Dow Jones Futures: Market Rally Shrugs Off Hot Inflation, Tesla Runs; Airbnb Flies On Earnings

Dow Jones futures fell slightly after hours, along with S&P 500 futures and Nasdaq futures. Airbnb (ABNB) headlined after-hours earnings reports with Shopify (SHOP) leading results before Wednesday’s open.

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The stock market rally closed mixed, well off session lows despite the hot January CPI inflation report. The headline and core CPI inflation rates both continued to drift lower, but by less than Wall Street expected. Treasury yields ultimately rose once again as markets price in further Federal Reserve rate hikes.

A number of leading stocks flashed buy signals Tuesday, including Boeing (BA), Arista Networks (ANET), Wingstop (WING), Cadence Design Systems (CDNS) and Marriott International.

TSLA stock, which has surged in 2023, revved higher Tuesday despite declining weekly Tesla (TSLA) EV registrations declining last week.

Airbnb and TripAdvisor (TRIP) led key earnings reports late Tuesday.

ABNB stock flew into a buy zone after hours as Airbnb earnings beat views with guidance also strong. TRIP stock jumped late on its results after closing back above a buy point.

However, Credo Technology Group (CRDO) crashed after hours after warning of a massive shortfall in its April fourth quarter. It sees revenue of $30 million-$32 million vs. views for $58 million, saying its largest customer is cutting back. CRDO stock, which had been trading near record highs, dived more than 40% overnight.

In other news, Warren Buffett’s Berkshire Hathaway (BRKB) disclosed its Q4 investment holdings vis SEC filings Tuesday. Berkshire continued to add to its Apple (AAPL) stake, but sold almost all of its Taiwan Semiconductor (TSM) shares after buying them in Q3. TSM stock fell modestly overnight.

Shopify Earnings Early Wednesday

E-commerce software giant Shopify, Biogen (BIIB), Analog Devices (ADI), Trade Desk (TTD), Roblox (RBLX), Taylor Morrison Home (TMHC) and more are on tap early Wednesday.

TMHC stock and Analog Devices closed Tuesday in traditional buy zones. SHOP stock is slightly extended while Biogen stock is just below an aggressive entry as well as a handle buy point. Trade Desk and RBLX stock are in bottoming bases but between their 200-day and 50-day lines.

WING stock is on IBD Leaderboard. BA stock is on SwingTrader. CDNS stock is on IBD Long-Term Leaders. Cadence Design. Wingstop and ANET stock are on the IBD 50. ADI stock and Arista Networks are on the Big Cap 20.

The video embedded in this article discussed Tuesday’s market action and analyzed Boeing, Wingstop and MAR stock.

Dow Jones Futures Today

Dow Jones futures edged lower vs. fair value. S&P 500 futures and Nasdaq 100 futures lost 0.1%.

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 whipsawed Tuesday morning, but strengthened in the afternoon to finish mixed.

The Dow Jones Industrial Average fell 0.5% in Tuesday’s stock market trading. The S&P 500 index lost a fraction, despite big gains by Tesla, Aptiv and CDNS stock. The Nasdaq composite rose 0.6%. The small-cap Russell 2000 edged lower

U.S. crude oil prices fell 1.4% to $79.08 a barrel. Natural gas futures popped 6.7%, trying to stabilize after plunging from late August highs.

The 10-year Treasury yield rose 4 basis points to 3.76%.

The 6-month T-bill rate is at 5.02%, above the 5% level for the first time since 2007. The one-year Treasury yield is up to 4.99%. These rising rates point to markets finally believing Fed policymakers that rate hikes will go above 5% and stay elevated. Some of this reflects optimism that the economy will not fall into a recession, but it’s also a sign that inflation may be sticky.

Markets are now pricing in three more quarter-point rate hikes, bringing the fed funds range to 5.25%-5.5% by the June or July policy meeting.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.9%, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 1%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 1.1%. The VanEck Vectors Semiconductor ETF (SMH) jumped 2.15%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) leapt 2.5% and ARK Genomics ETF (ARKG) rose 0.8%. Tesla stock remains a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) rallied 2.4%. U.S. Global Jets ETF (JETS) ascended 1.6%. SPDR S&P Homebuilders ETF (XHB) dipped 0.4%. The Energy Select SPDR ETF (XLE) was just above break-even while the Financial Select SPDR ETF (XLF) fell 0.5%. The Health Care Select Sector SPDR Fund (XLV) lost 0.6%.

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Tesla Stock

TSLA stock jumped 7.5% to 209.61, up 106% from its Jan. 6 bear market low of 101.81.

Tesla China EV registrations fell to 6,963 in the week ended Feb. 12 from 8,643 in the prior week, while BYD[ticker symb=BYDDF] and most other EV makers had higher registrations. That decline by itself may indicate that the demand boost from Tesla’s big price cuts are losing steam. However, Tesla Shanghai exporting recent production could explain the lower local sales figures.

Still, aside from the Model Y in the U.S., there are indications of lackluster Tesla demand.

Investors may be looking ahead to a Tesla investor day on March 1. CEO Elon Musk is expected to unveil his Master Plan Part Three, with Tesla providing more details on a new EV platform. Analysts also will be looking for updates on the Cybertruck and any confirmation on a long-rumored Model 3 revamp.

Market Rally Analysis

The stock market rally had some whipsaw action Tuesday morning but ultimately closed relatively well. Given that stocks had rallied on Monday, Tuesday’s action on the hotter-than-expected January CPI inflation report was quite bullish.

The Nasdaq and S&P 500 are comfortably above their 21-day moving averages, while the Dow Jones and Russell 2000 found support at that key level.

So far the major indexes are trading this week within the range of the prior week, which also was an inside week.

Ultimately, it’s not the news, it’s reaction to the news.

Whether it’s the major indexes or individual names such as Tesla stock, the market in 2023 has reacted positively overall to mixed earnings, economic data and other news.

While the indexes were mixed, leading stocks were generally higher.

Arista Networks, GlobalFoundries (GFS), CDNS stock and Marriott cleared buy points on earnings, though they are elevated from their 50-day lines.

Aptiv (APTV), one of several auto parts makers showing strength, reclaimed a buy point Tuesday and then ran through the buy zone.

BA stock cleared a fresh buy point on a major Boeing jet order from Air India. WING stock broke out and On Holding (ON) flashed an aggressive entry.

Time The Market With IBD’s ETF Market Strategy

What To Do Now

The stock market rally is still healthy, with the major indexes consolidating over the past several sessions.

Investors could choose to add exposure carefully. As you add new positions, do so as close to the buy point as possible. Don’t buy extended stocks. Be ready to cut losers quickly or if solid gains round trip.

Keep working on those watchlists. The market rally pause has offered a chance for stocks to set up again. Leading stocks are all pushing to move higher, so you want to be ready,

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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