Dow Jones futures rose Monday evening, along with S&P 500 futures and Nasdaq futures. Tesla (TSLA) deliveries hit a record in Q4, but came in below estimates for a second straight quarter. That followed December deliveries from China EV rivals Li Auto, Nio, XPeng and giant BYD.
Investors will be looking for a brighter stock market in 2023 after a “stay away” year, especially for growth. The Dow, S&P 500 and Nasdaq all had their biggest annual declines in 14 years. A stock market rally attempt is underway, but has a long way to go to prove itself.
The Dow Jones dipped below its 50-day moving average on Friday. The S&P 500 and especially the Nasdaq have some distance to go to their 50-day lines, with several other key resistance areas along the way.
Celsius Holdings (CELH), Deere (DE), BioMarin Pharmaceutical (BMRN), Exxon Mobil (XOM) and Medpace (MEDP) are five stocks near buy points. It’s a diverse list, reflecting possible areas of market leadership in the new year.
Deere was Friday’s IBD Stock Of The Day.
But whether these stocks work or not depends on the market trending higher. Right now it is not. Investors should remain very cautious.
The video embedded in the article discussed the recent market action in depth and discussed what investors should be doing as stock market 2023 gets going. The video also analyzed CELH stock, Deere and BioMarin.
Dow Jones Futures Today
Dow Jones futures rose 0.5%. S&P 500 futures climbed 0.6% and Nasdaq 100 futures climbed 0.7%.
U.S. stock and bond markets will be closed on Monday, Jan. 2, in observance of New Year’s.
On Friday, the December jobs report looms large as the Federal Reserve looks for signs of a weakening job market.
Tesla EV Deliveries
Tesla deliveries rose to 405,278 in the fourth quarter, up 31% vs. a year earlier and 18% above Q3’s record 343,800. But that came in well below lowered estimates of 418,000-420,000. Tesla offered big year-end incentives, especially in China and the U.S., to boost sales.
Q4 deliveries included 388,131 Model 3 and Model Y vehicles, with 17,147 Model S and X luxury EVs.
The figures do not include any Tesla Semi deliveries. A small number was delivered to Pepsi in December.
Q4 production swelled to 439,701 in Q4, exceeding deliveries by more than 34,000. That’s even with Tesla curbing Shanghai output on Dec. 12 and suspending production on Dec. 24. In Q3, output topped sales by just over 22,000, with deliveries also falling short that quarter.
Once again, Tesla blamed an increase in vehicles “in transit at the end of the quarter.”
Perhaps the biggest red flag for Tesla? Tesla’s new orders fell far short of Q4 deliveries and Tesla’s 2023 sales target, according to Bernstein’s Toni Sacconaghi.
“Tesla’s annual order run rate in Q4 including significant discounting was only ~1M units, and the company’s target is to sell close to 2M units in 2023, with no new models,” he wrote in a note.
In 2023, Tesla will benefit from new U.S. tax credits of up to $7,500, though the year-end incentives of $7,500 for the Model 3 or Model Y — with Model S and X vehicles added Dec. 30 — may have tapped some of that demand. A $55,000 price cap on most Model Y vehicles could limit Tesla’s EV credit boost.
Meanwhile, China ended EV subsidies. Tesla may need significant new price cuts in China, where competition continues to heat up from BYD, Nio, Li Auto, Xpeng and others. Tesla has already renewed year-end incentives for Jan. 1-Feb. 28.
Over in Europe, several countries cut or ended EV subsidies, providing another headwind for Tesla as backlogs there fade.
Tesla stock plunged 65% in 2022, its worst annual decline by far. Shares crashed 37% in December to their lowest levels since September 2022. The EV giant did rebound from midweek bear market lows to end the week roughly flat. TSLA stock volume has been very high in the past several weeks.
China EV Deliveries: BYD
BYD reported on Jan. 2 that it sold 235,197 all-electric BEVs and plug-in hybrids in December, a fourth straight record, though up just 2.1% vs. November. Sales surged 150% vs. a year earlier.
