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Dow Jones futures fall: Microsoft erases gains on weak guidance; Tesla On Tap earnings


Dow Jones futures fell after hours, along with S&P 500 futures and Nasdaq futures, as Microsoft (MSFT) guidance outweighed better-than-expected earnings. ASML (ASML), Boeing (B.A) and Tesla (TSLA) are on tap on Wednesdays.




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The stock market rally traded in a relatively narrow range on Tuesday after big gains in the previous two sessions. Major indexes closed mixed. Nasdaq withdrew after the Justice Department filed a second antitrust suit against the Google parent Alphabet (GOOGLE).

Microsoft’s earnings beat past views on the strong growth of cloud computing. But the software giant gave weak guidance. MSFT shares, initially strongly up, turned down.

Intuitive surgery (ISRG) and Texas Instruments (TXN) is also reported. Missed ISRG earnings with built-in revenue. Texas Instruments takes a slight beating but is guided lower. Shares of ISRG fell, while shares of TXN fell slightly.

Early Wednesday, chip equipment giant ASML communicated with other semiconductor equipment makers Lam Research (LRCX), Teradin (TER) and Wolfspeed (WOLF) maturing after closing.

Boeing and Freeport-McMoran (FCX) also report early Wednesday.

Tesla will lead the revenue Wednesday night. Tesla’s earnings will be important, but investors will likely focus on 2023 guidance, especially after the big global price cuts earlier in the year. Those price cuts boosted demand for Tesla — at the expense of margins — but will the boost last?

After the closing, Tesla said it would spend $3.6 billion on or around its initial “Gigafactory” outside Reno, Nevada. It will be used for the Tesla Semi line and mass production of 4,680 battery cells.

Tesla shares fell 2% overnight. Shares rose 0.1% on Tuesday to 143.89, near the 50-day line. Shares of TSLA are up nearly 17% so far in 2023.

Dow Jones futures today

Dow Jones futures were down 0.25% at fair value. S&P 500 futures were down 0.4%. Nasdaq 100 futures sank 0.7 percent, reversing modest initial gains. MSFT shares are a component of the Dow Jones, S&P 500 and Nasdaq.

Remember this night action in Dow futures and elsewhere does not necessarily become an actual trade in the next regular Stock Exchange session.


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Stock market rallies

After a NYSE bug interrupted 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 Exchange Trading. The S&P 500 was down 0.1%. The Nasdaq Composite was down 0.3%. The small-cap Russell 2000 gave up 0.25%.

U.S. crude oil prices fell 1.8 percent to $80.13 a barrel. Natural gas fell 5.5% after rising more than 6% on Monday.

The yield on the 10-year Treasury note fell basis points to 3.47% amid mixed to weak manufacturing data.


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DOJ is suing Google again

DOJ sues Google for dominating online ads, trying to force the company to divest certain assets. In October 2020, the Department of Justice filed an antitrust lawsuit alleging abuse of online search powers. Groups of countries have three antitrust cases against Google, including one related to advertising.

Shares of Google fell 2.1% to 97.70 on Tuesday, although that followed a 10% gain on heavy volume over the previous three sessions.

Google reports its fourth quarter earnings on February 2nd.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) and the Innovator IBD Breakout Opportunities ETF (BOOTH) rose higher. iShares Expanded Tech-Software Sector ETF (IGV) decreased by 0.6%. Microsoft stock is a major component of IGV.

VanEck Vectors Semiconductor ETF (SMH) down 0.7%, ASML stock is a big holding, with TXN, LRCX and TER also in SMH.

Reflecting 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’s ETF. Cathie Wood’s Ark has boosted its position in TSLA in recent weeks, adding shares as recently as Monday.

SPDR S&P Metals & Mining ETF (XME) rose 0.2%, and the Global X US Infrastructure Development ETF (PAVING) rose 0.4%. US Global Jets (STREAMS) flashes lower. SPDR S&P Homebuilders ETF (XHB) advanced by 0.4%. Energy Select SPDR ETF (XLE) shed 0.4% and the Financial Select SPDR ETF (45) rose 0.1%. Select Healthcare Sector SPDR Fund (XLV) fell by 0.7%.


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Microsoft earnings

Microsoft’s earnings fell 6% from a year earlier, excluding various items, just beating estimates for the fiscal second quarter. Revenue rose 1.9%, the smallest increase in more than six years and missing forecasts. Revenue from Azure and other cloud computing services jumped 31% — 38% excluding currency fluctuations — slightly beating consensus views. Analysts worried about Azure’s growth.

Investors were relieved by the decent performance of the tech titan Dow Jones. But Microsoft gave weak guidance, warning of a slowdown in activity.

Shares of MSFT fell 1% after initially jumping 5% or more after hours.

Last week, Microsoft announced plans to cut 10,000 jobs, about 4.5% of its workforce.

Shares fell 0.2% to 242.04 on Tuesday, holding the 50-day line after retaking that key level on Monday. Microsoft stock probably has the lowest base at 264.02 point of purchase. It is forming below the 200-day line, but a breakout would involve clearing that level and breaking a long downtrend.

Microsoft’s earnings and guidance are important to other software makers, PC and cloud-related stocks such as Google and Amazon.com (AMZN). Microsoft’s recent large stake and alliance with ChatGPT creator OpenAI could be another threat to Google and Amazon.

Amazon and several cloud software firms fell overnight after initially rising on Microsoft’s earnings.

Market Rally Analysis

The stock market rally stalled on Tuesday, with major indexes ending mixed. But that was normal action after the big gains on Friday and Monday, especially amid a huge stream of profits.

The S&P 500, which cleared last week’s highs and Monday’s 4,000 level, is holding those key levels.

The Nasdaq Composite edged lower and is still modestly below the 200-day line and December highs.

The Dow Jones continued its rally from the 50-day line after reclaiming that key level on Monday

The small-cap Russell 200 edged lower but is near its late-2022 highs.

The market rally looks strong, but all major indices are facing resistance levels. Technology led the market in 2023, but now we will get a flood of technology gains. Even if the macroeconomic picture stabilizes and the Fed’s rate hikes ease, companies could cut guidance over the next few weeks.

Microsoft might just start.

In addition to Tesla, ASML and Boeing on Wednesday, An apple (AAPL), parent of Facebook Meta platforms (META), Amazon, AMD (AMD), Google and many others are due to report next week

If the market rally has cleared the highs since late 2022 by the end of next week, it would be a strong signal that a sustained uptrend is underway.


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What should we do now

The stock market rally is showing more strength and offers a number of buying opportunities.

Investors should add exposure gradually and not concentrate too much on a particular stock or sector. Earnings season can shake up the market, but especially individual stocks. One option for investors is to buy market or sector ETFs along with individual names.

Definitely focus on building your watchlists. Be aware of the key earnings for the market and your holdings, including competitors, customers and suppliers of the companies in which you hold positions.

Read it The big picture every day to stay in sync with 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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