Dow Jones Futures Fall After Market Rally Shrugs Off Hot Inflation, Tesla Races; Airbnb Flies On Earnings

Dow Jones futures fell modestly early Wednesday, along with S&P 500 futures and Nasdaq futures. Airbnb (ABNB) soared on earnings while CRDO stock plummeted on a warning. Tesla (TSLA) rose on reports that a Model 3 upgrade is imminent.

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The stock market rally closed mixed Tuesday, but off session lows despite a hot January CPI inflation report. The headline and core CPI inflation rates 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.

Overnight, Airbnb, TripAdvisor (TRIP), Trade Desk (TTD), Analog Devices (ADI), Biogen (BIIB), Taylor Morrison Home (TMHC) and Roblox (RBLX) all topped earnings views.

TSLA stock, which has surged in 2023, revved higher Tuesday. Tesla (TSLA) rose early Wednesday on a variety of news, including a Model 3 upgrade and opening up its Supercharger network.

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 tumbled 6{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} overnight.

Credo Technology Group (CRDO) crashed 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{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} overnight.

Dow Jones Futures Today

Dow Jones futures dipped 0.3{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} vs. fair value. S&P 500 futures fell 0.4{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} and Nasdaq 100 futures lost 0.4{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}.

Crude oil futures fell 1{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}. Copper futures slid more than 1{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}.

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

Key Earnings

Airbnb and TripAdvisor led key earnings reports late Tuesday. ABNB stock flew 8{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} overnight out of a base, as Airbnb earnings beat views with guidance also strong. TRIP stock jumped 9{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} after closing Tuesday back above a buy point.

Trade Desk topped earnings views before the open and guided up on Q1 revenue, even as it just missed on Q4 sales. The online advertising firm also announced a $700 million buyback. TTD stock jumped, signaling a move well above its 200-day line within a bottoming base.

Analog Devices topped quarterly views and guided higher. ADI stock rose modestly after closing Tuesday in a buy zone.

Biogen beat Q4 views. BIIB stock rose slightly, perhaps testing a trendline entry with a handle buy point also in sight.

Taylor Morrison Home beat consensus. TMHC stock was not yet trading after finishing Tuesday in a buy zone.

Roblox also topped views Wednesday. RBLX stock surged, signaling a big move above its 200-day line within a bottoming base.

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.

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{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} 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{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}. The small-cap Russell 2000 edged lower

U.S. crude oil prices fell 1.4{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} to $79.08 a barrel. Natural gas futures popped 6.7{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}, trying to stabilize after plunging from late August highs.

The 10-year Treasury yield rose 4 basis points to 3.76{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}.

The 6-month T-bill rate is at 5.02{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}, above the 5{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} level for the first time since 2007. The one-year Treasury yield is up to 4.99{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}. These rising rates point to markets finally believing Fed policymakers that rate hikes will go above 5{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} 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{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}-5.5{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} by the June or July policy meeting.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.9{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 1{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}. The iShares Expanded Tech-Software Sector ETF (IGV) gained 1.1{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}. The VanEck Vectors Semiconductor ETF (SMH) jumped 2.15{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) leapt 2.5{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} and ARK Genomics ETF (ARKG) rose 0.8{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}. Tesla stock remains a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) rallied 2.4{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}. U.S. Global Jets ETF (JETS) ascended 1.6{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}. SPDR S&P Homebuilders ETF (XHB) dipped 0.4{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}. The Energy Select SPDR ETF (XLE) was just above break-even while the Financial Select SPDR ETF (XLF) fell 0.5{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}. The Health Care Select Sector SPDR Fund (XLV) lost 0.6{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9}.

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Tesla Stock

TSLA stock jumped 7.5{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} to 209.61, up 106{a78e43caf781a4748142ac77894e52b42fd2247cba0219deedaee5032d61bfc9} 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. 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.

TSLA stock rose modestly before the open.

Tesla will halt some Shanghai output through the end of February to upgrade production lines for an upgraded Model 3, Bloomberg reported early Wednesday, citing sources. Tesla has not publicly confirmed reports of an upgraded Model 3. The EV sedan has seen waning demand, especially in China.

Meanwhile, Tesla has committed to opening at least 7,500 Superchargers to non-Tesla EVs by the end of 2024, the Biden administration said Wednesday. That will make Tesla for billions of dollars in new subsidies.

Musk said overnight that he hopes to name a new CEO of Twitter by year-end, later than many had expected.

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.

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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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