Tuesday morning saw modest drops for Dow Jones, S&P 500 and Nasdaq futures. Chinese economic figures surpassed expectations, and Tesla’s electric vehicle registrations in the country increased after sizable price reductions. Despite this, Goldman Sachs (GS) did not meet the Q4 estimates.
The stock market’s surge in the past week was significant, with noteworthy increases that surpassed key thresholds. The S&P 500 encountered difficulty at the 200-day line, however, it rose above it on Friday. A multitude of influential stocks showed signals to purchase.
Investors may want to consider adding exposure to their portfolios as the market rallies. While some leading stocks may be overvalued, Wendy’s (WEN), Exxon Mobil (XOM), Quanta Services (PWR), Celsius Holdings (CELH) and Insulet (PODD) may provide actionable opportunities, with WEN and PWR stocks forming flat bases, while XOM and Insulet stocks have already done so. CELH stock may take a bit longer to form a proper base.
You can find CELH stock on SwingTrader and the IBD 50. Among the most recent IBD Stock Of The Day selections are Celsius, Insulet and Wendy’s.
About Earnings
Goldman Sachs released earnings that were significantly lower than what analysts had predicted, and revenue fell short as well. The GS stock price dropped by almost 3% in pre Market trading.
Morgan Stanley (MS) divulged that their Q4 earnings were in line with expectation, though their revenue exceeded expectations slightly. The stock price experienced a slight increase due to the report.
In the meantime, Tesla (TSLA) stock slightly rose on Tuesday following the weekly Chinese EV registration data that revealed a surge in sales due to the recent price cuts in China. Even though Tesla’s shares dipped on Friday, they eventually rebounded by the end of the week.
Despite this, the electric vehicle company is going through a difficult adjustment since investors are now seeing Tesla as a car maker, not a tech firm.
This article contained a video that analyzed the powerful week for the market rally, and looked at the stocks of WEN, Quanta Services, and Celsius.
An Analysis of China’s Economy
A close examination of the economic data from China reveals certain trends and patterns. It is possible to gain insight into the country’s economic situation by sifting through the available data. An understanding of China’s economic performance can be gleaned from a study of the figures.
Overnight Chinese economic figures exceeded expectations. For the fourth quarter, GDP increased 2.8% compared to the same period in the prior year, surpassing estimates of 1.8%. For the entire year, GDP rose 3%, slightly above projections.
Retail sales for December experienced a 1.8% drop compared to the same period in the previous year; however, this was much better than the estimated 8.6% decrease. Industrial production also saw an increase of 1.3% in comparison to the anticipated 0.2% growth.
As China has relaxed its measures against Covid, a huge surge in infections has followed. According to Chinese reports, around 60,000 people have died in their hospitals from the virus between the dates of December 8 and January 12.
Looking ahead, it appears that China’s economy may be more promising.
Futures of Dow Jones Today
The Dow Jones futures went down by 0.4% in comparison to their estimated value. Goldman Sachs and Travelers (TRV), who had previously given a warning of poor performance, slightly pulled back the large-cap stocks.
The S&P 500 futures dropped by 0.3%, with the Nasdaq 100 futures not far behind, down 0.5%. Despite this, TSLA stock was providing a much-needed lift.
The yield on 10-year U.S. Treasury bonds increased by 7 basis points to 3.58%.
The price of crude oil increased slightly, reaching values above $80 per barrel. Meanwhile, natural gas experienced an increase of 9%, whereas copper futures dipped by over 1%.
It’s essential to keep in mind that movements in Dow futures and other markets during off-hours may not be reflected in the regular stock market trading day.
Value of Bitcoin
Monday saw the Bitcoin price reach an interim peak of $21,430, a two-month high. Presently, the coin is hovering at roughly $21,300. It wasn’t until the 8th of January that the leading cryptocurrency regained the $17,000 mark.
The stock market has seen a resurgence of riskier investments, and Bitcoin has seen an upturn in value as a result. This includes growth stocks, and in particular, high-risk ventures such as the ARKK ETF. Some meme stocks, for instance Bed Bath & Beyond (BBBY), saw vast spikes in value, despite the fact that the retailer has announced its potential bankruptcy.
