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

Dow Jones futures fell early Wednesday, along with S&P 500 futures and Nasdaq futures, as Microsoft (MSFT) guidance exceeded better-than-fear earnings late Tuesday ASML (ASML) beat forecasts, with Boeing (BA) and Tesla (TSLA) is also on tap today.




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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 indices closed mixed. Nasdaq retreats as Justice Department files second antitrust suit against Google parent Alphabet (GOOGL).

Microsoft’s earnings beat previous views after closing on strong cloud-computing growth. But the software giant provides weak guidance. MSFT’s stock, which rose sharply initially, is back down.

Intuitive Surgical (ISRG) and Texas Instruments (TXN) also reported. ISRG lost revenue with in-line revenue. Texas Instruments was slightly beaten, but guided lower. ISRG stock fell while TXN stock fell slightly.-Early Wednesday, chip equipment giant ASML reported better-than-expected Q4 earnings and sales, with strong Q1 earnings guidance and increase in dividend. Associated semiconductor-equipment manufacturers Lam Research (LRCX), Teradyne (TER) and Wolfspeed (WOLF) is after closing.

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

Tesla will headline earnings on Wednesday evening. Tesla’s earnings are significant but investors are likely to focus on 2023 guidance, especially following several global price cuts to start the year. Price cuts have boosted demand for Tesla — at the expense of margins — but will that boom last?

After the shutdown, Tesla said it would spend $3.6 billion near its original “Gigafactory” outside Reno, Nevada. It will be used for a Tesla Semi line and for mass producing 4680 battery cells.

Tesla stock fell 2% overnight. Shares rose 0.1% on Tuesday to 143.89, 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% versus the fair value. S&P 500 futures were down 0.3%. Nasdaq 100 futures sank 0.5%, reversing modest early gains. MSFT stock is a component of the Dow Jones, S&P 500 and Nasdaq.

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

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Stock Market Rally

After a glitch on the NYSE disrupted about 100 tickers at the open, the stock market rally traded slightly lower in the morning before gradually improving in the mix.

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

US crude oil prices fell 1.8% to $80.13 per 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 weak manufacturing data.


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DOJ Sues Google Again

The DOJ is suing Google over its dominance in online advertising, seeking to force the company to divest some properties. In October 2020, the Department of Justice filed an antitrust suit over alleged misuse of online search power. Groups of states have three antitrust suits against Google, including one involving advertising.

Google stock fell 2.1% to 97.70 on Tuesday, though it was after running 10% higher on heavy volume over the past three sessions.

Google reported its Q4 earnings on February 2.

ETFs

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

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

Showing stocks with more speculative stories, ARK Innovation ETF (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 Ark has increased its position in TSLA in recent weeks, adding shares on Monday.

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The SPDR S&P Metals & Mining ETF (XME) rose 0.2%, and the Global X US Infrastructure Development ETF (PAVE) rose 0.4%. US Global Jets (JETS) blinked below. 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 Health Care Select Sector SPDR Fund (XLV) fell 0.7%.


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Microsoft Revenues

Microsoft’s earnings fell 6% compared to a year earlier, excluding miscellaneous items, just beating the fiscal Q2 outlook. 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 changes – slightly exceeding the consensus view. Analysts are concerned about Azure’s growth.

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

MSFT stock 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 retracing key levels on Monday. In fact, Microsoft stock has a bottom base with a 264.02 buy point. 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 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 Microsoft’s earlier earnings rally.

Market Rally Analysis

The stock market rally stalled on Tuesday, with major indexes finishing mixed. But that’s normal action after big wins on Friday and Monday, especially leading to a big flood of earnings.

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

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

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The Dow Jones extended its rise from its 50-day line after retracing key levels on Monday

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

The market rally looks strong, but the major indices are facing resistance levels. Tech will lead the market in 2023, but now we will get more profits in technology. Although the macroeconomic picture continues and Fed rate hikes are in the air, companies may cut guidance in the coming weeks.

Microsoft can start.

In addition to Tesla, ASML and Boeing on Wednesday, Apple (AAPL), parent of Facebook Meta Platform (META), Amazon, IBM (AMD), Google and more will be reported next week

If the market rally clears the late 2022 high by the end of next week, it will be a strong signal that a sustained uptrend is underway.


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What To Do Now

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

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

Definitely focus on building your watchlists. Find out the important income for the market and your assets, including competitors, customers and suppliers of companies with your position.

Read the Big Picture every day to stay in tune 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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