Among its 234,598 passenger vehicles, BEV sales were 111,939, up 132% from a year earlier but down slightly from 113,915 in November. PHEV sales surged 176% to 122,659, topping November’s 116,027.
BYD sold 683,440 vehicles in Q4, up 157% vs. a year earlier and 27% from Q3. For 2022, sales spiked 209% to 1,863,494 BEV and PHEVs.
At one point, December sales above 250,000 or even 260,000 seemed likely for BYD. But on Dec. 22, a top exec stated that Covid infections among workers were reducing production by at least 2,000 vehicles per day. He said full-year deliveries would be around 1.88 million, implying December deliveries around 247,000-250,000.
The actual December and full-year sales suggest a greater Covid impact than BYD anticipated on Dec. 22.
China EV Startups
BYD’s sales follow Li Auto, XPeng and Nio on Jan. 1.
Li Auto (LI) reported that it delivered 21,233 vehicles in December, with both its L8 and L9 hybrid SUVs topping 10,000. That was up nearly 50% vs. a year earlier and soaring 41% vs. the previous record of 15,034 in November. Li Auto on Friday said December deliveries of its hybrid SUVs would top 20,000.
Li Auto delivered 46,319 vehicles in Q4, up 31.5% vs. a year earlier and nearly 75% vs. Q3, as a model changeover was underway. Li Auto delivered 133,246 vehicles in 2022, up 47% from 2021.
XPeng (XPEV) EV deliveries hit 11,292 in December, down 29% vs. a year earlier. But sales leapt 94% vs. November and topped 10,000 for the first time since July. That includes 4,020 G9 SUVs, up 160% vs. November for the relatively new crossover model. Q4 deliveries came in at 22,204, down from 29,570 in Q3 and weakest showing since Q2 2021. Full-year sales climbed 23% to 120,757.
Nio (NIO) delivered 15,815 vehicles in December, up 51% vs. a year earlier and nearly 12% vs. the prior record of 14,178 set in November. Nio recently lowered its Q4 delivery guidance, citing Covid-related issues. The guidance implied December deliveries of 14,263-15,263 EVs December sales included 7,594 ET5 sedans and 4,154 ES7 SUVs, Nio’s two newest models. The ET5 is a Tesla Model 3 competitor.
Q4 sales jumped 60% vs. a year earlier to 40,052. For 2022, deliveries climbed 34% to 122,486.
Nio stock, Li Auto, Xpeng and BYD all had a tough 2022, like other EV makers and growth stocks generally. They all bottomed in October or early November, but pulled back in recent weeks.
China’s Economy Struggling
China’s economic activity is tumbling as the abrupt end of strict Covid rules spur massive waves of infections. The official manufacturing index fell 1 point in December in 47, the government said Saturday. The nonmanufacturing PMI, which covers service-sector and construction activity, dived 6.1 points to 41.6. Both are the lowest since February 2020, when Covid-19 first hit the country. Readings below 50 signal contraction.
Stock Market 2022 Ends
The stock market fell into a correction on Wednesday, but a new rally attempt began Thursday. The major indexes slipped Friday, closing out a slightly negative week.
The Dow Jones Industrial Average dipped 0.2% in last week’s stock market trading. The S&P 500 index edged down 0.1%. The Nasdaq composite fell 0.3%. The small-cap Russell 2000 lost a fraction.
For the full year, the Dow Jones retreated 8.8%, the S&P 500 slumped 19.4% and the Nasdaq tumbled 33.1%. It was their worst annual performances since 2008.
The 10-year Treasury yield jumped 13 basis points last week to 3.88% after spiking 27 basis points in the prior week. The 10-year yield ended 2021 at 1.51%.
