Dow Jones futures rose overnight, along with S&P 500 and Nasdaq futures, after the Bank of Japan unexpectedly held the course. Shares of United Airlines and Moderna jumped on the news. Big job cuts at Microsoft could take place on Wednesday.
The stock market rally had a relatively calm session, despite a solid decline in the Dow Jones.
You’re here (TSLA) continued its rebound from bear market lows, surging 7.4% to 131.49. Stocks moved slightly above the 21-day line, but remained well below the 50-day line and especially the 200-day line. Tesla China EV registrations have rebounded over the past week following recent steep price declines there. But it may be some time before investors have a clear idea of the impact of Tesla’s global price drops and demand. Tesla’s fourth-quarter revenue is expected on Jan. 1. 25.
A pause of a few days would allow more stocks to build. This includes stocks that have rallied since early entries and could use handles.
Chevron (CLC), Vertex Pharmaceuticals (VRTX) and TJX Cos. (TJX) are three actions that are actionable now.
But overall, investors need to be patient.
The Bank of Japan holds steady
The Bank of Japan left its monetary policy unchanged. The BoJ maintained its policy of keeping rates and Japanese sovereign debt close to 0%. In December, the BoJ did rise, letting the Japanese 10-year rate rise to 0.5%. This raised speculation that the Bank of Japan would end the zero rate policy altogether.
The BoJ’s decision to stay the course sent Dow Jones futures, Treasury yields and the dollar swinging.
United Airlines (ALU) and Interactive brokers (IBKR) reported Tuesday evening.
United Airlines’ earnings far exceeded fourth-quarter views, while the carrier also gave bullish indications. UAL stock rose slightly after hours. The shares fell 0.9% to 51.20 on Tuesday, but after rising sharply in eight sessions.
Revenue from Interactive Brokers also topped views. IBKR stock rose slightly overnight. Shares slid 2 cents to 77.19 on Tuesday, working a buy point of 80.95 from a double-bottom base. Friday’s cross above the 50-day line offered early entry, but just ahead of profits.
Charles Schwab (SCHW) and trucking company JB Hunt Transportation Services (JBHT) are expected early Wednesday. SCHW stock edged up 0.6% to 83.49 on Tuesday, hovering in a buy zone. JBHT stock fell 0.3% to 176.29, between the 50- and 200-day lines.
UAL stock is on the IBD 50. VRTX stock is on the IBD Big Cap 20.
Modern RSV vaccine
Moderna announced strong results for the respiratory syncytial virus, or RSV, vaccine Tuesday night. Biotech’s RSV vaccine uses its mRNA technology. ARNM stock rose solidly in extended trade, signaling a strong rebound around the 10-week line. Moderna RSV vaccine follows positive RSV results from Pfizer (EFP) and GlaxoSmithKline (GSK).
Microsoft job cuts loom
Meanwhile, Microsoft (MSFT) could announce further job cuts as early as Wednesday, Bloomberg reported, citing sources. The cuts could be “significantly higher” than in previous layoffs. Sky News has reported that software giant Dow Jones could cut up to 5% of its workforce, which would amount to 11,000 jobs. In October, Microsoft cut around 1,000 positions.
MSFT stock rose 0.5% to 240.35 on Tuesday, its seventh consecutive advance and just below its 50-day line. Microsoft revenue is due January 1. 24.
The video embedded in the article reviews CVX stock, Eli Lily (LLY) and MercadoLibre (MELI).
Dow Jones Futures Today
Dow Jones futures were up slightly from fair value. S&P 500 futures climbed 0.1% and Nasdaq 100 futures rose 0.2%.
The 10-year Treasury yield fell 5 basis points to 3.48% on the Bank of Japan’s decision, after trading near 3.56% just before that.
The dollar surged against the Japanese yen.
Crude oil prices rose 1%.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally had a mixed session on Tuesday, generally showing modest intraday swings.
