Dow Jones futures edged lower early Thursday, but S&P 500 futures and especially Nasdaq futures rose. Taiwan Semiconductor (TSM) earnings and guidance buoyed the chip sector, while Humana (HUM) hit health insurers.

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The stock market rally retreated again Wednesday amid weak China GDP growth, higher European inflation figures and mixed U.S. economic data. The major indexes tested a key level, but closed off lows.

However, a number of stocks fared relatively well, holding in or near buy zones. Those included Microsoft (MSFT), GitLab (GTLB), Datadog (DDOG), Expedia (EXPE), Royal Caribbean (RCL), United Rentals (URI), Axon Enterprise (AXON), GoDaddy (GDDY), Celsius Holdings (CELH), Elastic (ESTC), DoubleVerify (DV), Novo Nordisk (NVO), Spotify (SPOT), Skechers (SKX), Interactive Brokers (IBKR), AppLovin (APP), Arm Holdings (ARM).

Many of these names, including Datadog, ARM, Skechers, DoubleVerify and IBKR stock, reversed higher. Others pared losses and held key levels, such as Spotify and ESTC stock.

However, Tesla (TSLA) retreated amid substantial price cuts in Europe following cuts in China. TSLA stock sank 2%, hitting a two-month low intraday. Tesla earnings are due on Jan. 24.

DDOG stock, Spotify and Novo Nordisk are on IBD Leaderboard, with CELH stock on the Leaderboard watchlist. Microsoft, Skechers and SPOT are on SwingTrader. MSFT stock is on IBD Long-Term Leaders. RCL stock, Datadog, Celsius, Microsoft, Novo Nordisk, United Rentals and Axon Enterprise are on the IBD 50 list. Datadog, Axon Enterprise and URI stock are on the IBD Big Cap 20.

DoubleVerify was Wednesday’s IBD Stock Of The Day. GTLB stock was Tuesday’s selection.

Dow Jones Futures Today

Dow Jones futures were slightly below fair value. S&P 500 futures climbed 0.5% and Nasdaq 100 futures advanced 0.9%.

Humana plunged in premarket trade after warning that 2023 earnings would come in well below estimates. That hit other health insurers, including Dow component UnitedHealth (UNH).

The 10-year Treasury yield dipped to 4.09%.

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

Taiwan Semiconductor Earnings

Taiwan Semiconductor (TSM) reported lower earnings and sales that slightly beat Q4 views. The chip foundry giant predicted more than 20% revenue growth in 2024, fueled by demand for artificial intelligence chips.

TSM stock jumped in premarket trade, signaling a breakout past various buy points.

TSMC makes chips for Apple (AAPL), Nvidia (NVDA), Qualcomm (QCOM) and many more. It’s also a huge buyer of chipmaking equipment from Applied Materials (AMAT), ASML (ASML), Lam Research (LRCX) and more. So Taiwan Semi earnings and guidance are key for the chip sector.

AMAT, LRCX and Nvidia stock rose modestly before the open.

Birkenstock Earnings

Birkenstock Holding (BIRK) reported earnings for the first time as a public company early Thursday. Revenue rose 16.5% in local currency terms while the sandals giant guided higher on sales. But it also cited margin pressures.

Shares tumbled in premarket trade.

BIRK stock climbed 1.1% to 49.98 on Wednesday. The Birkenstock IPO, which came public at 46 in early October, could have a flat base by Friday’s close with a 52.12 buy point.

Join IBD experts as they analyze leading stocks and the market on IBD Live

Stock Market Rally

The stock market rally gave up ground but closed off lows. U.S. and global economic data and recent commentary from policymakers signal slower rate cuts in the U.S. and Europe with no big stimulus for a struggling China.

The Dow Jones Industrial Average dipped 0.25% in Wednesday’s stock market trading. The S&P 500 index and Nasdaq composite lost 0.6%, rebounding from around the 21-day line. Both are in the middle of a modest range, above their Jan. 5 lows with the 50-day and especially 10-week lines offering potential support as well.

Once again, market breadth was decisively negative.

The small-cap Russell 2000 sank 0.7%, but did bounce from near its 50-day line.

The Invesco S&P 500 Equal Weight ETF (RSP) sank 0.8%, now clearly below its 21-day line and at a one-month low.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) sank x%, but did just manage to hold its 21-day line.

An extended market pause would be normal and healthy after strong gains to end 2023. If the major indexes hold near current levels or even at their early January lows, most leading stocks should be fine.

One positive is that the CBOE Volatility Index, or VIX, has jumped to a two-month high. Far from being elevated, the market fear gauge is no longer hovering around pre-Covid lows.

U.S. crude oil prices rose 0.2% to $72.56 a barrel.

The 10-year Treasury yield rose 4 basis points to 4.10%, hitting its highest level in a month. The two-year Treasury bond yield leapt 13 basis points to 4.35%.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.4%, with Microsoft stock a major holding and DDOG also in IGV. The VanEck Vectors Semiconductor ETF (SMH) fell 0.6%. TSM stock is a big SMH component, along with Nvidia, AMAT, LRCX and QCOM.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) sank 1.8% and ARK Genomics ETF (ARKG) tumbled 3.1%. Tesla stock is a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) declined 0.8%. U.S. Global Jets ETF (JETS) descended 1.9%. SPDR S&P Homebuilders ETF (XHB) stepped down 0.3%. The Energy Select SPDR ETF (XLE) gave up 0.8% and the Health Care Select Sector SPDR Fund (XLV) dipped 0.2%

The Industrial Select Sector SPDR Fund (XLI) shed 0.7%, with URI stock a component. The Financial Select SPDR ETF (XLF) edged down 0.2%.

Time The Market With IBD’s ETF Market Strategy

What To Do Now

You can make incremental buys, but a rangebound market is tricky. Buying opportunities will appear when the market is on a short-term upswing, only for those stocks to fall back when the indexes fade.

Investors can still have a significant exposure, though they should be ready to scale back if individual holdings or the broader market deteriorate.

Look for stocks that are holding up well and finding support at key levels. A longer pause will let some leaders forge new pause, while stocks moving higher will gain relative strength. So keep your watchlists up to date.

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, X/Twitter at @IBD_ECarson and Bluesky at @edcarson.bsky.social for stock market updates and more.

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