Dow Jones Futures Fall: JPMorgan Earnings, UnitedHealth Top; Tesla has cut US and European prices


Dow Jones futures fell sharply on Thursday, along with S&P 500 futures and Nasdaq futures. Tesla cut prices in the U.S. and Europe last week after big discounts in China and key Asian markets, sending TSLA shares and other automakers down. Earnings at JPMorgan, Bank of America, Delta Air Lines and UnitedHealth beat pre-open views. But these stocks were generally lower.




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Although the S&P 500 faced resistance in a critical area, the stock market rally gained more ground on Thursday.

The much-awaited CPI inflation report showed that price pressures were largely in line with expectations, although service price growth was a mixed picture. Still, the slowing inflation trend should continue for several months, raising hopes that the Federal Reserve will end rate hikes soon.

Investors should try to add exposure carefully. This market tends to pull back, and that may be why. Meanwhile, many leading stocks are now at least extended from their early buy points. Exxon Mobil (XOM) and Celsius Holdings (CELH) is still operating.

XOM stock and Celsi are in the IBD 50. CELH shares are listed on SwingTrader and on the IBD Leaderboard watchlist.

Discounts on the price of Tesla

Tesla slashed prices in the US, qualifying more models for up to $7,500 in tax credits. US Model 3 prices have been reduced by 6% to 14%, depending on trim. The Base Model Range Standard Range RWD has been reduced by $3,000 to $43,990, meaning it will be $36,240 after IRA tax credits. The Performance version has been reduced from $9,000 to $53,990, falling below the $55,000 limit for tax credits. The base Model Y is down $13,000, or about 20%, to $52,990. The Performance variant has been reduced by $13,000 to $56,990.

Meanwhile, Tesla has lowered the prices of the Model 3 and Y in at least Austria, France, Germany, the Netherlands, Norway, Switzerland and the United Kingdom.

The price cuts should boost sales significantly in the US and boost sales in Europe, where backlogs have eased significantly. But they also raise concerns about Tesla’s premium profit margins.

On Jan. 6, Tesla significantly cut Chinese prices for the second time in less than three months as inventories rose despite big year-end incentives and a temporary production shutdown at its Shanghai plant.

Tesla shares fell 6% in premarket trading. General Motors (GM), Ford (F), Rivian (RIVN) and It is obvious (LCID) fell 3%-4% as Tesla’s price cuts could reduce demand and prices for their EVs and other vehicles.

Basic Earnings

UnitedHealth ( UNH ) earnings beat fourth-quarter views early Friday. UNH shares pulled back a bit early Friday. Shares were traded along with other health insurers in 2023, though they rose on Thursday.

Delta Airlines ( DAL ) also beat Q4 estimates and reiterated its recent bullish outlook for 2023. But the stock fell sharply before the opening. DAL shares rose in 2023, along with the airline group, on Thursday’s preliminary earnings call. American Airlines (AAL). The delta is well extended from early entries and works to the right of a long, deep base.

JPMorgan Chase (JPM) and Bank of America (BAC) beat expectations in the fourth quarter Wells Fargo (WFC) and Citigroup (C) produced mixed results.

Shares of JPM and BofA fell modestly, while shares of Wells Fargo and Citi also declined. JPMorgan shares closed Thursday in a buy zone after a traditional decline. Shares of Bank of America and Citigroup were near bottoms in early entries. WFC shares have more to do.

Dow Jones Futures today

Dow Jones futures were down 0.7% at fair value. JPM stock and UnitedHealth are both Dow Jones components. S&P 500 futures were down 0.9%. Nasdaq 100 futures fell 1%. Tesla shares are weighing on the S&P 500 and Nasdaq futures, while all banks and DAL shares are hitting the S&P 500.

The 10-year Treasury yield rose 3 basis points to 3.48%.

Remember that an overnight move in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.


Join IBD’s experts as they analyze the stocks that made the most of the stock rally on IBD Live


Stock market rally

Thursday’s stock market rally was choppy and erratic swings continued into the morning. But as the session wore on, the major indexes calmed down and edged higher for the day.

The Dow Jones Industrial Average advanced 0.6% in Thursday’s trading. The S&P 500 index rose 0.3%. The Nasdaq composite rose 0.6%. The small-cap Russell 2000 rose 1.7%.

