Dow Jones futures will open Sunday evening along with S&P 500 futures and Nasdaq futures.
The stock market rallied last week with strong gains, clearing key levels. The S&P 500 briefly faced resistance at the 200-day line, but broke above that key level on Friday. A large number of leading stocks hit buy points.
Investors can gradually add exposure as the market rally improves. Although many top stocks are now extended, Wendy’s (WEN), Exxon Mobil (XOM), Quanta Services (PWR), Celsius Holdings (CELH) and Insulation (PODD) are all effective from early entries. Wendy’s and PWR stocks have new flat bases, joining XOM stock and Insulet. CELH stock needs another week to establish a proper base.
CELH shares are on SwingTrader and the IBD 50. Celsius, Insulet and Wendy’s were the three most recent IBD Stock Of The Day picks.
In the meantime, Tesla ( TSLA ) announced big price cuts in the U.S. and Europe on Friday, a week after slashing prices in China and key Asian markets.
Tesla shares closed modestly lower, but rose solidly for the week. But the EV giant faces a painful transition as investors increasingly view Tesla as an automaker rather than a technology company.
The video embedded in this article discussed a strong week for the market rally and analyzed WEN stocks, Quanta Services and Celsius.
On Friday night, the price of bitcoin briefly crossed $21,200, reaching its highest level in two months. The leading cryptocurrency is currently trading around $20,800. Bitcoin was trading just below $17,000 on January 8th.
Bitcoin’s rise coincides with a stock market rally that signals a return to more speculative investments. This includes growth stocks, especially speculative-type plays like the ARKK ETF. Some meme stocks in particular had a big week Bed Bath & Beyond (BBBY). Shares of BBBY soared 179% even as the retailer announced it was headed for bankruptcy.
Dow Jones Futures today
Dow Jones futures open at 6:00 PM ET along with S&P 500 and Nasdaq 100 futures.
US stock and bond markets will be closed on Monday for the Martin Luther King holiday, but other markets around the world will be open.
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
The stock market rally had a strong week, with major indexes closing near session highs.
The Dow Jones Industrial Average rose 2% last week. The S&P 500 index rose 2.7%. The Nasdaq composite jumped 4.8%. The small-cap Russell 2000 rose 5.3%.
The 10-year Treasury yield fell 6 basis points to 3.51%, even with Friday’s jump. Markets are strongly anticipating quarterly Fed rate hikes in February and March, but then see policymakers on hold. Falling Treasury yields and a brighter economic outlook elsewhere are putting pressure on the dollar, giving stocks and commodities another boost.
US crude oil futures rose 8.3% last week to $79.86 per barrel. Copper prices increased by 7.65%.
Among rising ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 4.4% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 2.1%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 4.9%. VanEck Vectors Semiconductor ETF (SMH) rose 6.7%.
Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) gained 14.7% last week, while the ARK Genomics ETF ( ARKG ) gained just over 16%. TSLA stock is a core holding among Ark Invest’s ETFs. Cathie Wood’s Ark has replenished its Tesla holdings in recent days and weeks.
The SPDR S&P Metals & Mining ETF ( XME ) surged 6.3% last week to a seven-month high. The Global X US Infrastructure Development ETF ( PAVE ) rose 4.2%. The US Global Jets ETF (JETS) rose 9.4%. The SPDR S&P Homebuilders ETF ( XHB ) gained 4.6% despite weakness KB Home page (KBH) profit. The Energy Select SPDR ETF ( XLE ) rose 0.14%, with XOM shares a key component. The Financial Select SPDR ETF ( XLF ) rose 2.1%. The Healthcare Select Sector SPDR Fund ( XLV ) fell 0.2%.
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Stocks in Buying Areas
Shares of Wendy’s made a big comeback on Friday, rising 6% to 23.08 after hitting an intraday low of 21.36. WEN shares have retook the 50-day line, moved above the 21-day and broke above the trend line. It offered early access to the new flat base. According to MarketSmith analysis, the official buy point is 23.88.
On Friday, Wendy’s reported accelerating fourth-quarter sales growth, doubled its dividend and announced a $500 million buyback.
XOM shares rose 2.4% last week to 113.16, posting a fifth weekly gain. Shares are just below the official 114.76 buy point and will not appear to be extended above the 50-day line with this move. But investors could already get into Exxon shares.
PWR shares rose 6.7% last week to 148.50, offering an early entry above the 50-day line. The stock also retook the previous buy point of 144.41 which is no longer valid.