The Dow Jones Industrial Average fell 1.1% in Tuesday’s stock trading, but that was largely due to Goldman Sachs (GS) and Travelers (TRV) weighing in on blue chips. The S&P 500 index fell 0.2%, with Tesla stock and Morgan Stanley (MS) the best performers. The Nasdaq composite advanced 0.1%. The small cap Russell 2000 edged down 0.1%.
U.S. crude oil prices edged up 0.4% to $80.18 a barrel, closing above $80 for the first time in two weeks. Crude futures hit $81.23 intraday.
The 10-year Treasury yield rose 2 basis points to 3.53%.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.3%, with Microsoft shares a major holding. ETF VanEck Vectors Semiconductor (SMH) climbed 0.6%.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) jumped 2.9% and ARK Genomics ETF (ARKG) 1.8%, both extending gains from the 50-day line and trading approaching their 200-day averages. TSLA stock remains one of Ark Invest’s top ETF holdings, with Cathie Wood adding significantly more stocks in recent weeks.
The SPDR S&P Metals & Mining (XME) ETF fell 1%. The US Global Jets ETF (JETS) edged up 0.4%, with UAL stock holding a large position. The SPDR S&P Homebuilders ETF (XHB) fell 0.8%. ETF Energy Select SPDR (XLE) rose 0.2%, with CVX stock a major holding. The Financial Select SPDR ETF (XLF) fell 0.7%. The SPDR healthcare sector fund (XLV) slipped 0.5%.
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Chevron climbed 1.65% to 180.49, moving above the 50-day line and a short-term high of 180.23. CVX stock has a fixed base buy point of 189.78, according to MarketSmith analysis.
VRTX stock jumped 3.7% to 311.58, bouncing above the 50-day line in an above-average trade. This offers an early entry for Vertex, which has a flat-based buy point of 324.85. VRTX stock also rallied from an earlier buy point of 306.05. Biotech hit a record high of 324.75 on Dec. 21. 8, but then fell to the 200-day line at the end of the year. Vertex stock rebounded from there last week. Investors could wait to see if stocks pause around the 50-day line.
TJX stock closed 2 cents higher at 81.55, rebounding intraday after a fixed-base buy point test of 81.29 cleared on Jan. 1. 6. Since then, stocks have consolidated in the buy zone. The 5% deep flat base is just above a long 31% deep cup consolidation.
Market rally analysis
The stock market rally had a relatively quiet session after last week’s big gains.
The S&P 500 briefly recovered from the 4000 level and fell back, but only held above the 200-day mark.
The Russell 2000, which broke its 50- and 200-day lines last week, retreated after coming within 1% of its November highs.
The Nasdaq composite is holding above its 50-day line, with the December highs and the 200-day line being the major areas of resistance on the horizon. Much of Tuesday’s strength came from Tesla, chip and cloud-beaten software names.
The Dow Jones fell solidly, largely on GS stocks and Travelers. The blue-chip index is comfortably above its moving averages, with only its December highs to watch.
The market rally still looks healthy. A number of trends, including the Nasdaq’s advanced decline line and new highs versus lows, have improved over the past few sessions.
A modest pause or withdrawal here would be normal or even healthy. The S&P 500 breaking decisively below the 200-day line, perhaps undercutting the 50-day, would be more worrying. On the upside, the late 2022 highs are the next key level.
While Chevron, TJX and Vertex and a few other names are no doubt exploitable, there isn’t much to buy right now. A few stocks that looked promising on Tuesday morning, like monster drink (MNST), withered by the fence.
Many actions have already progressed in recent sessions, such as Medpace (MEDP) and MercadoLibre. A break would let many of these names form handles or shelves. Meanwhile, other actions come into play.
Time the Market with IBD’s ETF Market Strategy
What to do now
Patience is important. While the market may be ready for a break and few stocks are giving buy signals, resist the temptation to buy extended stocks. If this uptrend works, you will have safer opportunities ahead. This includes recently hot stocks if the form manages or touches support levels.
Certainly run your top stock screens to find the ones that show a promising stock.
If the market offers more stocks showing buy signals, you can gradually gain exposure over time. Along with a variety of economic and Fed cross-currents, earnings season is underway, with the next two weeks likely to be the heaviest releases.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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