Dow Jones Futures Fall On Weak Microsoft Guidance; Tesla Earnings On Tap

Dow Jones futures fell on Wednesday morning, along with S&P 500 futures and Nasdaq futures, as Microsoft ( MSFT ) guidance benefited better than feared earnings late Tuesday ASML (ASML) Break the forecast, with Boeing (BA) and Tesla (TSLA) also on tap today.




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The stock market rally traded in a relatively tight range on Tuesday after big gains in the previous two sessions. Major indices closed mixed. Nasdaq retreated as the Justice Department filed a second antitrust case against Google’s parent the alphabet (GOOGL).

Microsoft’s earnings improved on previous views after strong cloud-computing growth came to a close. But the software gave a great weak guide. MSFT stock, initially up sharply, has fallen back.

Intentional surgery (ISRG) and Texas Instruments (TXN) also reported. ISRG income is missing with online income. Texas instruments hit a bit, but low guidance. ISRG stock edged lower while TXN stock edged lower. – Earlier Wednesday, chip equipment major ASML reported better-than-expected Q4 earnings and sales, with Q1 revenue guidance and a dividend increase. Associate Semiconductor-Equipment Manufacturers Lam research (LRCX) Theridin (TER) and Wolf’s Spade (WOLF) are after closing.

Boeing and Freeport-McMoRan (FCX) also reports early Wednesday.

Tesla will headline earnings Wednesday night. Tesla’s earnings will be important but investors will likely focus on 2023 guidance, especially following major price cuts worldwide to start the year. These price cuts have boosted demand for Tesla — at the expense of margins — but will it last?

After the closing, Tesla said it would spend $3.6 billion on its main “gigafactory” outside Reno, Nevada. It will be used for the Tesla semi line and to produce 4680 battery cells.

Tesla stock fell 2% overnight. Shares rose 0.1% to 143.89 on Tuesday, near the 50-day line. TSLA stock is up nearly 17% year to date in 2023.

Dow Jones futures today

Dow Jones futures fell 0.1% against fair value. S&P 500 futures were down 0.3%. Nasdaq 100 futures sank 0.5%, reversing modest gains early on. MSFT stock is a component of the Dow Jones, S&P 500 and Nasdaq.

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Note that overnight action in Dow futures and elsewhere does not translate into actual trading in the next regular stock market session.


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Stock market rally

After the NYSE crash disrupted nearly 100 tickers at the open, the stock market rally traded slightly lower in the morning before slowly adding to the mix.

The Dow Jones Industrial Average rose 0.3% in stock market trading on Tuesday. The S&P 500 index was down 0.1%. The Nasdaq composite was down 0.3%. The small-cap Russell 2000 yielded 0.25%.

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

The 10-year Treasury yield fell to 3.47% amid weak productivity data.


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DOJ is suing Google again

The DOJ sued Google over its online advertising dominance, seeking to force the company to divest some assets. In October 2020, the Justice Department filed an antitrust lawsuit alleging abuse of online search power. State groups have three antitrust lawsuits against Google, including one involving advertising.

Google stock fell 2.1% to 97.70 on Tuesday, though that’s after a 10% run higher over the past three sessions on heavy volume.

Google reports Q4 earnings on February 2.

ETFs

Among growth ETFs, the Innovative IBD 50 ETF (FFTY) and the Innovative IBD Breakout Opportunities ETF (BOUT) rose. The iShares Expanded Tech Software Sector ETF ( IGV ) fell 0.6%. Microsoft stock is a major component of IGV.

The VanEck Vector Semiconductor ETF ( SMH ) fell 0.7%, a major holding of ASML stock, with TXN, LRCX and TER also in SMH.

Reflecting stocks with more speculative stories, ARK Innovation ETF (ARKK) sank 1.6% and ARK Genomics (ARKG) lost 1.4%. Tesla stock is a major holding among Ark Invest’s ETFs. Cathy Wood Arch has been strengthening his TSLA position in recent weeks, adding shares as recently as Monday.

The SPDR S&P Metals & Mining ETF ( XME ) rose 0.2%, and the Global X US Infrastructure Development ETF ( PAVE ) rose 0.4%. US International Jet Airways (JETS) has been downgraded. The SPDR S&P Homebuilders ETF ( XHB ) advanced 0.4%. The Energy Select SPDR ETF ( XLE ) was down 0.4% and the Financial Select SPDR ETF ( XLF ) was up 0.1%. The Healthcare Select Sector SPDR Fund ( XLV ) fell 0.7%.

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Microsoft Income

Microsoft’s revenue fell 6% from a year ago, excluding various items, just beating fiscal Q2 views. Revenue rose 1.9%, the smallest increase in six years and missing forecasts. Revenue from Azure and other cloud-computing services rose 31% – 38% excluding currency changes – slightly exceeding consensus estimates. Analysts were worried about Azure’s growth.

Investors were relieved by the good results of the Dow Jones tech titan. But Microsoft gave weak guidance, warning about reduced performance.

MSFT stock fell 1% after jumping 5% or more in early after hours.

Last week, Microsoft announced it was cutting 10,000 jobs, about 4.5% of its workforce.

Shares fell 0.2% to 242.04 on Tuesday, holding the 50-day line after retracing that key level on Monday. In fact, Microsoft stock has a close with a buy point of 264.02. It formed below the 200-day line, but a breakout would involve clearing that level and breaking the long downtrend.

Microsoft’s earnings and guidance are important to other software makers, PC-related stock and cloud computing players such as Google and Amazon.com (AMZN). Microsoft’s latest major acquisition and alliance with ChatGPT developer OpenAI may be another threat to Google and Amazon.

Amazon and several cloud software companies initially fell overnight after Microsoft’s earnings beat.

Market rally analysis

The stock market rally stalled on Tuesday, with major indexes ending mixed. But this was normal practice after the big gains on Friday and Monday, especially to the big flood of earnings.

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

The Nasdaq Composite dipped and is still below the 200-day line and December highs.

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The Dow Jones extended its rally above the 50-day line after retracing that key level on Monday

The small-cap Russell 200 is lower but close to a 2022 finish.

The market rally looks strong, but the major indices are all facing resistance levels. Tech was leading the market in 2023, but now we’re getting the tech revenue flag. Even if the macroeconomic picture remains stable and the Fed raises rates, companies could cut guidance in the next few weeks.

Microsoft can only be started.

In addition to Tesla, ASML and Boeing on Wednesday, Appl (AAPL), the parent of Facebook Meta platforms (META), Amazon, AMD (AMD), Google and many others will report next week

If the market rally clears the 2022-2022 highs by the end of next week, it will be a strong signal that continued growth is underway.


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what to do now

The stock market rally has shown great strength and presents a number of buying opportunities.

Investors should add exposure gradually and not focus too much on a particular stock or sector. An earnings season can disrupt the market, but especially individual stocks. One option for investors is to buy market or sector ETFs with individual names.

Definitely focus on building your watch lists. Be aware of key revenue streams for the market and your properties, including competitors, customers and suppliers to the companies in which you are located.

Read the big picture daily to stay in tune with market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.

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