Market rally pauses, Tesla continues to recover; United Airlines, Moderna, Microsoft In Focus

Dow Jones futures fell slightly after hours along with S&P 500 futures and Nasdaq futures. United Airlines headlined overnight earnings, while shares of Moderna rose based on RSV vaccine trial data. The job cuts at Microsoft and a policy change from the Bank of Japan could come Wednesday.




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The stock market rally had a relatively quiet session, despite a sharp fall for the Dow Jones.

Tesla (TSLA) continued its recovery from bear market lows, jumping 7.4% to 131.49. Shares moved slightly above the 21-day line, but remained well below the 50-day and especially the 200-day line. Tesla China EV registrations bounced over the past week after recent big price cuts there. But it may take some time for investors to get a clear picture of the impact of Tesla’s global price cuts and demand. Tesla earnings for Q4 are expected on January 25.

A break of a few days would allow more stocks to build up. So are stocks that recovered from early entry and could use handles.

Chevron (CVX), Vertex Pharmaceuticals (VRTX) and TJX Cos. (TJX) are three stocks that are usable right now.

But in general, investors should be patient.

Main income

United Airlines (UAL) and Interactive Brokers (IBKR) reported Tuesday evening.

United Airlines’ revenues far surpassed fourth-quarter earnings, while the airline also provided bullish guidance. UAL stock rose modestly after hours. Shares fell 0.9% to 51.20 on Tuesday, but surged sharply higher after eight sessions.

Interactive Brokers’ earnings also exceeded views. IBKR shares rose modestly in overnight action. Shares fell 2 cents to 77.19 on Tuesday, working to a buy point of 80.95 from a double bottom. Friday’s move over the 50-day mark offered early entry, but just ahead of the win.

Karl Schwab (SCHW) and transport company JB Hunt Transport Services (JBHT) are expected early Wednesday. SCHW shares rose 0.6% to 83.49 on Tuesday, in a buy zone. JBHT shares fell 0.3% to 176.29, between the 50-day and 200-day lines.

UAL stock is on the IBD 50. VRTX stock is on the IBD Big Cap 20.

Moderna RSV Vaccine

Moderna reported strong results late Tuesday for its respiratory syncytial virus, or RSV, vaccine. The biotech’s RSV vaccine uses its mRNA technology. MRNA stocks rose solidly in extended trading, signaling a strong rebound from about the 10-week line. The Moderna RSV vaccine follows positive RSV results from Pfizer (PFE) and GlaxoSmithKline (GSK).

Microsoft Job Loss Loom

In the meantime, Microsoft (MSFT) may announce new jobs as early as Wednesday, Bloomberg reported, citing sources. The cuts could be “significantly higher” than previous layoffs. Sky News reported that the Dow Jones software giant could cut up to 5% of its workforce, equating to 11,000 jobs. In October, Microsoft cut about 1,000 jobs.

MSFT shares rose 0.5% on Tuesday to 240.35, the seventh straight increase and just below the 50-day mark. Microsoft earnings are expected on January 24.

The video embedded in the reviewed CVX stock article, Eli Lilly (LLY) and MercadoLibre (MELI).

Dow Jones Futures Today

Dow Jones futures fell 0.1% from fair value. S&P 500 futures fell 0.15% and Nasdaq 100 futures fell 0.2%.

The Bank of Japan could spell the end of its long-term policy of keeping official interest rates and Japanese government debt around 0%. In December, the BoJ effectively raised by raising the Japanese 10-year yield to 0.5%.

Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.


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


Stock market rally

The stock market rally had a mixed session on Tuesday, with generally modest intraday swings.

The Dow Jones Industrial Average fell 1.1% during Tuesday’s stock trading, but that was largely through Goldman Sachs (GS) and Travelers (TRV) weighing on blue chips. The S&P 500 index fell 0.2%, with Tesla stock and Morgan Stanley (MS) the best performers. The Nasdaq composite was up 0.1%. The small-cap Russell 2000 fell 0.1%.

US crude oil prices rose 0.4% to $80.18 a barrel and closed above $80 for the first time in two weeks. Crude futures reached $81.23 intraday.

The yield on 10-year Treasury bills rose 2 basis points to 3.53%.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) was up 0.3%, with Microsoft stock the key holding. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.6%.

Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) rose 2.9% and the ARK Genomics ETF (ARKG) rose 1.8%. TSLA stock remains a top ranking among Ark Invest’s ETFs, with Cathie Wood adding many more stocks in recent weeks.

SPDR S&P Metals & Mining ETF (XME) fell 1%. US Global Jets ETF (JETS) was up 0.4%, with UAL stocks a large position. SPDR S&P Homebuilders ETF (XHB) fell 0.8%. The Energy Select SPDR ETF (XLE) was up 0.2%, with CVX stock holding a significant stake. The Financial Select SPDR ETF (XLF) fell 0.7%. The Health Care Select Sector SPDR Fund (XLV) fell 0.5%.


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Shares in buying zones

Chevron advanced 1.65% to 180.49, above the 50-day line and a short-term high of 180.23. CVX shares have a flat-base buying point of 189.78, according to MarketSmith’s analysis.

VRTX share rose 3.7% to 311.58 and rebounded above the 50-day line in above-average trading. That provides early access for Vertex, which has a buy point of 324.85 flat-base. VRTX shares also retook a previous buy point of 306.05. The biotech reached a record high of 324.75 on Dec. 8, but fell to the 200-day mark by the end of the year. Vertex shares rallied there last week. Investors can wait to see if stocks pause around the 50-day line.

TJX stock closed 2 cents to 81.55, recovering intraday from a buy point test of 81.29 on Jan. 6. Since then, the shares have been consolidating in the buy zone. The 5% deep flat base sits just above a long, 31% deep cup consolidation.

Analysis of the market rally

The stock market rally had a relatively quiet session after last week’s big gains.

The S&P 500 briefly retook the 4,000 level and retreated, only staying above 200 days.

The Russell 2000, which passed its 50-day and 200-day lines last week, pulled back after coming within 1% of its November highs.

The Nasdaq composite remains above its 50-day line, with December’s highs and the 200-day line serving as major areas of resistance on the horizon. Much of Tuesday’s power came from Tesla, chips and knocked-down cloud software names.

The Dow Jones fell sharply, largely on GS stocks and Travelers. The blue-chip index is well above its moving averages, with only the December highs to watch.

The market rally still looks healthy. A number of trends, including the Nasdaq progress-downline and new highs versus lows, have improved over the past several sessions.

A pause or a modest retreat would be normal or even healthy here. It would be more worrisome if the S&P 500 broke decisively below the 200-day mark, perhaps even below the 50-day mark. On a positive note, the late 2022 highs are the next key level.

While Chevron, TJX and Vertex and a few other names are arguably useful, there’s not much to buy right now. A few stocks that looked promising Tuesday morning, such as Monstrous drink (MNST), wilted by the lockdown.

Many stocks have already risen in the past several sessions, such as Medtempo (MEDP) and MercadoLibre. A break would let many of these names form handles or shelves. Meanwhile, other stocks are coming into the picture.


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What to do now

Patience is important. With the market ready and possibly pausing and not many stocks showing buy signals, resist the temptation to buy extensive stocks. If this uptrend works, you have safer opportunities ahead. That includes recently popular stocks as the form turns or hits support levels.

Be sure to run your screens of leading stocks to find those showing promising action.

As the market offers more stocks with flashing buy signals, you can invest gradually over time. In addition to a variety of economic and Fed crosscurrents, earnings season is underway, with the next two weeks arguably the heaviest releases.

Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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