Dow Jones Futures Drop After Market Recovery Effort Begins, Tesla Leaps Between Electric Vehicle Credit Guidelines
Dow Jones futures fell on Friday morning, along with S&P 500 futures and Nasdaq futures, heading for the final trading day of 2022. The major indexes rallied on Thursday on the back of data. job, Apple (AAPL) iPhone News and Tesla (TSLA) continues to bounce.
X
But the market is correcting after breaking key levels on Wednesday. Thursday only marked the first day of a fresh stock-market recovery attempt. Investors should be very cautious when entering new positions.
space (MEDP) gives a buy signal on Thursday, while KLA Corporation (KLAC), Starbucks (SBUX), Flowers for rent (URI), mobile (MBLY), Microcomputer (SMCI) and Fluorescent (FLR) is setting. But these stocks will likely rise or fall according to the market.
MEDP, Fluor and United Rentals shares on sale IBD Rankings. KLAC stock is active Long-term leadership of IBD. MBLY stock is on the rise IBD 50. Shares of KLA Corp. and URI is on the floor IBD Large Hat 20.
Meanwhile, new Treasury Department guidelines say many Model Y vehicles will not be eligible for U.S. tax credits starting January 1 without a steep discount. But there is a loophole that could allow all Tesla vehicles — and any electric vehicle — to qualify for hefty tax credits at any price point.
Dow Jones Futures Today
Dow Jones futures contract is down 0.4% from fair value. S&P 500 futures fell 0.6%. Nasdaq 100 futures fell 0.85%.
The yield on the 10-year Treasury note rose 2 basis points to 3.85%.
Remember that action overnight in future index and other places that don’t necessarily translate into actual transactions the next time stock market meeting.
Join IBD experts as they analyze stocks that could act in the stock market rally on IBD Live
Efforts to recover the market
The stock market had a strong rally, rising throughout the morning and then maintaining that momentum into the afternoon.
The Dow Jones Industrial Average is up just over 1% on Thursday stock market trading. The S&P 500 index rose 1.75%. Nasdaq composite and small-cap Russell 2000 rose 2.6%.
Initial jobless claims rose slightly more than expected for the week ending December 24, but remained at a low of 225,000. Claims continued to increase by 41,000 to 1.71 million in the latest week, the highest level since early February.
AAPL stock rose 2.8% to 129.61 after sliding 3.1% on Wednesday to a bear market low. According to The Wall Street Journal, Apple’s iPhone production is recovering after another report of a recent drop in iPhone production.
US crude oil prices fell 0.7 percent to $78.40 per barrel.
The yield on the 10-year Treasury note fell 5 basis points to 3.83%.
ETFs
Among the best ETFsInnovator IBD 50 ETF (FFTY) rose 1.1%, while the Innovator IBD Breakout OPPORTUNITY ETF (HOUR) increased by 0.9%. IShares Expanded Tech-Soft Sector Sector ETF (IGV) returned 3%. VanEck Vectors Semiconductor ETF (SMH) increased by 3.3%. Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) spiked 5.2% and the ARK Genomics ETF (ARKG) 4.1%. Tesla stock is the primary stock held on Ark Invest ETFs.
SPDR S&P Metals & Mining ETF (XME) increased by 1.9%. US Global Jets ETF (jet plane) increased by 2.65%. SPDR S&P Homebuilders ETF (XHB) increased by 2.4%. Energy Select SPDR ETF (XLE) is up just over 1% and the Financial Select SPDR ETF (XLF) increased by 1.4%. SPDR Foundation for healthcare sector (XLV) increased by 1.1%.
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Tesla shares
Tesla shares rose 8.1% to 121.82 after gaining 3.3% on Wednesday. TSLA stock is still down slightly for the week and 37% in December. After such a massive sell-off, Tesla stock has managed to recover, but is still far below key levels.
Tesla stock is on track to record its worst annual loss ever.
Tesla Model Y tax credit
Tesla’s bullish case for 2023 relies heavily on new US tax credits of up to $7,500 under the Inflation Reduction Act, boosting profitable, offsetting domestic sales. for weaker demand and prices in China and possibly Europe.
On Thursday, the Treasury Department listed vehicles eligible for the US EV credit. Most versions of the Model Y will have a maximum price of $55,000 for EV credits, compared to a maximum of $80,000 for SUVs, pickups, and vans.
But the seven-seat Model Y cars, which didn’t sell well, would qualify for up to $80,000.