The price of US crude oil rose 7.6% in the last six sessions, up 1.3% to $78.39/barrel.

Copper rose 0.8% on Thursday, up 11.9% over the past six trading days.

The 10-year Treasury yield fell 11 basis points to 3.45%, near recent lows. Two-year Treasury yields, which are more closely tied to Fed policy, hit a three-month low. On February 1, markets priced in almost exactly a quarter-point rate hike, which would be a step down from 50 basis points and 75 basis points at the previous two meetings. Investors expect another quarterly increase in the range of 4.75%-5% in March. Markets are currently betting that this is the end.


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ETFs

Among rising ETFs, Innovator IBD 50 ETF ( FFTY ) and Innovator IBD Breakout Opportunities ETF ( BOUT ) gained 0.7%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 0.8%. The VanEck Vectors Semiconductor ETF ( SMH ) rose 1.5%.

The SPDR S&P Metals & Mining ETF ( XME ) rose 2%, while the Global X US Infrastructure Development ETF ( PAVE ) rose 0.8%. The US Global Jets ETF ( JETS ) rose 4.6%, with DAL shares and American Air both top holdings. The SPDR S&P Homebuilders ETF ( XHB ) rose 0.3%. The Energy Select SPDR ETF (XLE) advanced 1.9%. The Financial Select SPDR ETF ( XLF ) rose 0.2%, with JPMorgan, Wells Fargo, Citigroup and BAC all major components. The Healthcare Select Sector SPDR Fund ( XLV ) fell 0.3%, with UNH shares as its main holding.

Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) gained 2.1% and the ARK Genomics ETF ( ARKG ) gained 3.45%. TSLA stock is a core holding among Ark Invest’s ETFs. Cathie Wood’s Ark has been loading up on Tesla stock in recent days and weeks.


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Market rally analysis

After morning hesitancy, the major indices finally rose modestly, while small caps bounced back.

The S&P 500 closed just below that key level, reaching its 200-day moving average. The Nasdaq held support at its 50-day line and rose slightly above that area.

The Dow Jones and Russell 2000 are all running toward December highs, above their moving averages.

Overall, the market rally has made great strides in the last five sessions. Investors see light at the end of the tunnel for the Fed to raise interest rates.

Still, major indexes face further challenges. The S&P 500 must decisively clear the 200-day line, which it has repeatedly resisted. The December highs are the ultimate test for the indices. But after running for a few sessions, when the key indicators are around key levels, a break or pullback would not be a surprise.

Dow Jones futures are pointing to a pullback at Friday’s open.

The leading stocks are doing better, but many are now at least extended from early entries or moving averages.

Exxon Mobil shares rose 1.7% to 113.22, just below a flat base buy point of 114.76, according to MarketSmith analysis. But the XOM fund is outside the 50-day line. Shares of Celsius fell 0.2% to 106.40, but found support at the 21-day line. CELH shares are still moving after Wednesday’s bounce, breaking above the 50-day line and breaking a short trend line.

In a positive sign for the broader market rally, the chip sector has regained momentum, with the SMF ETF moving firmly above its 200-day line this week. Taiwan Semiconductor SMH’s largest holding (TSM) crossed the 200-day profit line. This is despite lower revenue and TSMC also showing lower guidance in Q1. But many chip names, even the obvious market leaders, are currently inactive.


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What to do now

The stock market rally had a strong stretch, breaking above some key resistance areas and outpacing the CPI inflation report.

If conditions continue to improve, investors can gradually add exposure. Major indexes, sectors, and leading stocks tend to make big pullbacks as they gain steam. And the market rally is getting stronger.

Earnings season can fuel a market rally or hammer specific sectors or stocks.

Investors who have been largely on the sidelines in recent days may feel that big opportunities have passed them by. It is true that some stocks may not be available at the moment. But don’t go after the extended names. Wait to see them pause or pull back or establish new bases. In the meantime, other shares will come to the fore.

Chances are if this market rally has real legs. If it stops quickly again, then you’ll be glad you didn’t invest too much.

However, it is very important that your watchlists are up-to-date. Cast a wide net to find established stocks in various sectors. Then look out for stocks that are “ready” or nearly so.

Read The Big Picture daily to stay in sync with market direction and leading stocks and sectors.

Follow Ed Carson on Twitter @IBD_ECarson for stock updates and more.

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