CELH shares rose above the 50-day and 21-day lines on Wednesday, breaking the downtrend, offering plenty of reasons for an early entry. Shares held support at 21 days, then rallied on Friday. Shares of Celsius can now run after gaining 13.2% for the week.
Insulet stock rose 4.65% last week to 305.89, bouncing back from the 21- and 50-day lines. Shares are now live. But investors can now expect a break of the trendline, which is just above Friday’s high of 309.44.
Is Tesla stock going down on the car?
Tesla shares rose 8.3% to 122.40 last week, continuing their decline to 101.81 on Jan. 6. Shares fell 0.9% on Friday, their lowest for the day despite Tesla announcing sharp price cuts in the US and Europe. This comes a week after Tesla cut prices in China and key Asian markets.
The price cuts should boost sales, especially with more Tesla EV options available for a $7,500 tax credit in the US. This means a huge price cut for US consumers. But Tesla’s premium margins will likely take a hit.
On Tuesday, investors will get weekly Chinese EV registrations, which should show a big jump in Tesla sales, as well as any impact on rivals. But will Tesla get a lasting boost, especially in China and Europe? Orders have significantly delayed deliveries in late 2022, so Tesla needs a big boost in new demand in 2023 to maintain its current delivery pace.
Already fierce competition in China is set to intensify in 2023, with Tesla’s price cuts possibly triggering a wave of margin-killing cuts. Europe is also becoming increasingly crowded. Even the US EV market will be more competitive a year from now, with the drop in used car prices already taking a toll on new car prices.
But Tesla’s EV sales aside, TSLA stock has a bigger problem. Investors are increasingly viewing the EV giant as an automaker rather than a technology company. Tesla’s current price-to-earnings ratio isn’t too steep for a 33 tech development company. But it is unusually high for a car manufacturer. The advantages and margins of the auto industry tend to erode relatively quickly, which may be the case with Tesla right now.
TSLA stock may be worth a premium for the car manufacturer, reflecting the EV giant’s still solid EPS and sales growth. But even so, that would suggest a lower valuation than it has boasted until recently.
General Motors (GM), Ford (F) and Chrysler-and-Fiat parent Stellantis ( STLA ) all have single-digit PE ratios. Toyota (TM) is at 10.
Tesla Vs. BYD: EV giants vying for the crown, but which one is better to buy?
Market rally analysis
The stock market rally had an encouraging week, building on strong gains on January 6. Major indices rose solidly, recovering key levels. During the week, a large number of leading stocks issued buy signals, with a large number of gains or increases.
The S&P 500 index rose above the 50-day moving average and rose to the 200-day line. The benchmark index found resistance at this key level Thursday-Friday, but eventually strengthened above it.
The Dow Jones, Russell 2000 and S&P MidCap 400 are all above their moving averages and nearing their short-term highs for December.
The Nasdaq recovered its 50-day moving average and broke above the 11,000 level. At the beginning of the year, the retracement index was near the lows of the bear market.
Stocks opened sharply lower on Friday, as gains initially hit airlines, health insurers and bank stocks, Tesla price cuts hurt auto stocks and analyst downgrades hit major defense contractors.
Even without negative headlines, the market should have pulled back after strong gains and with the S&P 500 at its 200-day line.
However, the market quickly bounced back and closed higher.
Industrials, the broader housing sector, many medicals, as well as some retail and restaurants are showing strength.
While tech names are trying to make a comeback, they are still few and far between among the leading stocks. The SMH chip ETF cleared its 200-day line this past week, while the IGV software ETF and ARKK are above their 50-day moving averages.
The S&P 500 has yet to definitively clear the 200-day line. December’s highs look big for all major indexes.
Earnings season will take center stage, with the stock market seemingly less worried about the Federal Reserve, with interest rate hikes on the way to a halt.
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What to do now
As stocks continue to improve, investors can make new purchases. But do it gradually. While the market rally has shown strength and resilience in recent days, the pullback will not come as a surprise to major indices, major sectors or individual stocks.
Earnings season will intensify over the next few weeks, creating the potential for big changes. Shares of Exxon and Tesla will report over the next three weeks, along with the tech giants apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN) and parent Google Alphabet (GOOGL).
Therefore, do not over-concentrate on a particular sector, even if it is performing well. Aim for a variety of leading stocks.
Collect your watch lists. Look for stocks that may move, build, or potentially move on a break or pullback. Broad power should provide a range of possibilities, at least outside of technology.
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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