Stock indexes reversed after an opening rally bounce and sold off by lunchtime on the first trading day of 2023. Tesla ( TSLA ) fell nearly 13% to a two-year low after the automaker missed supply estimates. Gold rose to a six-month high as the 2% inflation mantra attracted the skeptical crowd.
The end of the tax sale season and a clean slate encouraged investors to buy depressed stocks early Tuesday, but lower macroeconomic issues kept the bears out in force.
The Dow Jones Industrial Average fell 0.6% in the first half, while the S&P 500 fell 0.9%. Small caps led early interest as positive seasonality took control, but the Russell 2000 matched blue chip losses at lunchtime. The Nasdaq composite led the decline, down 1.3%.
Volume on the Nasdaq and NYSE rose by high double-digit percentages in the first half of Friday’s holiday session.
The yield on the 10-year Treasury note fell 2.3%, or about 8 basis points, to 3.80%. Crude oil fell more than 3.4% to $77.60/barrel. While Asian markets were mixed, weighed down by the Nikkei’s 1.3% loss, European markets rallied together.
In the cryptocurrency world, bitcoin has risen above November lows, trading around $16,600. Coinbase (COIN) traded slightly above last week’s all-time low at 31.83.
The S&P 500 and Nasdaq are trading below their 50-day moving averages. The Dow opened the session above its 50-day line and broke support, but the index remains firm above its 200-day line. The current IBD outlook remains a “market in correction.” Investors are advised to keep their powder dry as market trends unfold in early 2023.
Stock market: The week ahead
December employment data will dominate this week’s economic reports, with JOLTs, ADP and Friday’s non-farm payrolls report also due. However, corporations are likely to delay major job cuts until January or February to avoid employee backlash and bad press during the holiday season. Consequently, the data for February may be more illuminating. Fed minutes and ISM production mark the top events on the economic calendar on Wednesday.
Dow Jones component Walgreens Boots Alliance (WBA) reports earnings on Thursday. The drugstore chain recently failed in an attempt to move above its 50-day and 200-day moving averages. WBA stock has remained in a downtrend since its 2015 rally.
Troubled retailer Bed Bath & Beyond (BBBY) also plans to report on the same day.
Apple’s 52-Week Bottom
Dow Jones component and technology icon apple ( AAPL ) completed a double top and fell to an 18-month low after a one-week test. AAPL shares were down 4.2% by lunchtime.
A final level of intermediate support may emerge around 120, perhaps in time for the January 26 earnings report. However, it is unwise to overthink the declines in this dangerous market environment, as bear markets often ignore technical support levels, at least during active declines.
At the High Limit of the Golden Six Months
SPDR Gold Trust (GLD) rose to a six-month high on Tuesday morning, completing a successful test of its 200-week moving average. The yellow metal bottomed as the Federal Reserve completed its fourth-quarter hike of 75 basis points to 50 basis points.
Gold ended a four-year slide in early 2016 after testing the $2,000 level in 2011. It completed its return to its previous peak in August 2020 and began a base pattern that broke out last September. The contract and the stock have now regained the broken base support, signaling increased momentum and buying interest. However, the stock has a ton of resistance above 180 and around $1,900 in the futures contract.
The rally casts doubt on the central bank’s promise to return to the 2% inflation rate that has characterized the past decade. At some point, bankers will admit that core inflation is returning to higher long-term norms because those days, and perhaps our lifetimes, are long gone. This acceptance could cause gold to quickly break to all-time highs.
Stock Shifters and Pullers
Tesla traded at 108 last week and rose above 124 by the end of 2022. After reporting 405,000 vehicles for the full year and 1.3 million vehicles delivered in the fourth quarter, it was down about 13% by midday Tuesday. This represented a 40% year-on-year increase, which was less than estimates.
The electric car maker hit a low of 108 on Dec. 28, but shares of TSLA fell to around 104 in the premarket that morning. More importantly, this looks like a classic test of “round number” support at 100, with sell stops and buy orders naturally gathering around these psychological levels.
The Innovator IBD 50 ETF ( FFTY ) fell 1.1% to match the blue chip losses.
IBD 50 component Griffon (GFF) has pulled back from the top of a six-week flat base that crossed the buy zone of the 33.63 buy point. GFF shares are nearing all-time highs.
The building construction manufacturer has posted double- or triple-digit earnings growth in each of the past four quarters.
Wynn Resorts (WYNN) and Las Vegas Sands ( LVS ) rose more than 3%, both in response to China’s reopening of the economy and the impact on Macau casino earnings after Wells Fargo updates.
Meanwhile, the Macau Gaming Inspection and Coordination Bureau reported a 56% drop in December receipts, following an equally sharp decline in November.
These dire numbers, on top of already depressed revenues, highlight a tough road ahead for both resort operators.
Follow Alan Farley on Twitter at @msttrader.
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