Stock market indices reversed after a sharp rally at the open and sold off in the lunch hour of the first trading day in 2023. Tesla (TSLA) fell nearly 13% to a two-year low after the automaker miscalculated its delivery estimates. Gold rose to a six-month high as the 2% inflation slogan attracted a skeptical crowd.
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The end of the tax selling season and a clean schedule encouraged investors to buy into lower stocks early on Tuesday, but bearish macroeconomic issues sent the bears into a breakout.
The Dow Jones Industrial Average fell 0.6% in the first half of the year, while the S&P 500 fell 0.9%. Small caps attracted interest early on as positive seasonality took over, but Russell 2000 matched excellent losses in the lunch hour. The Nasdaq led the downside with a decline of 1.3%.
Trading volumes on the NASDAQ and the New York Stock Exchange rose by double-digit highs compared to the first half of Friday’s light session.
The 10-year Treasury yield fell about 2.3%, or 8 basis points, to 3.80%. Crude Oil fell more than 3.4% to $77.60 a barrel. European markets rose in unison while Asian markets were mixed, dragged down by the Nikkei’s 1.3% loss.
In the crypto world, bitcoin traded above its November lows, trading around $16,600, while Coinbase (Currency) was trading above last week’s low at 31.83.
S&P 500 and Nasdaq are trading below 50-day moving averages. The Dow Jones opened the session right above the 50-day line and broke through support, but the index is still solidly above the 200-day line. The current outlook for IBD remains that of a “market in a correction.” It is recommended that investors keep their powder dry while market trends are revealed in early 2023.
Stock market: next week
December employment data will dominate this week’s economic reporting, with the JOLTs, ADP and Nonfarm Payrolls due on Friday. However, it is likely that companies will postpone large job cuts to January or February to avoid a backlash from workers and bad press during the holiday season. As a result, February’s data may be clearer. Fed Meeting Minutes and ISM Manufacturing are the main events on the economic calendar on Wednesday.
Dow Jones component Walgreens Boots Alliance (WBA) announces earnings on Thursday. The pharmacy chain recently failed in its attempt to move above the 50-day and 200-day moving averages. WBA stock has been stuck in a downtrend since it topped out in 2015.
Disturbed retailer bed bath behind (BBBY) also to report on that day.
Apple is at a 52-week low
Dow Jones component and technology icon an Apple (AAPL) completed a double top collapse after a week-long test, falling to an 18-month low. AAPL stock traded down 4.2% in the lunch hour.
The latest level of intermediate support could come into play around 120, perhaps in time for the January 26th earnings report. However, it is not wise to overthink dips in this risky market environment because bear markets often don’t care about technical support levels, at least during active declines.
Gold is at its highest level in six months
SPDR Gold Fund (gld) rose to a six-month high on Tuesday morning, to complete a successful test at the 200-week moving average. The yellow metal bottomed out as the Federal Reserve completed its last quarter transition from 75bps to 50bps.
Gold ended its four-year decline at the beginning of 2016, after testing the $2,000 level in 2011. It completed a round trip to the previous peak in August 2020 and began a fundamental pattern that broke down last September. The contract and the fund have now regrouped the broken key support, indicating increasing momentum and buying interest. However, there is still a lot of resistance above 180 in the fund and around $1900 for the futures.
The rally points to suspicions about the central bank’s obsession with returning to the 2% inflation rate that marked the past decade. At some point, bankers will admit that those days are over for the time being, perhaps for our lifetime, as core inflation returns to higher standards over the long term. This acknowledgment could lead to a rapid eruption of gold to all-time highs.
Stock market movers and shakers
Tesla sold to 108 last week and has bounced back above 124 as 2022 comes to a close. It was down nearly 13% at midday Tuesday after reporting Q4 deliveries of 405,000 and 1.3 million vehicles for the full year. This represents 40% year-over-year growth, which is lower than estimates.
The electric car maker trimmed a Dec. 28 low near 108, but TSLA stock fell to about 104 in the primary market that morning. More importantly, this looks like a classic test of ‘circular’ support at 100, with sell stops and buy orders naturally clustering around those psychological levels.
The Innovator IBD 50 ETF (fifty) offset excellent losses, down 1.1%.
Ingredient IBD 50 Griffon (gff) It retreated from the top of a six-week flat base that intersects the overbought zone at 33.63 buy points. GFF stock is trading near an all-time high.
The building manufacturer has posted double or triple profit growth in each of the past four quarters.
Wayne Resorts (where) And the Las Vegas Sands (LVSBoth rose more than 3% after Wells Fargo’s upgrades, in reaction to China’s reopening of its economy and the impact that had on Macau casino revenue.
Meanwhile, the Macau Gaming Examination and Coordination Bureau just reported that December revenue fell 56% after a similarly sharp drop in November.
These dire numbers, combined with already depressing revenues, highlight the difficult road ahead for each of the resort operators.
Follow Alan Farley on Twitter at @tweet.
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