May 24, 2024

Dow Jones futures rose slightly overnight, while S&P 500 futures and Nasdaq futures climbed modestly. Tesla (TSLA) jumped despite bleak earnings as it said an “affordable” EV is coming soon. Elon Musk later touted Tesla’s robotaxi ambitions.




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The stock market rebounded Tuesday for a second straight session, with the key indexes and many leaders showing strength. But the key indexes and many growth tech leaders are still below their 50-day moving averages, including Nvidia (NVDA).

This is still just day two of a stock market rally attempt. Investors should be looking for a follow-through day later this week.

In addition to Tesla earnings, Dow Jones giant Visa (V) reported late Tuesday. Early Wednesday, Boeing (BA) and AI play Vertiv (VRT) are on tap.

Nvidia stock is on IBD Leaderboard.

Dow Jones Futures Today

Dow Jones futures were 0.1% above fair value, with Visa stock providing a boost. S&P 500 futures climbed 0.3%. Nasdaq 100 futures rose 0.7%. Tesla stock is a big S&P 500 and Nasdaq holding.

The 10-year Treasury yield edged up to 4.62%.

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


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Stock Market Rally Attempt

The stock market rally attempt had another strong session Tuesday, with techs and small caps leading once again. Treasury yields eased on weaker-than-expected economic data, providing a lift.

The Dow Jones Industrial Average gained 0.7% in Tuesday’s stock market trading. The S&P 500 index popped 1.2%. The Nasdaq composite jumped 1.6%. The small-cap Russell 2000 leapt 1.8%.

A solid day or two isn’t a big surprise after a string of heavy losses. The major indexes are all below their 50-day moving averages.

Many leaders have a lot of repair work to do. Nvidia stock bounced 3.65% Tuesday after Monday’s 4.35% gain, but is still trading within Friday’s 10% dive and below the 50-day line.

Some stocks are clearing entries, though often they have weak long-term relative strength lines. But there are energy, financial, aerospace, medical and restaurant names showing strength with solid RS lines.

Investors should look for a follow-through day starting late this week. A FTD involves one or more of the major indexes showing strong gains on higher volume than the prior session. That would indicate big institutions believe in the nascent rally attempt.

U.S. crude oil prices rose 1.8% to $83.36 a barrel.

The 10-year Treasury yield fell 2.5 basis points to 4.6%, but not far from five-month highs.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) gained 1.7%. The VanEck Vectors Semiconductor ETF (SMH) popped 2.35%, with Nvidia stock the dominant SMH holding.

Reflecting more-speculative stocks, ARK Innovation ETF (ARKK) bounced 3% and ARK Genomics ETF (ARKG) 1.6%. Tesla stock is a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) fell 1.4% and the Global X U.S. Infrastructure Development ETF (PAVE) advanced 0.9%. U.S. Global Jets ETF (JETS) descended 0.7%. The SPDR S&P Homebuilders ETF (XHB) jumped 2.7%. The Energy Select SPDR ETF (XLE) gained 0.55% and the Health Care Select Sector SPDR Fund (XLV) climbed 1.3%.

The Industrial Select Sector SPDR Fund (XLI) rebounded 1.4%. The Financial Select SPDR ETF (XLF) added 0.6%, with Visa stock a major holding.


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Tesla Earnings

Tesla earnings plunged 47% vs. a year earlier, its third straight big year-over-year decline. Revenue fell 9% to $21.3 billion, the biggest decline since 2012, amid sliding vehicle deliveries and prices. Both fell short of estimates.

The EV giant also reported cash burn of $2.53 billion. That’s despite days payable outstanding rising from 63 days to 75 days as Tesla delayed paying bills even longer.

Tesla ‘Affordable’ EVs Coming

But investors didn’t care, because Tesla said new models will “start production in the second half of 2025” including “more affordable” EVs.

Furthermore, Elon Musk, speaking on the conference call, said production of the new EVs could start in “early 2025, if not this year,”

However, the upcoming EVs will now be less ambitious. They will “utilize aspects of the next-generation platform as well as aspects of our current platforms,” Tesla said. That means that they can be made on the same production line as current models, without the need for new factories.

There is a downside. Tesla concedes this less-ambitious plan “may result in achieving less cost reduction than previously expected.”

Musk had previously stated that a next-generation model would use “revolutionary” manufacturing to achieve cost savings.

Musk declined to answer a question from Bernstein analyst Toni Sacconaghi on whether the new models would be “tweaks” on existing EVs, given how long the modest Model 3 refresh took.

Some other analysts also were speculating that cheaper EVs could involve a stripped-down Model 3 or Y.

Tesla also didn’t indicate a specific price for a more-affordable vehicle, so it’s unclear if could achieve a $25,000 EV, at least without IRA credits.

Tesla said that it’s working on ride-hailing functionality that will be “available in the future.” The EV giant previewed a possible ride-hailing app.

The impression is that this ride-hailing service could launch with human drivers, trying to take on Uber (UBER)and Lyft (LYFT). Tesla, echoing statements made back in 2016, said it will bar owners from using the Level 2 FSD for Uber or other ride-hailing services.

Musk also he expects Tesla deliveries to rise in 2024. That’s despite a big drop in Q1 deliveries, along with production curbs, layoffs and other steps suggesting that demand will remain weak in Q2 with no clear catalysts following that.

Musk said the Optimus robot will provide “useful” tasks in Tesla factories by year-end, with outside sales by the end of next year, though he said those were “guesses.”

Tesla Stock

Tesla stock shot up 13% in late trading.

Shares rose 1.8% on Tuesday to 144.61, snapping a seven-session losing streak and rebounding from their worst levels since January 2023. TSLA stock had plunged 14% last week on fears that Musk was shelving a cheap EV.

Tesla is down 41.8% in 2024, the S&P 500’s worst performer as of Tuesday’s close.

Visa Earnings

Visa earnings came in better than expected.

Visa stock rose modestly overnight. The Dow Jones payments giant edged up 0.7% to 274.13 on Tuesday. Visa could have a base soon if it keeps building the right side, with the 50-day line a key level.

Boeing earnings are due Wednesday morning. BA stock dipped 0.8% to 169.08 on Tuesday, hitting its worst levels intraday since late 2022.

Vertiv reports early Wednesday, with the data-center coolant systems maker a de facto AI play. VRT stock popped 4.05% to 79.15 on Tuesday, extending Monday’s bounce back above the 50-day line.


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What To Do Now

The market rally attempt is still just getting started. It’s still a time to be watching and waiting, especially with so many earnings reports coming in the next few days.

If you want to try some swing trades or pilot positions, you can, but you have to be just as aggressive in getting out.

In theory, a FTD could come as early as Thursday.

However, Microsoft (MSFT) and Google parent Alphabet‘s (GOOGL) earnings Thursday night and the core PCE price index, the Fed’s favorite gauge, could prove critical to the market’s direction.

In a montage-fast dream scenario, the Nasdaq or S&P 500 confirm their rally attempts Friday as they break above their 50-day lines, along with leaders such as Nvidia.

But a sustained rally could be weeks or even months away. For investors, the key is to be ready for that next market run.

Work on those watchlists. Look for stocks showing relative strength, holding or reclaiming key levels and regaining the bulk of their recent losses. Remember that the leaders of the last market rally may lag in the next uptrend.

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

Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.

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Source: investors.com

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