Upturn in Stock Market Prices
The current market has experienced a rally in stock prices. This surge in value has been a boon for many investors.
The stock exchange experienced a powerful surge last week, with the primary indexes finishing close to the peak of their trading session.
In the last week’s trading of the stock market, the Dow Jones Industrial Average augmented 2%, the S&P 500 went up by 2.7%, the Nasdaq composite soared 4.8%, and the Russell 2000, a small-cap index, soared by 5.3%.
The 10-year Treasury yield declined by 6 basis points to 3.51%, despite the rebound on Friday. Markets are expecting the Federal Reserve to raise rates by a quarter of a point in February and March, and then remain steady. The value of the US dollar is diminishing in the face of lower Treasury yields and improved economic conditions around the world, which is providing a lift to stocks and commodities.
Last week, the price of U.S. crude oil futures rose dramatically by 8.3% to $79.86 per barrel, while the cost of copper increased by 7.65%.
Exchange-Traded Funds
Exchange-traded funds (ETFs) are a type of security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. They are traded on exchanges like stocks. ETFs are popular because they provide diversification, low costs, and tax efficiency.
The Innovator IBD 50 ETF (FFTY) saw a 4.4% gain last week, and the Innovator IBD Breakout Opportunities ETF (BOUT) rose 2.1%. Among other growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) jumped 4.9%, while the VanEck Vectors Semiconductor ETF (SMH) skyrocketed 6.7%.
The price of 200,250 was listed for 2,190,000 from January to December with the following figures: 27, 13, 30, 16, 02, 18, 04, 21, 07, 23, 09, 26, 12, 29, 15, 01, 17, 03, and 20.
Last week, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) experienced a surge in their share prices — 14.7% and 16%, respectively — due to the speculation around so-called “story stocks”. Cathie Wood’s Ark Invest has been bolstering its Tesla (TSLA) holdings in the last few days and weeks.
The SPDR S&P Metals & Mining ETF (XME) experienced a 6.3% jump last week to a seven-month peak. Additionally, the Global X U.S. Infrastructure Development ETF (PAVE) was up 4.2%, and the U.S. Global Jets ETF (JETS) soared 9.4%. The SPDR S&P Homebuilders ETF (XHB) saw a 4.6% increase, despite KB Home’s (KBH) disappointing earnings. The Energy Select SPDR ETF (XLE) edged up 0.14%, with XOM stock being a key element. The Financial Select SPDR ETF (XLF) rose 2.1%, while the Health Care Select Sector SPDR Fund (XLV) edged down 0.2%.
China’s Electric Vehicle Sales from Tesla
The week of Jan. 9-15 saw 12,654 Tesla electric vehicle registrations in China, an increase from the 2,110 registered in the prior week. This surge is thought to owe its cause to the considerable reductions in prices that were made on the 6th of January, which were also implemented in other significant Asian markets.
The question stands: will the cuts to costs contribute to an enduring improvement to Tesla’s Chinese sales? The Lunar New Year holiday is likely to restrict spending, and with Tesla halting production for a few days, it could be a few weeks before the true effects are seen.
On the same day, XPeng (XPEV) reduced the cost of the majority of its vehicles. The majority of the vehicles in the XPeng lineup are of a comparable price to the Model 3 and Y, though many of them are older models.
In comparison to Li Auto (LI) and Nio (NIO), who had registrations of 4,527 and 2,974 EVs respectively, the number for XPeng was significantly lower at 1,817. The EV and battery giant BYD (BYDDF) sold the most, with a figure of 40,420.
Shares of Tesla
The stock of Tesla has been a subject of a lot of media attention lately. Much has been said about the firm’s current market price and its potential for growth. Analysts have been keeping a close eye on the company’s stock and its performance in the stock market.
Early Tuesday saw TSLA stock experience a surge of almost 3%.
Tesla’s stock climbed 8.3% to 122.40 in the previous week, building on its recovery from the bear market low of 101.81 on the 6th of January. On Friday, the stock fell 0.9%, albeit still off its intraday lows, even after Tesla declared deep discounts in both the U.S. and Europe. This was after the EV giant had already diminished pricing in China a week earlier.
