Dow Jones Futures Fall: Microsoft erases gains on weak guidance; Tesla earnings


Dow Jones futures fell after hours, along with S&P 500 futures and Nasdaq futures. Microsoft ( MSFT ) management did better than fear. ASML (ASML), Boeing (BA) and Tesla (TSLA) is found on Wednesday.




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Tuesday’s stock rally was traded in a relatively narrow range after big gains in the previous two sessions. Major indices closed mixed. The Nasdaq retreated as the Justice Department filed a second antitrust lawsuit against Google Alphabet (GOOGL).

Microsoft earnings beat past views of strong cloud computing growth. But the software giant provided poor guidance. MSFT shares initially rose strongly, but then fell.

Intuitive Surgery (ISRG) and Texas Instruments (TXN) also informed. ISRG income is omitted from ordinary income. Texas Instruments took a slight beating, but steered lower. ISRG shares fell, while TXN shares fell slightly.

On Wednesday, chip equipment giant ASML reports, along with other semiconductor equipment makers Lam Research (LRCX), Teradyne (TER) and Wolfspeed (WOLF) after closing.

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

Tesla will hold earnings on Tuesday. Tesla’s earnings will be substantial, but investors will likely focus on its 2023 guidance, especially after massive price cuts around the world to start 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 the Tesla Semi factory and mass production of 4,680 battery cells at its facilities near Reno, Nevada. This confirmed earlier reports.

Tesla shares fell 2% overnight. Shares rose 0.1% to 143.89 on Tuesday, nearing the 50-day line. TSLA shares are up nearly 17% through 2023.

Dow Jones Futures today

Dow Jones futures were down 0.2% at fair value. S&P 500 futures were down 0.4%. Nasdaq 100 futures lost 0.7%, reversing modest gains initially. The MSFT fund is a component of the Dow Jones, S&P 500 and Nasdaq.

Remember that an overnight move in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.


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Stock market rally

After an NYSE error disrupted nearly 100 tickers at the open, the stock market rallied modestly lower in the morning before gradually building to mixed levels.

The Dow Jones Industrial Average rose 0.3% in Tuesday’s trading. The S&P 500 index fell 0.1%. The Nasdaq composite fell 0.3%. The small-cap Russell 2000 yielded 0.25%.

The price of crude oil in the United States fell by 1.8% to 80.13 dollars/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 and weak manufacturing data.


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The DOJ sued Google again

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

Google shares fell 2.1% to 97.70 on Tuesday, though that’s after a 10% gain on heavy volume over the previous three sessions.

Google reports Q4 earnings on February 2.

ETFs

Among the rising ETFs, Innovator IBD 50 ETF ( FFTY ) and Innovator IBD Breakout Opportunities ETF ( BOUT ) were higher. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 0.6%. Microsoft shares are the main IGV component.

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

Backing stocks with more speculative stories, ARK Innovation ETF ( ARKK ) lost 1.6%, while ARK Genomics ( ARKG ) lost 1.4%. Tesla stock is a major holding in Ark Invest’s ETFs. Cathie Wood’s Ark has strengthened its position in TSLA in recent weeks, adding that its shares are on Monday.

The SPDR S&P Metals & Mining ETF ( XME ) rose 0.2%, while the Global X US Infrastructure Development ETF ( PAVE ) rose 0.4%. US Global Jets (JETS) is down. The SPDR S&P Homebuilders ETF ( XHB ) advanced 0.4%. The Energy Select SPDR ETF (XLE) gained 0.4%, while the Financial Select SPDR ETF (XLF) gained 0.1%. The Healthcare Select Sector SPDR Fund ( XLV ) fell 0.7%.


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Microsoft Earnings

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

Investors were relieved by the decent results of the Dow Jones tech titan. But Microsoft issued weak guidance, warning of a slowdown in 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 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 certainly has a low base with a buy point of 264.02. It formed 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 for other software makers, PC-related stocks and cloud computing players like Google and others. Amazon.com (AMZN). Microsoft’s recent large stake and alliance with ChatGPT creator OpenAI could be another threat to Google and Amazon.

Amazon and a number of cloud software firms fell overnight after initially rallying on Microsoft’s gains.

Market rally analysis

The stock market rally stalled on Tuesday, with major indexes ending mixed. However, this was a normal move after the big gains on Friday and Monday, especially heading into a big flood of gains.

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

The Nasdaq composite fell and is still below the 200-day line and December high.

The Dow Jones extended its rally above the 50-day line after retaking 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 the major indices are all facing resistance levels. Technology will lead the market in 2023, but now we will get a barrage of technological gains. Even if the macroeconomic picture stabilizes and the Fed’s rate hikes ease, companies may cut guidance over the next few weeks.

Microsoft may just be the beginning.

Along with Tesla, ASML and Boeing on Wednesday, apple (AAPL), the parent of Facebook Meta platforms (META), Amazon, AMD (AMD), Google and more should report next week

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


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What to do now

A stock market rally shows more strength and offers a number of buying opportunities.

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

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

Read The Big Picture daily to stay in sync with market direction and leading stocks and sectors.

Follow Ed Carson on Twitter @IBD_ECarson for stock updates and more.

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