Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures, as Microsoft (MSFT) guidance canceled out better-than-feared gains. ASML (ASML), Boeing (licensed in letters) Y tesla (TSLA) are available on Wednesday.
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The stock market rally traded in a relatively tight range on Tuesday after big gains in the previous two sessions. The main indices closed mixed. The Nasdaq backed down as the Justice Department filed a second antitrust lawsuit against it. google father Alphabet (Google).
Microsoft’s earnings beat previous views in strong growth of cloud computing. But the software giant gave weak guidance. MSFT shares, which rose strongly at first, reversed lower.
intuitive surgical (ISRG) Y Texas Instruments (txn) also reported. lost ISRG earnings with income online. Texas Instruments slightly outperformed but led lower. ISRG shares fell while TXN shares fell slightly.
Early Wednesday, chip equipment giant ASML reports, with other semiconductor equipment makers Lam Research (LRCX), Theradine (ter) Y wolf speed (WOLF) expired after closing.
Boeing and Freeport-McMoRan (FCX) also report early Wednesday morning.
Tesla will lead the gains Wednesday night Tesla’s earnings will be big, but investors are likely to focus on guidance for 2023, especially after big price cuts around the world to start the year. Those price cuts have boosted demand for Tesla, at the expense of margins, but will that boost last?
After the shutdown, Tesla said it will spend $3.6 billion in or around its original “Gigafactory” outside Reno, Nevada. It will be used for a Tesla Semi line and for the mass production of 4680 battery cells.
Tesla shares fell 2% overnight. The shares rose 0.1% on Tuesday to 143.89, nearing the 50-day line. TSLA shares are up nearly 17% so far in 2023.
Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures fell 0.45%. Nasdaq 100 futures sank 0.7%, reversing modest early gains. MSFT stocks are a component of the Dow Jones, S&P 500, and Nasdaq.
Remember that overnight action in dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock Exchange session.
Join IBD experts as they discuss actionable actions in the stock market rally on IBD Live
stock rally
After a failure on the New York Stock Exchange disrupted about 100 tickers at the open, the stock market rally traded modestly lower in the morning before gradually improving to mixed.
The Dow Jones Industrial Average rose 0.3% on Tuesday stock trading. The S&P 500 index fell 0.1%. The Nasdaq Composite fell 0.3%. The small-cap Russell 2000 lost 0.25%.
US crude prices fell 1.8% to $80.13 a barrel. Natural gas fell 5.5% after rising more than 6% on Monday.
The 10-year Treasury yield fell basis points to 3.47% amid mixed-to-weak manufacturing data.
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DOJ sues Google again
The DOJ sued Google over its dominance of online adsseeking to force the company to dispose of certain assets. In October 2020, the Department of Justice filed an antitrust lawsuit for alleged misuse of online search power. Groups of states have three antitrust lawsuits against Google, including one involving advertising.
Google shares fell 2.1% to 97.70 on Tuesday, though that is after rising 10% on heavy volume in the previous three sessions.
Google reports fourth-quarter earnings on February 2. 2.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (ffty) and the Innovator IBD Breakout Opportunities ETF (COMBAT) bordered higher. The iShares Expanded Technology Software Sector ETF (IGV) decreased by 0.6%. Microsoft shares are an important component of IGV.
The VanEck Vector Semiconductor ETF (HMS) fell 0.7%, ASML shares are a big holding, with TXN, LRCX and TER also in SMH.
Mirroring stocks with more speculative histories, the ARK Innovation ETF (ARKK) sank 1.6% and ARK Genomics (ARKG) lost 1.4%. Tesla stock is a major holding in Ark Invest ETFs. Cathie Wood’s Ark has been bolstering its position at TSLA in recent weeks, adding stock as recently as Monday.
The SPDR S&P Metals & Mining ETF (XME) rose 0.2%, and the Global X US Infrastructure Development ETF (TO PAVE) rose 0.4%. US Global Jets (JETS) emitted a lower beep. SPDR S&P Home Builders ETF (XHB) advanced 0.4%. The Energy Select SPDR ETFXLE) fell 0.4% and the Financial Select SPDR ETF (XLF) rose 0.1%. The SPDR Select Healthcare Sector Fund (XLV) fell 0.7%.
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Microsoft earnings
Microsoft’s earnings fell 6% vs. a year earlier, excluding several items, simply surpassing fiscal second quarter views. Revenue rose 1.9%, the smallest increase in more than six years and below forecasts. Revenue from Azure and other cloud computing services increased 31% (38% excluding currency fluctuations), slightly exceeding consensus views. Analysts were concerned about Azure’s growth.
Investors were relieved by decent results from the tech titan Dow Jones. But Microsoft gave weak guidance, a warning about slowing activity.
MSFT shares fell 1% after initially jumping 5% or more after hours.
Last week, Microsoft announced plans to cut 10,000 jobs, about 4.5% of the staff.
The shares fell 0.2% to 242.04 on Tuesday, holding the 50-day line after retaking that key level on Monday. Microsoft stock arguably bottoms at 264.02 point of purchase. It formed below the 200-day line, but a break would imply breaking above that level and breaking a long downtrend.
Microsoft’s earnings and guidance are important to other software makers, PC-related stocks and cloud computing games like Google and amazon.com (AMZN). Microsoft’s recent big involvement and alliance with ChatGPT creator OpenAI could be another threat to Google and Amazon.
Amazon and several cloud software companies fell overnight after initially rebounding on Microsoft’s gains.
Market recovery analysis
The stock market rally came to a halt on Tuesday and the major indices ended mixed. But that was normal action after the big gains on Friday and Monday, especially in the face of a big earnings rush.
The S&P 500, which broke above last week’s highs and the 4,000 level on Monday, held those key levels.
The Nasdaq Composite fell and is still modestly below the 200-day line and December highs.
The Dow Jones extended its rise from the 50-day line after retaking that key level on Monday
The small-cap Russell 200 is down, but is close to its late-2022 peaks.
The market rally looks strong, but all major indices are facing resistance levels. Technology has been leading the market in 2023, but now we are going to receive a barrage of technological gains. Even if the macroeconomic outlook stabilizes and the Fed’s rate hikes ease, companies could cut guidance in the coming weeks.
Microsoft could just get started.
In addition to Tesla, ASML and Boeing on Wednesday, Apple (AAPL), father of Facebook metaplatforms (GOAL), Amazon, AMD (AMD), Google and many more are due to report next week
If the market rally has breached the late-2022 highs by the end of next week, it would be a strong sign that a sustained uptrend is underway.
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What to do now
The stock market rally has been showing more strength and offering a number of buying opportunities.
Investors should gradually add exposure and not focus too much on a specific stock or sector. Earnings season could roll the market, but especially individual stocks. One option for investors is to buy market or sector ETFs, along with individual names.
Definitely focus on creating your watch lists. Consider the key earnings for the market and your holdings, including rivals, customers and suppliers of the companies in which you have positions.
read The panorama daily to stay in sync with market direction and major stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson for stock market updates and more.
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