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

Dow Jones futures fell after hours, along with S&P 500 futures and Nasdaq futures, respectively Microsoft Guideline (MSFT) exceeded earnings expectations. ASML (ASML), Boeing (BA) and Tesla (TSLA) was on tap Wednesday.




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Stocks traded in a relatively narrow range Tuesday after big gains in the past two sessions. Major indexes closed mixed. The Nasdaq retreated after the Justice Department filed a second complaint against Google’s parent company Alphabet (GOOGL).

Microsoft’s earnings rose from previous estimates on strong cloud growth. But great software provided weak guidance. MSFT stock, previously up sharply, turned down.

Mind surgery (ISRG) and Texas Instruments (TXN) also reported. ISRG money lost through online investment. The Texas fast hit a little bit, but it was directed down. ISRG stock fell while TXN stock fell slightly.

Early Wednesday morning, equipment giant ASML reported, along with fellow semiconductor equipment makers Research Lam (LRCX), Teradyne (TER) and Wolfspeed (WOLF) will close after completion.

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

Tesla will report earnings on Wednesday night. Tesla’s earnings will be important but investors will focus on the 2023 guidance, especially following the big global price drop to start the year. Those price cuts have boosted demand for Tesla — at a premium — but will that last?

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

Tesla stock fell 2% overnight. Shares rose 0.1% on Tuesday to 143.89, nearing the 50-day line. TSLA stock is almost 17% higher than in 2023.

Dow Jones Futures Today

Dow Jones futures fell 0.2% vs. useful value. S&P 500 futures declined 0.45%. Nasdaq 100 futures fell 0.7%, reversing earlier modest gains. MSFT’s stock is a component of the Dow Jones, S&P 500 and Nasdaq.

Remember that overnight events in the Dow Futures and elsewhere do not necessarily translate to the actual market in the next stock market session.

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Market Rally

After the NYSE glitch knocked about 100 tickers out of business, the stock market was trading well in the morning before being slowly reversed.

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

US crude oil prices fell 1.8% to $80.13 a barrel. Wind power fell 5.5% after rising more than 6% Monday.

The 10-year yield fell to 3.47% amid mixed weak manufacturing data.


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The DOJ sued Google again

The DOJ sued Google over its online advertising rights, seeking to force the company to divest some assets. In October 2020, the Department of Justice filed a complaint alleging abuse of internet search power. One state has three restrictions against Google, including one related to advertising.

Google stock fell 2.1% to 97.70 on Tuesday, though that was after a 10% higher run on volume in the past three sessions.

Google reports Q4 earnings on February 2.

ETFs

Among the younger ETFs, the Innovator IBD 50 ETF (FFTY) and the Innovator IBD Breakout Opportunities ETF (BOUT) were up. The iShares Expanded Tech-Software Sector ETF (IGV) declined 0.6%. Microsoft products are IGV’s main asset.

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

Looking at other trending stocks and news, ARK Innovation ETF (ARKK) fell 1.6% and ARK Genomics (ARKG) lost 1.4%. Tesla is the main stock held across Ark Invest’s ETFs. Cathie Wood’s stock has been raising its TSLA position in recent weeks, adding shares as recently as Monday.

The SPDR S&P Metals & Mining ETF (XME) rose 0.2%, and the Global X US Infrastructure Development ETF (PAVE) climbed 0.4%. US Global Jets (JETS) has hit the ground running. SPDR S&P Homebuilders ETF (XHB) changed 0.4%. The Energy Select SPDR ETF (XLE) gave up 0.4% and the Financial Select SPDR ETF (XLF) rose 0.1%. The Health Care Select Sector SPDR Fund (XLV) fell 0.7%.

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Microsoft Money

Microsoft’s revenue fell 6% vs. a year ago, apart from various factors, only beat the Q2 fiscal opinion. Revenue rose 1.9%, the smallest increase in more than six years and missing forecasts. Revenues from Azure and other cloud computing services rose 31% – 38% excluding currency changes – slightly more than consensus estimates. Analysts are worried about Azure’s growth.

Dow Jones tech titan got relief from investors. But Microsoft gave weak guidance, warning about service damage.

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

Last week, Microsoft announced plans to cut 10,000 jobs, about 4.5% of the workforce.

The index fell 0.2% to 242.04 on Tuesday, holding the 50-day line after retracing that key level on Monday. Arguably, Microsoft’s product has a ground base with a buy point of 264.02. It started below the 200-day line, but a break would involve clearing the level and breaking long-term.

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

Amazon and many other cloud software companies collapsed in the blink of an eye after their first foray into Microsoft’s earnings.

Market Rally Analysis

The stock market closed on Tuesday, with major indexes ending mixed. But that’s normal behavior when there are big profits on Friday and Monday, especially going into the big money market.

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

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The Nasdaq composite edged lower and remains modestly below the 200-day line in December range.

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

The small-cap Russell 200 is down but near its late-2022 peak.

Stocks are looking strong, but all major indexes are facing resistance levels. Tech leads the market in 2023, but now we will get a lot of money from technology. Even with the macroeconomic picture improving and the Fed rate going down, companies may reduce guidance in the next few weeks.

Microsoft can start.

In addition to Tesla, ASML and Boeing on Wednesday, apple (AAPL), Facebook’s parent Meta Platform (META), Amazon, AMD (AMD), Google and many others will report next week

If the stock market has cleared the high-2022 high at the end of next week, it will be a strong signal that a permanent improvement is starting.


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What You Should Do Now

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

Investors should gradually add exposure and not concentrate too much on stocks or sectors. A recession can disrupt the market, but especially individual stocks. One option for investors is to buy a stock or ETF unit, with individual names.

Really focus on building your checklist. Be aware of the main sources of income for your business and holdings, including competitors, customers and suppliers of the companies you have a position with.

Read The Big Picture every day to stay in touch with the market leading stocks and sectors.

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

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