The current base Model Y in the US starts at $65,990, Tesla will need to lower the price, perhaps by reintroducing the lower-range Model Y SR+, to get a tax break — unless it’s a seven-seat variant.
But, there is still another turning point! The Treasury Department also said electric vehicles rented by consumers may be eligible for commercial electric vehicle tax credits. That makes electric vehicles assembled outside of North America eligible, including the Hyundai Ioniq 5 and Kia EV6. Foreign automakers and US allies in Europe and Asia have strongly opposed the North American assembly requirement. But the rental rules also seem to allow any qualifying EV at any price point with no income cap.
It will be interesting to see what Tesla and other automakers do regarding variants and pricing to maximize the benefits of the new tax credits.
TSLA stock fell slightly Friday morning.
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Stocks near the buy point
Medspace stock rose 3.4% to 215.62, breaking a downtrend line as it recovered from the 21- and 50-day lines. MEDP stock has consolidated well, creating a 16% deep consolidation next to the top of a deep, long base. Official buy points is 235, but Thursday provided an early entry.
KLAC stock rose 3.3% to 379.86, bouncing off its 10-week moving average. A move above the 21-day line could present an opportunity to buy KLAC stock as a Long Term Leader.
SBUX stock rose 1.2% to 99.77, recovered in 10 weeks and crossed the 21-day line. That could be an early entry into a not-quite-short base. That, in turn, could be seen as a workaround to the 17-month deep consolidation in Starbucks stock.
URI stock rose 1.2% to 356.21, recovering from its 21-day moving average. United Rentals is close to a 368.04 handle buy point on a 13-month consolidation, briefly peaking earlier this month. URI stock has been trading very closely in its handling capacity. The relative strength line is at a new high, reflecting the outperformance of United Rentals stock relative to the S&P 500 index.
MBLY stock rose 2.8% to 34.51, recovering from an intraday drop in the 21-day moving average. Mobileye IPO at the end of October at 21 shares. MBLY stock has shown strength in a weak market, but like many new IPOs there have been big moves. Stocks are starting to calm down. An aggressive investor may be looking for a trendline break to enter, but ideally Mobileye stock will create a new base.
FLR stock edged up 0.8% to 34.95, continuing tight trading, working on track flat solethat would be a model-based. Fluor income is expected to grow 80% by 2023, as infrastructure reserves show strength in public and private projects.
SMCI stock rose 1.6% to 81.91, recovering from the 50-day line but finding resistance at the 21-day line. A strong move above the 21-day line, past Wednesday’s high of 84.35, could offer an early entry. As one of the biggest gainers of 2022, Super Micro Computer stock has been consolidating for several weeks following a breakout in earnings on November 2, with gains continuing to 95.22 on Monday. Nov. 25. SMCI stock may have a new base at next weekend’s price.
Market analysis
The stock market has posted a solid recovery from Wednesday’s sell-off. After falling since the intraday high on December 13, the major indexes are definitely “due” for a recovery.
The question is whether they will follow up in the days and weeks ahead.
The market entered a correction on Wednesday as the Dow Jones Industrial Average fell to its 50-day moving average and the Nasdaq posted its lowest close in two years.
So Thursday is just the first day of a fresh market recovery attempt. It takes more than that to feel more confident.
The Dow Jones is back above the 50-day line, but still below the 21-day line.
The S&P 500 remains below its 50-day line, with next resistance at the 200-day line and the December tops.
While shares of Tesla, Apple and many chip and software names that took a beating led the rally on Thursday, some of the top stocks have signaled buy or move positions, such as: MEDP shares.
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What to do now
It’s tempting to get back into the market as the indexes surge and there’s a sea of blue between the top and notable stocks.
But since the bear market bottomed on October 13, breakout and buy signals have largely failed.
Several sectors, including industrials, metals and healthcare, have outperformed in recent weeks, so it will be easier to justify investing in these sectors, with stocks specific or industry ETFs. But keep any exposure small and quickly take profits and cut losses.
Bottom line: This is a market correction. Doesn’t work by the rules of the bull market, especially the crazy bull rules of 2020.
Invest as if you were driving on an icy, windy road, not an open highway. Proceed carefully, or wait for it at the side of the road.
It’s time to plan your trip rather than venture out. Work on watchlists. Several stocks from a variety of sectors are showing strength.
Read Big picture every day to stay in sync with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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