price cuts across the globe to start 2023. Will Tesla stick to its 50% distribution growth target? Will Elon Musk provide more Cybertruck details, and will he confirm the reported Model 3 improvements? What about new EV plants? Tesla stock rose 9% last week to 133.42, above its 21-day moving average after plunging to 101.81 intraday on Jan. 6. But it is still below its 50-day line and especially its 200-day line.
Microsoft’s earnings are due Tuesday night. Analysts expect Microsoft’s earnings to decline slightly, with modest revenue growth. Microsoft’s results will matter to software makers, the PC sector and cloud-computing rivals such as Amazon.Com (amzn). Last week, the Dow Jones tech titan said it would cut 10,000 jobs, or 4.5% of its workforce. MSFT stock gained 0.4% last week, hitting resistance at the 50-day line. Microsoft arguably has a base below the 200-day line. But a breakout would involve clearing the 200-day line and a longer downward-sloping trendline.
Boeing’s earnings are due Wednesday morning, with a thin profit expected after a string of losses. Investors are betting on rebounding profits and cash flows in the years to come. Boeing stock fell 3.4% to 206.76 last week. After a big move, BA stock needs to retest.
ServiceNow earnings are slated for Wednesday night. Analysts expect an 38% EPS gain, the second straight quarter of accelerating growth. Executives upbeat on 2023 IT spending. The report will be important for highly valued business software names. The stock is now up 6.5% at 441.83 after rising 13% in the prior week. Shares crossed the 200-day line on Friday, hitting a four-month high and wiping out a long decline. It offered very quick entry, but the earnings that followed make it highly risky.
Chevron’s earnings are due Friday morning. Analysts expect another quarter of faster EPS growth than a year ago, but down from Q2-Q3. CVX stock rose 1.8% last week to 180.81, retesting its 50-day line. Chevron is on a flat base, but a move above Wednesday’s high of 182.38 will provide early entry. Chevron earnings will be important to the oil and gas sector, especially oil majors such as exxon mobil (XOM).
Mastercard’s earnings are due early Thursday, with Visa’s following after the earnings close. MasterCard’s EPS has been clocked around 10%, compared with Visa’s 11%. The credit card giant’s results and comments will be important for other payments firms and for insights into consumer spending trends. Visa and MasterCard stocks are both working the handles out in long consolidations, trading around key resistance levels leading back into early 2022.
ASML’s earnings release is due early Wednesday, followed by the close of Lam Research and Teradyne. KLA gave the report late on Thursday night. ASML’s earnings are expected to decline 11%, but Lam Research’s earnings should rise 15% and KLA’s 27%. Guidance will be important in what is likely to be a challenging 2023. Along with these earnings reports from chip makers such as intel (INTC), will provide insights into the semiconductor space and end markets.
ASML stock is extended from the 200 day line. LRCX stock is trading below its 50-day and 200-day lines. KLAC stock has a short handle for consolidation on a weekly chart going back a year.
Market Rally Analysis
The stock market rally was due for a pullback, and it got one. The major indices fell sharply on Wednesday and continued to fall on Thursday. But they closed lower on Thursday and made a strong comeback on Friday.
The Nasdaq posted a weekly gain on Friday, decisively outperforming the 50-day moving average. Friday’s action was another aftermarket follow-up day for the Nasdaq.
The S&P 500 reclaimed its 50-day line and moved back above its 200-day line. The Russell 2000 found support at the 200-days and may soon try to test its late 2022 top.
The Dow Jones was the week’s biggest loser, falling below its 50-day low and ending the week well below that level.
Outside of the Dow, the recent pullback looks normal and healthy so far.
The pause is giving an opportunity to major stocks to build a handle while some are breaking down. If anything, a slightly longer pullback can be useful in this regard.
But there are several key resistance levels in the major indices. The S&P 500 needs to decisively retest the 200-day line, with last week’s high and December peak serving as key milestones.
Earnings season can be a catalyst for big market gains or losses — or both.
This coming week will also feature the first readings on the December PCE inflation gauge as well as the fourth quarter GDP. They will pave the way for the Federal Reserve policy meeting on February 1.
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Tech revival continues
The stock market rally seems to be turning around on a tech growth play after a long break. The Nasdaq Composite closed out a bear market as recently as December 28. But in 2023 the Nasdaq is up 6.4%. SMH Chip ETF rallied 12%, IGV Software ETF 5.5% and Satta ARKK 16.8%.
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Treasury yields are falling, which is a positive for highly priced growth stocks. Meanwhile, there are hopes of an economic soft landing, as China and Europe improve and Fed rate hikes appear to peak. Bets that price in a lot of bad news for growth stocks
The Russell 2000, another riskier play, is up about 6.1% in 2023 with the Nasdaq.
The S&P 500 has climbed 2.5% to start the new year. The Dow Jones is up 0.7%, and has only positives thanks to Friday’s solid gains.
Many technical developments are not yet named status. LRCX stock is one of the emerging large-cap chip leaders. Software is scarce, though now stock is making the case. e-commerce is picking up, with MercadoLibre (meli) breaking and Etsy (ETSY) was established. Chinese e-commerce and internet companies are also doing well.
Big earnings reports over the next two weeks are technically heavy, so investors will watch to see if a growth revival has legs.
Meanwhile, several financials struggled last week, while stocks of defense contractors and defensive-minded food and consumer goods wobbled.
But metal and mining stocks are showing strength. Airlines have taken off, while investors are flocking to hotels as well. Retail is a mixed bag. So are medicals: biotechs look interesting but health insurers are weak.
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What should we do now
The market rally at the end of last week showed some resilience with many quality stocks. It is still possible that the current pullback will resume, causing more permanent damage. Earnings season can make huge moves in specific stocks, but also their competitors, suppliers and customers.
So while the markets, especially the Nasdaq, may indicate “at risk,” investors should be careful about adding risk. One possible option for avoiding single-stock risk is through market or sector ETFs. If you add exposure, be prepared to exit quickly. If you are not ready and willing to exit quickly, then you need to be more conservative in entering positions.
But the next few weeks can provide many buying opportunities. So prepare your meditation list and stick with it.
Read The Big Picture every day to keep up with market direction and the leading stocks and sectors.
Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and much more.
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