U.S. crude oil futures rose 0.9% to $80.26 a barrel last week, the third straight weekly gain. Crude oil prices climbed 6.7% for the year, but finished well off their peaks above $130 a barrel.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rose 0.9% last week, but after hitting a fresh five-year low on Wednesday. ARK Genomics ETF (ARKG) declined 0.7%. TSLA stock is a major holding across Ark Invest’s ETFs, with Cathie Wood ramping up holdings in recent weeks. Ark also owns a small position in BYD stock.
SPDR S&P Metals & Mining ETF (XME) fell 1.9%% last week. The Global X U.S. Infrastructure Development ETF (PAVE) lost 1.2%. U.S. Global Jets ETF (JETS) descended 0.9%. SPDR S&P Homebuilders ETF (XHB) slipped 0.8%. The Energy Select SPDR ETF (XLE) rose 0.5% and the Financial Select SPDR ETF (XLF) advanced 0.7%. The Health Care Select Sector SPDR Fund (XLV) dipped 0.2%.
Stock Market 2023: 5 Stocks To Watch
BioMarin stock dipped 0.8% to 103.49 last week, pulling back in the second half of December but holding support around its 21-day line. A strong rise from current levels might offer an aggressive entry. But investors may want to wait for BMRN stock to forge a new base, or find support at the 10-week line. BioMarin earnings are expected to triple in 2023.
Deere stock fell 1.9% to 428.76 in the past week, pulling back to the 10-week moving average, with a flat base now on a weekly chart. The official buy point is 448.50. Investors might use a 10-week line bounce as an early entry for DE stock, perhaps after retaking the 21-day line.
CELH stock retreated from record highs in December, sliding for the past four weeks, but rebounded from its 50-day line on Friday, closing at 104.04. Celsius stock could offer an early entry if it clears the 21-day line decisively, with a move above the Dec. 27 high of 109.31 as a specific trigger.
XOM stock climbed 1.5% last week to 110.30, slightly above a rising 50-day moving average. A move above the Dec. 27 high of 110.47 would offer an early entry. Exxon stock has a flat base with a 114.76 buy point, according to MarketSmith analysis.
MEDP stock rose modestly Thursday from its 50-day moving average, breaking above a downtrend line in a recent consolidation. That offered an early entry within its consolidation. On Friday, with the major indexes retreating again, Medpace stock fell back to its 50-day, but did close well.
Medpace’s move could still work, but it just shows how difficult it has been for stocks to make headway.
Stock Market Analysis
The stock market edged lower last week, even with Thursday’s strong bounce, capping a tough year.
The major indexes are off their October bear market lows but well below their December short-term highs. A rally attempt technically is underway as the 2023 stock market kicks off, but it needs a follow-through day to confirm a new uptrend.
Even then, the market would face a number of technical hurdles, with the S&P 500, Nasdaq and Russell 2000 all some distance below their 50-day and 200-day lines. The Dow Jones, the relative leader in recent months, dipped below its 50-day line to end 2022 but is above its 200-day.
Until there’s clarity on the Fed rate endgame and the economy, the market could be rangebound in choppy, sideways action.
The December jobs report on Friday, Jan. 6, will be important. Significant slowing in hiring and wage gains would reinforce expectations for further slowing in Fed rate hikes, and raise hopes that peak rates are near. But robust or accelerating job and pay growth would likely trigger a big sell-off.
What To Do Now
On Friday’s year-end IBD Live, O’Neil Global Advisors portfolio manager Charles Harris said it was a “stay away” market in 2022. There will be great opportunities ahead, including in innovative companies and trends, but not yet.
A number of stocks are setting up nicely, including Deere, BioMarin and Medpace. The problem is that in the past few months, a lot of stocks have set up, but those setups generally haven’t worked out.
But investors should be stay engaged and be ready to act. If there’s a confirmed rally in early 2023, many stocks have the potential to quickly move solidly or sharply higher.
So work on your watchlists but enjoy the long weekend. Come back to the new year refreshed, waiting for the next bull market.
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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