Dow Jones futures were little changed after hours, along with S&P 500 futures and Nasdaq futures.
The stock market rally saw mixed action on Tuesday, with the Dow rally, the Nasdaq falling and the S&P 500 somewhere in between.
On the bright side, Dow Jones giant Caterpillar (CAT), Deere (THE), ATI (ATI), Freeport-McMoRan (FCX) and Schlumberger (SLB) are industrial, metal, mining and energy plays in or near buy points. Underlying commodity prices rose solidly on Tuesday, aided by China further rolling back Covid restrictions.
Dow Jones Futures Today
Dow Jones futures rose 0.1% from fair value. S&P 500 futures rose higher. Nasdaq 100 futures were flat, with TSLA stock extending losses overnight.
Stock market rally
The stock market rally had a mixed session, with industrial and metal stocks holding or rising while growth struggled.
The Dow Jones Industrial Average rose 0.1% on Tuesday trading on the stock exchange. The S&P 500 index fell 0.4%, with Tesla stock the worst performing day, followed by Moderna and Nvidia. The Nasdaq composite fell 1.4%. The small-cap Russell 2000 lost 0.7%.
Apple shares fell 1.4% to 130.03. During the day, AAPL reached 128.76, just below the bear market low.
Tesla shares plunged 11.4% to 109.01, its biggest one-day loss in 11 months, amid a Shanghai plant shutdown. weak sales figures in China and other news. TSLA stock has now crashed 44% this month to its lowest level since August 2020. Volume was very high all month, pointing to institutional selling. TSLA stock fell slightly in extended trading.
Nvidia shares fell 7.1% to 141.21, breaking below the 50-day mark. NVDA stock is down 19% from its intraday high of 187.90 on December 13.
MRNA inventory fell 9.5% to 180.17 and fell below 188.75 cup-with-handle point of sale, according to MarketSmith Analysis. Moderna shot out of that base on Dec. 13 based on bullish cancer vaccine trial data, rising 20% that day and reaching 217.25 the next session. But MRNA stock has made gains of 15% and more.
ENPH shares fell 6.6% to 274.54, now well below the 50-day mark after undermining that level on Friday.
The price of US crude oil fell 3 cents to $79.53 a barrel after surpassing $80 Tuesday morning.
The 10-year Treasury yield rose 11 basis points to 3.86%, after rising 27 basis points last week.
Below the best ETFsthe Innovator IBD 50 ETF (FFTY) fell 0.5%, while the Innovator IBD Breakout Opportunities ETF (BOLT) climbed 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 0.6%. The VanEck Vectors Semiconductor ETF (SMH) fell 1.8%. NVDA stock is a major SMH holding company.
The SPDR S&P Metals & Mining ETF (XME) increased by 0.8%. FCX stock and ATI are XME components. The Industrial Select Sector SPDR Fund ETF (XLI) rose 0.3%, with Caterpillar and DE stocks both in the top 10.
The US Global Jets ETF (JETS) decreased by 1.3%. SPDR S&P Homebuilders (XHB) decreased by 0.3%. The Energy Select SPDR ETF (XLE) rose 1.1%, with SLB stocks being a major component. The Financial Select SPDR ETF (XLF) was just below break-even. The Care Select Sector SPDR Fund (XLV) gave up 0.3%.
Reflecting stocks with more speculative narratives, ARK Innovation ETF (ARKK) fell 4.15% to a new five-year low. ARK Genomics (ARKG) fell 3.8%, approaching the June low of the bear market. Tesla stock remains an important position in Ark Invest’s ETFs.
Stocks to watch
Caterpillar shares rose 1.4% to 243.14, marking a buy point of 239.95 flat base right next to a depth cup base. Breakouts have struggled over the past year, but the 6% deep base lowers the risk somewhat. The relative strength line is at its best level in almost 10 years.
Deere shares fell 0.2% to 436.15, still close to the 21-day line catching up with the 10-week line. DE shares are trading briskly after a strong run. It is on track to have a shallow flat base at the end of the week with a buy point of 448.50. A move above the December 21 high of 444.51 would allow early entry into Deere shares. The RS line for DE stocks is at an all-time high.
The ATI share rose 3.8% to 31.45, recovered from the 10-week line and entered a trendline. The official buy point is 31.84 from a handle. The RS line for ATI is at its highest point in three years.
Freeport-McMoRan shares were up just over 2% to 38.88, rising from the 21-day and 10-week lines. That offers early access from a long, deep cup-with-handle base with a buy point of 41.26. FCX stock has not yet extended from the 50-day line, which just crossed the 200-day mark
Schlumberger shares climbed 1% to 53.50, working to a buy point of 56.14 from a short base. SLB stock has broken a trendline and is still close to the 21-day and 50-day lines.
Analysis of the market rally
The stock market rally showed split, divergent actions during Tuesday’s session.
The Dow Jones once again found support at its 50-day line, but encountered resistance at its 21-day line.
The S&P 500 lost a little more ground from a 50-day uptrend.
The Invesco S&P 500 Equal Weight ETF (RSP) rose fractionally and briefly surpassed the 50-day line, while the impact of Tesla, Nvidia, Moderna and Enphase diminished.
The Nasdaq slipped Tuesday, approaching Thursday’s lows. The composite flirted with a falling bear market.
In addition to industrial, metal, mining, and energy plays like Caterpillar, Schlumberger, and FCX Stocks, many medical plays work well. Housing stocks, from construction companies to materials to retailers, are also showing strength, along with some retailers. Chinese internets are recovering as the economy opens up.
But growth stocks and technology generally look terrible.
A bullish trend that is under pressure and at the same time a divergent market rally amid massive macroeconomic uncertainty is unstable and highly risky. And that’s before individual equity risk.
It is possible that names from the real economy will attract techies in a stock market rally in 2023, especially if the Federal Reserve and economic headwinds ease. Or technology and growth stocks could drag the broad market back to bear lows. Or the major indices could swing sideways with significant sector rotation over an extended period of time.
What to do now
The stock market rally continues. Parts of the market are doing well as the uptrend continues to diverge.
A savvy investor might try buying CAT stock, ATI, or Schlumberger, for example. But the exposure should be light and any new positions should be small. Investors can also play on the sector or theme through ETFs such as XME, XLE, OIH or XLI.
There is nothing wrong with not taking any new positions, or even being completely in cash.
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 market updates and more.
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