Dow Jones Futures Fall: Microsoft Erases Gains on Low Forecast; Tesla earnings on tap

Dow Jones futures fell after hours, along with S&P 500 and Nasdaq futures, as Microsoft (MSFT) forecasts took precedence over better-than-expected earnings. ASML (ASML), Boeing (BA) and You’re here (TSLA) are in theaters Wednesday.




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The stock market rally traded in a relatively narrow range on Tuesday after big gains in the previous two sessions. The main indices closed on a mixed note. Nasdaq pulls out as Justice Department files second antitrust lawsuit against Google’s parent company Alphabet (GOOGL).

Microsoft’s earnings have exceeded past views on the strong growth of cloud computing. But the software giant gave weak advice. MSFT stock, which was up sharply at first, reversed lower.

Intuitive surgery (ISRG) and Texas Instruments (TXN) also reported. ISRG Earnings Missed with Online Earnings. Texas Instruments beat slightly, but guided lower. ISRG stock fell while TXN stock fell slightly.

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

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

Tesla will make headlines on Wednesday night. Tesla’s earnings will be strong, but investors are likely to focus on the 2023 forecast, especially following steep price declines around the world to start the year. These price cuts have boosted demand for Tesla – at the expense of margins – but will this increase last?

After the closing, Tesla said it would spend $3.6 billion in or around its original “Gigafactory” outside of Reno, Nevada. It will be used for a Tesla Semi line and for mass production of 4680 battery cells.

Tesla stock fell 2% overnight. Shares edged up 0.1% on Tuesday to 143.89, closing in on the 50-day line. TSLA stock is up nearly 17% so far in 2023.

Dow Jones Futures Today

Dow Jones futures fell 0.25% from fair value. S&P 500 futures fell 0.4%. Nasdaq 100 futures fell 0.7%, reversing from initially modest gains. MSFT stock is a component of the Dow Jones, S&P 500 and Nasdaq.

Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.


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Stock market rally

After a NYSE glitch disrupted around 100 tickers at the open, the stock rally traded slightly lower in the morning before gradually improving to mixed.

The Dow Jones Industrial Average rose 0.3% in trading on Tuesday. The S&P 500 index fell 0.1%. The Nasdaq composite fell 0.3%. Small cap Russell 2000 fell 0.25%.

U.S. crude oil 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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The DOJ sues Google again

The DOJ sued Google for its dominance of online advertising, seeking to force the company to divest certain assets. In October 2020, the Department of Justice filed an antitrust complaint for alleged misuse of online search power. Groups of states have filed three antitrust lawsuits against Google, including one over advertising.

Google stock fell 2.1% to 97.70 on Tuesday, although that was after rising 10% in volume in the previous three sessions.

Google releases its fourth quarter results on February 2.

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

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

Mirroring stocks with more speculative histories, ETF ARK Innovation (ARKK) fell 1.6% and ARK Genomics (ARKG) lost 1.4%. Tesla stock is a major holding in Ark Invest’s ETFs. Cathie Wood’s arch has been strengthening its TSLA position in recent weeks, adding stock recently like Monday.

The SPDR S&P Metals & Mining ETF (XME) rose 0.2% and the Global X US Infrastructure Development ETF (PAVE) climbed 0.4%. America’s Global Jets (JETS) fell. The SPDR S&P Homebuilders ETF (XHB) rose 0.4%. ETF Energy Select SPDR (XLE) fell 0.4% and ETF Financial Select SPDR (XLF) rose 0.1%. The SPDR healthcare sector fund (XLV) fell 0.7%.


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Microsoft Benefits

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

Investors were relieved by the Dow Jones tech titan’s decent results. But Microsoft gave weak indications, warning of the slowdown in activity.

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

Last week, Microsoft announced plans to cut 10,000 jobs, or around 4.5% of staff.

Shares fell 0.2% to 242.04 on Tuesday, holding the 50-day line after recovering from that key level on Monday. Microsoft stock can be said to have a minimum basis with a buy point of 264.02. It formed below the 200-day line, but a breakout would involve breaking that level and breaking a long downtrend.

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

Amazon and several cloud software companies fell overnight after initially bouncing back on Microsoft’s earnings.

Market rally analysis

The stock market rally came to a halt on Tuesday, with major indexes ending mixed. But that was normal action after big gains on Friday and Monday, especially before a huge flood of earnings.

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

The Nasdaq composite dipped and is still slightly 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 has fallen slightly but is close to its late 2022 highs.

The market recovery looks strong, but the major indices are all facing resistance levels. Technology dominated the market in 2023, but now we will get a barrage of technology revenue. Even if the macroeconomic situation stabilizes and the Fed rate hikes end, companies could revise their forecasts downwards in the coming weeks.

Microsoft might just start.

Besides Tesla, ASML and Boeing on Wednesday, Apple (AAPL), parent Facebook Metaplatforms (META), Amazon, AMD (AMD), Google and more are due to report next week

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


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What to do now

The stock market rally has shown more strength and offers a number of buying opportunities.

Investors should increase their exposure gradually and not focus too much on a specific stock or sector. Earnings season could shake up the market, but especially individual stocks. One option for investors is to buy market or sector ETFs, as well as individual names.

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

Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.

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

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