Dow futures fell after hours, along with S&P 500 futures and Nasdaq futures. Microsoft MSFT Guidelines Exceeded Profits That Were Better Than Fear. ASML (ASML), Boeing (Bachelor) f Tesla (TSLA) on tap Wed.
The stock market rally traded in a relatively narrow range on Tuesday after big gains in the previous two sessions. The major indices closed mixed. The Nasdaq tumbled as the Department of Justice filed a second antitrust suit against a Google parent the alphabet (The Google).
Microsoft’s earnings exceeded previous views on the strong growth of cloud computing. But the software giant gave poor guidance. MSFT stock initially rose strongly and reversed lower.
Intuitive surgery (ISRG) f Texas Instruments Inc (TXN) also reported. Loss of ISRG profits with direct revenue. Texas Instruments won slightly, but guided lower. ISRG stock declined while TXN stock declined slightly.
Early Wednesday, chip equipment giant ASML, along with fellow semiconductor equipment makers, reported L Research (LRCX), Teradine (TER) f wolfspeed (WOLF) due after closing.
boeing f Freeport McMoRan (FCX) also reported early on Wednesday.
Tesla will headline earnings Wednesday night. Tesla’s earnings will be important but investors are likely to focus on 2023 guidance, especially after deep price cuts around the world to kick off the year. These price cuts have boosted demand for Tesla — at the expense of margins — but will that last?
After the shutdown, Tesla said it would spend $3.6 billion in or around its original “Gigafactory” outside of Reno, Nevada. It will be used for the Tesla Semi line and for the mass production of 4680 battery cells.
Tesla stock fell 2% overnight. Shares rose 0.1% on Tuesday, to 143.89, close to the 50-day line. TSLA stock is up nearly 17% so far in 2023.
Dow jones futures today
Dow futures fell 0.25% against fair value. S&P 500 futures fell 0.45%. Nasdaq 100 futures fell 0.7%, retracing initially modest gains. MSFT stock is a component of the Dow Jones, Standard & Poor’s 500, and Nasdaq.
The 10-year Treasury yield fell 2 basis points, to 3.45%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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Stock market rise
After a New York Stock Exchange glitch disrupted about 100 indexes at the open, the stock market traded slightly lower in the morning before gradually improving to mixed.
The Dow Jones Industrial Average rose 0.3% in stock market trading Tuesday. The S&P 500 fell 0.1%. The Nasdaq Composite fell 0.3%. The small Russell 2000 gave up 0.25%.
US crude oil prices fell 1.8% to $80.13 a barrel. Natural gas fell 5.5 percent after rising more than 6 percent on Monday.
The 10-year Treasury yield fell 1 basis points to 3.47% amid mixed to weak manufacturing data.
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The Department of Justice is suing Google again
The Department of Justice has sued Google over its dominance in online advertising, in an effort to force the company to divest certain assets. In October 2020, the Department of Justice filed an antitrust suit over an alleged misuse of Internet search power. Groups of countries have filed three antitrust lawsuits against Google, including one involving advertising.
Google stock fell 2.1% to 97.70 on Tuesday, although that was after rising 10% on heavy volume in the previous three sessions.
Google reports fourth quarter earnings on February 2nd.
Exchange Traded Funds
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) and the Innovator IBD Breakout Opportunities ETF (BOUT) both rose. The iShares Expanded Tech-Software ETF (IGV) fell 0.6%. Microsoft stock is a major component of IGV.
The VanEck Vectors Semiconductor ETF (SMH) is down 0.7%. ASML stock is a large holding, with TXN, LRCX and TER also in SMH.
Reflecting stocks with speculative stories, ARK Innovation ETF (ARKK) sank 1.6% and ARK Genomics (ARKG) lost 1.4%. Tesla stock is a major holding across Ark Invest’s ETFs. Cathie Wood’s Ark has strengthened its position in TSLA in recent weeks, adding that stock is as recently as Monday.
The SPDR S&P Metals & Mining ETF (XME) was up 0.2%, and the US ETF Global X Infrastructure Development (PAVE) was up 0.4%. American Global Jets (JETS) has fallen. SPDR S&P Homebuilders ETF (XHB) advanced 0.4%. The Energy Select SPDR ETF (XLE) gave up 0.4% and the Financial Select SPDR ETF (XLF) rose 0.1%. The Healthcare Select Healthcare Sector SPDR (XLV) Fund fell 0.7%.
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Microsoft’s earnings were down 6% year-over-year, excluding various items, beating only its fiscal second-quarter views. Revenue rose 1.9%, the smallest increase in more than six years and missing expectations. Revenue from Azure and other cloud computing services jumped 31% – 38% excluding currency fluctuations – slightly outpacing consensus views. Analysts were concerned about Azure’s growth.
Investors were relieved by the decent results of tech giant Dow Jones. But Microsoft gave weak guidance, warning of slowing 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 employees.
Shares fell 0.2% to 242.04 on Tuesday, holding on to the 50-day line after regaining that key level on Monday. It can be said that Microsoft stock has a bottom base at 264.02 buy points. It formed below the 200-day line, but a breakout would involve removing this level and breaking a long downtrend.
Microsoft’s earnings and guidance are important to other software makers, PC-related stocks and cloud computing plays 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 companies tumbled overnight after initially bouncing back on Microsoft’s earnings.
Market rally analysis
The stock market rally was paused on Tuesday, with the major indexes finishing mixed. But that was standard procedure after the big gains on Friday and Monday, particularly heading into a massive cash flow.
The S&P 500, which crossed last week’s highs and the 4,000 level on Monday, held those key levels.
The Nasdaq Composite fell and is still below the 200-day line and the December highs.
The Dow Jones extended its rally from the 50-day line after reclaiming this key level on Monday
The small cap Russell 200 is down but close to peaks in late 2022.
The market rally looks strong, but the major indices are all facing resistance levels. Technology was the market leader in 2023, but now we’re going to get a barrage of tech profits. Even if the macroeconomic picture stabilizes and Fed rate hikes moderate, companies may lower guidance in the next few weeks.
Microsoft can start.
In addition to Tesla, ASML and Boeing on Wednesday, an Apple (AAPL), a parent on Facebook Meta platforms (META), Amazon, AMD AMD, Google and many others are due to report next week
If the market rally surpasses the late 2022 highs at the end of next week, that would be a strong indication that a continued uptrend is on the way.
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What are you doing now
The stock market rally showed more strength and offered a number of buying opportunities.
Investors should add exposure gradually and not focus too much on a particular stock or sector. Earnings season can roil the market, especially individual stocks. One option available to investors is to purchase a market or sector ETF, along with individual names.
Definitely focus on building your watchlists. Be aware of the main earnings of the market and your holdings, including competitors, customers and suppliers of those companies in which you have positions.
Read the big picture every day to stay in sync with market trend, leading stocks and sectors.
Please follow Ed Carson on Twitter at @tweet For stock market updates and more.
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