Price reductions are expected to bolster sales, particularly in America, as more Tesla Electric Vehicle options become eligible for a $7,500 tax rebate. That implies a considerable reduction in cost for U.S. customers. However, Tesla’s appreciated earnings are likely to suffer.
At the end of 2022, orders did not come close to the number of deliveries, so Tesla will be in need of a surge in demand if they want to stay on the same delivery track for 2023.
In the next three years, the market in China is expected to become even more competitive, with Tesla’s cost decreases likely leading to a decrease in profit margins. The EV market in Europe is becoming increasingly crowded, as well. In the U.S., competition has already begun to heat up due to a decrease in used-car prices, which has had an effect on new-car prices.
Could Tesla be a Profitable Investment in Auto Stocks?
Putting aside the sales of Tesla’s electric vehicles, TSLA has a larger issue to tackle. Investors are now seeing the EV giant as a car manufacturer and not a tech organization. A price-earnings ratio of 33 may be seen as acceptable for a tech growth business, but it is too high for a carmaker. It is possible that the competitive edges and revenue margins of the auto industry are being diminished for Tesla at this time.
The high valuation that TSLA stock has enjoyed up to this point might be justified for a company that manufactures vehicles, given its ongoing EPS and sales growth. Nevertheless, this would mean that the current valuation should be lower than it has been.
Single-digit P/E ratios can be seen for General Motors (GM), Ford (F) and Stellantis (parent company of Chrysler-and-Fiat) (STLA), with Toyota (TM) standing at 10.
Analysing the Market Rally
Last week was a positive one for the stock market, continuing the momentum seen on the 6th of January. The major indexes made strong advances, reclaiming important levels. In addition, many leading stocks displayed buy signals, with most either maintaining or increasing their gains.
After climbing above its 50-day moving average, the S&P 500 index encountered a resistance at its 200-day line on Thursday and Friday. Nevertheless, the benchmark index managed to surge past it.
All three of the Dow Jones, Russell 2000 and S&P MidCap 400 are above their respective moving averages, and they are approaching the highs they attained in December.
The Nasdaq soared above 11,000 and reclaimed its 50-day moving average, after it had been close to hitting its bear market lows at the turn of the year.
At the start of the week, stocks began trading on a bearish note, with airlines, health insurers, and banks suffering from earnings reports, Tesla’s cost reductions causing auto stocks to plummet, and an analyst downgrade taking a toll on the major defense contractors.
The market could have been expected to experience a decrease in value in spite of the positive news stories, particularly since the S&P 500 had reached its 200-day average.
Despite an initial dip, the market eventually rebounded and finished the day on an upswing.
There is strength for various industrial, housing, medical, retail and restaurant sectors.
Despite the lack of technology companies amongst major stocks, there have been some indications of a rebound. Last week, the SMH semiconductor exchange-traded fund crossed its 200-day line, while both the IGV software ETF and ARKK are above their 50-day average.
The S&P 500 remains without a clear break above the 200-day line. The December highs remain a formidable barrier for the major indexes.
The stock market has taken a less cautious approach to the Federal Reserve’s likely decision to pause their rate hikes, leaving earnings season to be the primary focus.
Taking Action Now
Now is the time to take action. What steps can you take to move forward?
Investors can cautiously add to their portfolios as stocks make gains. Nonetheless, it is important to keep in mind that the current market rally has exhibited durability in the recent days, however, a downturn shouldn’t come as a shock to the main indexes, sectors, and shares.
In the upcoming weeks, we will witness a surge in corporate earnings reports. Exxon and Tesla are two of the major companies to release their figures within the next three weeks. Additionally, Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), and Alphabet (GOOGL) – parent company of Google – are expected to deliver their earnings numbers as well.
Therefore, don’t become too focused on just one industry, even when it’s doing well. Strive to invest in a variety of top stocks.
Build up your lists of stocks to watch. Find stocks that are ready to take action, setting up, or that could be ready to act if they halt or pull back. Generally speaking, there should be plenty of options beyond those in the tech sector.
It is important to keep up with the market and the top stocks and sectors. One way to do this is to read the “The Big Picture” report daily.
