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Dow Jones Futures: S&P 500 Regains Key Level, But Stay Cautious; Tesla Doubles U.S. Discount

Dow Jones futures rose slightly after hours, along with S&P 500 futures and Nasdaq futures. Micron Technology (MU) and Tesla (TSLA) were in focus overnight.




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The stock market rally had a solid advance Tuesday, with Nike (NKE) surging and FedEx (FDX) leading the way on earnings, also buoying some peers and related stocks.

The S&P 500 index rallied to just above its 50-day line, a positive sign but not a decisive one.

Apple (AAPL) managed to rise modestly, extending a bounce from just above bear market lows Tuesday. Tesla (TSLA) was unable to eke out a gain, closing slightly lower. Tesla reportedly has doubled its year-end delivery discount in the U.S.

Investors should remain cautious. The market rally remains under pressure, and has had a nasty habit of pulling back after showing any strength.

Meanwhile, First Solar (FSLR), Medpace (MEDP), Aehr Test Systems (AEHR), Impinj (PI) and Schlumberger (SLB) are leading stocks still close to their 50-day or 10-week moving averages.

MEDP stock was added to IBD Leaderboard on Wednesday, with PI stock on the Leaderboard watchlist. SLB stock and KLA Corp. are on the IBD Big Cap 20.

Micron Earnings

Micron reported a wider-than-expected loss while Q1 revenue tumbled 47%. The memory chip giant guided slightly lower for the current Q2.

Micron said it will continue to cut capital spending. That’s not good news for memory-exposed chip-equipment makers Applied Materials (AMAT), Lam Research (LRCX) and KLA (KLAC)

MU stock fell 2% in extended trade. Shares had climbed 1% to 51.19 in Wednesday’s regular session.

Meanwhile, AMAT stock and Lam Research declined 2% overnight while KLAC stock sank less than 1%.

Disk drive makers Western Digital (WDC), Seagate Technology (STX) sank 2.2% and 1.5%, respectively.

Dow Jones Futures Today

Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures advanced 0.3% and Nasdaq 100 futures climbed 0.35%.

The 10-year Treasury yield fell 3 basis points to 3.65%.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.


Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live


Stock Market Rally

The stock market rally rebounded Wednesday, quickly climbing well over 1% and largely holding those gains into the close.

The Dow Jones Industrial Average climbed 1.6% in Wednesday’s stock market trading. The S&P 500 index rallied 1.5% with Dow Jones giant Nike the day’s top S&P 500 performer for the day. The Nasdaq composite also advanced 1.5%. The small-cap Russell 2000 rebounded 1.7%.

Apple stock rose 2.4% to 135.45 on Wednesday, still well below moving averages. On Tuesday, AAPL stock hit 129.89, just above its June bear market low of 129.04.

U.S. crude oil prices rose 2.7% to $78.29 a barrel.

The 10-year Treasury yield was unchanged at 3.68%.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) moved up 2.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) was 1.6% higher. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.2%. The VanEck Vectors Semiconductor ETF (SMH) climbed 2.2%. Micron stock is a notable SMH holding, along with chip-equipment stocks AMAT, LRCX and KLAC.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) climbed 1.7% and ARK Genomics ETF (ARKG) 2.2%. Tesla stock is a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) popped 2.6% and the Global X U.S. Infrastructure Development ETF (PAVE) 1.7%. U.S. Global Jets ETF (JETS) ascended 1.3%. SPDR S&P Homebuilders ETF (XHB) climbed 1.9%. The Energy Select SPDR ETF (XLE) and the Financial Select SPDR ETF (XLF) advanced 1.55%. The Health Care Select Sector SPDR Fund (XLV) added 1.3%.


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Tesla Delivery Discount

Tesla has begun offering $7,500 for taking U.S. delivery of a Model 3 or Model Y before year-end, Electrek reported late Wednesday. That’s up from $3,750 at the start of December, with 10,000 free Supercharger miles as well. Tesla is trying to boost its fourth-quarter delivery figures.

Many would-be buyers may be delaying taking delivery until Jan. 1, when new U.S. tax credits of up to $7,500 will kick in. Tesla’s U.S. sales also may be facing a negative impact from Elon Musk’s Twitter actions and politically charged tweeting.

Tesla stock tried to rally Wednesday but was unable to end its losing streak on a strong market day. TSLA stock dipped 0.2% on Wednesday to 137.57, hitting yet another bear low. Shares are down 8.4% so far this week and 29% in December.

Stocks To Watch

First Solar stock rose 3.5% to 162.06 after falling to 150.25 intraday, finding support just above the 50-day line. FSLR stock is now 5.7% above the 10-week line and right at short-term highs. The solar power leader could be working on a new base, but needs a few more weeks.

MEDP stock rose 3.4% to 210.59, rebounding from the 50-day line and regaining its 21-day line. Investors could buy Medpace stock now, or wait for a trendline break starting with Nov. 15. MEDP stock has a 235.82 buy point from a 16%-deep consolidation next to a 45%-deep cup base.

PI stock climbed 2.3% to 117.15, continuing to bounce from the 10-week line but only 4% above that level. That RFID chip play is actionable from that pullback following an earnings breakout in late October.

AEHR climbed 1.3% to 22.80, bouncing from its 50-day line. A move above the 21-day line would offer an entry into the volatile stock. The EV-exposed chip-testing firm is delivering booming revenue growth.

SLB stock rallied 3% to 53.31, continuing Tuesday’s bounce from the 50-day and 21-day lines. Now clearly breaking a trendline in a short consolidation, Schlumberger stock is still actionable here.

Market Rally Analysis

OK, now the stock market rally got a bounce. After eking out gains Tuesday, the major indexes had a strong session Wednesday.

The Dow Jones, buoyed by Nike, continued to rebound from its 50-day line.

The S&P 500 index and the S&P MidCap 400 just reclaimed their 50-day moving averages, but only by a hair. The S&P 500 needs to decisively move above the 50-day line, and that would only be a first step for the market rally.

The Nasdaq and Russell 2000 remain below their 50-day averages.

More leading stocks found support or rebounded from key levels, including First Solar and Aehr Test Systems. Some are flashing buy signals, but in a shaky market.


Time The Market With IBD’s ETF Market Strategy


What To Do Now

After last week’s ugly downside reversal week and Monday’s losses, the past couple of days were positive, but don’t get excited.

Market exposure should still be light. The uptrend remains under pressure with the S&P 500 right at a key level, with several other hurdles ahead.

Even if the market rally regains much of the prior week’s losses, there’s still the risk that this is another trap to lure investors in just before a pullback.

So while a few stocks flashed buy signals, investors should be wary of taking on any new positions. Yes, if the major indexes keep rebounding, new buys in the past couple of days likely will work out. But if the S&P 500 tumbles to Tuesday’s lows or worse, those new buys will likely fail.

If you do try to play the current market, keep the positions small and take at least partial profits quickly. Broad market ETFs could be a way to dabble in a mini-rally without the individual stock risk.

But, a lot of stocks are setting up. So investors should be ready to act, updating watchlists and staying engaged.

Read The Big Picture every day to stay in sync with the 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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