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 on Tuesday night topped better-than-expected earnings ASML (ASML) beat forecasts, with Boeing (BA) and Tesla (TSLA) today as well.




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

Microsoft’s earnings have fallen by the number of previous views after the end of strong growth in cloud computing. But the software giant provided weak guidance. Shares of MSFT initially rose strongly, but then fell.

Intuitive surgery (ISRG) and Texas Instruments (TXN) also reported. ISRG’s unearned revenue taking into account revenue. Texas Instruments slightly outperformed but led below. Shares of ISRG fell, while TXN stock fell slightly. Early Wednesday, chip equipment giant ASML reported better-than-expected fourth-quarter earnings and sales on the back of strong first-quarter earnings and dividend growth. Semiconductor equipment manufacturers Lama research (LRCX), Teradyne (TER) and Wolfspeed (WOLF) is due after closing.

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

Tesla will report earnings on Wednesday evening. Tesla’s earnings will be important, but investors will likely focus on 2023 guidance, especially after big price cuts around the world to start the year. These price cuts have increased demand for Tesla – at the expense of profits – but will it last?

After the shutdown, Tesla said it would spend $3.6 billion near the original “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% to 143.89 on Tuesday, nearing the 50-day line. TSLA stock is up nearly 17% so far in 2023.

Dow Jones futures today

Dow Jones futures fell 0.1% against the real value. S&P 500 futures were down 0.3%. Nasdaq 100 futures fell 0.5%, reversing early modest gains. MSFT shares are a component of the Dow Jones, the S&P 500 and the Nasdaq.

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


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Stock market rally

After the NYSE glitch disrupted roughly 100 swings at the open, the stock market rally edged lower in the morning before gradually improving to mixed.

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

US crude oil prices fell by 1.8% to 80.13 dollars per barrel. The price of natural gas fell 5.5% on Monday after rising more than 6%.

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


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DOJ is suing Google again

The DOJ sued Google over its dominance of online advertising in an effort 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. The state groups have three antitrust claims against Google, including one related to advertising.

Google shares fell 2.1% to 97.70 on Tuesday, although that is after a 10% gain in the previous three sessions.

Google reports Q4 earnings on February 2nd.

ETFs

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

VanEck Vectors Semiconductor ETF (SMH) was down 0.7%, ASML shares are large holdings, TXN, LRCX and TER also in SMH.

Reflecting stocks with more speculative stories, ARK Innovation ETF ( ARKK ) fell 1.6%, while ARK Genomics ( ARKG ) lost 1.4%. Tesla stock is a large component of the Ark Invest ETF. Cathie Wood’s Ark has boosted its position in TSLA in recent weeks, adding shares as recently as Monday.

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The SPDR S&P Metals & Mining ETF ( XME ) was up 0.2%, while the Global X US Infrastructure Development ETF ( PAVE ) was up 0.4%. US Global Jets ( JETS ) fell lower. The SPDR S&P Homebuilders ETF ( XHB ) rose 0.4%. The Energy Select SPDR ETF ( XLE ) was down 0.4%, while 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 profit

Microsoft’s profit, excluding miscellaneous items, fell 6% from a year earlier, just beating the fiscal quarter view. Revenue rose 1.9%, the slowest increase in more than six years and missing forecasts. Revenue from Azure and other cloud computing services rose 31% — 38% excluding currency effects — slightly beating consensus views. Analysts were worried about Azure’s growth.

Investors were relieved by decent results from the Dow Jones technology titan. But Microsoft provided 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 recovering that key level on Monday. Microsoft shares may have a lower base with a 264.02 buy point. It was forming below the 200-day mark, but a breakout would mean clearing that level and ending a prolonged downtrend.

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

Amazon and several cloud software companies fell overnight after Microsoft’s initial earnings boost.

Market rally analysis

The stock market rally stalled on Tuesday as major indexes ended mixed. But that was normal behavior after the big gains on Friday and Monday, especially when it was a huge flood of earnings.

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

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The Nasdaq composite fell and remains slightly below the 200-day line and December high.

The Dow Jones extended its gains from the 50-day line after retrieving that key level on Monday

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

The market rally looks strong, but all major indices are facing resistance levels. Tech was the market leader in 2023, but now we’re going to get huge revenue from tech. Even if the macroeconomic picture stabilizes and Fed rates rise, companies could cut guidance in the coming weeks.

Microsoft might just be getting started.

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

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


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What to do now

The stock market rally has shown more strength and offers several buying opportunities.

Investors should gradually increase their exposure rather than focusing too much on a particular stock or sector. Earnings season could disrupt the market, but particularly some 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 the key earnings in the market and your holdings, including competitors, customers and suppliers of the companies in which you have positions.

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

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

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