Dow Jones Futures: Microsoft, Google Fall On Earnings; Market Rally Runs Up To Key Test

Dow Jones futures fell slightly overnight, while S&P 500 futures and especially Nasdaq futures lost more ground. Microsoft (MSFT) and parent Google the alphabet ( GOOGL ) headlined a heavy night of earnings.




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The stock market rally had another strong session as Treasury yields and the dollar retreated. But the S&P 500 and Nasdaq are reaching key resistance levels. Investors should participate in the confirmed uptrend, but do not rush into it.

Intel (INTC) IPO price is set Mobile (MBLY) self-driving unit Tuesday. Twitter (TWTR) came close to its purchase price in recent signals Tesla ( TSLA ) CEO Elon Musk will close the deal by Friday.

Microsoft and Google posted megacap tech earnings Tuesday night. Enphase Energy (ENPH) and Chipotle Mexican Grill (CMG) also reported.

There were earnings and revenue gains for Microsoft, but MSFT shares fell sharply overnight on disappointing cloud revenue and weak guidance. Google’s shares fell after missing views. Enphase joined in with strong results. CMG stock initially rose, but then fell slightly.

Microsoft and Google stocks are on the IBD Long-Term Leaders list. ENPH stock is in the IBD Big Cap 20.

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Intel was set to offer 41 million Mobileye shares for $18 to $20. That would raise $820 million at the end of its range. Intel is targeting a valuation of $16 billion, up from the $15.3 billion it paid to acquire Mobileye in 2017.


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The Latest Musk-Twitter Deal

Tesla CEO Elon Musk’s stock investors today received the paperwork expected in the Twitter hire, CNBC reported Tuesday, the latest sign that Musk will close the $44 billion deal by Friday.

Bloomberg reports that Musk told the banks on Friday that he plans to close the Twitter acquisition. Shares of Twitter added to the day’s gains, rising 2.6% to 52.84, not far from the deal price of $54.20. Tesla shares briefly pared gains on Tuesday afternoon, but ended 5.3% higher at 222.41.

Concerns that Musk will have to sell more stock to pay for the Twitter deal have weighed on TSLA stock.

The video embedded in this article discusses Tuesday’s market rally and analysis Shockwave Medical (SWAV), Improve energy (EE) and Dollar General (DG).

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Dow Jones Futures Today

Dow Jones futures were down 0.3% versus fair value. S&P 500 futures were down 1%. Nasdaq 100 futures lost 2%. Microsoft shares are the Dow Jones, the S&P 500 and the giant Nasdaq. Google stock and Enphase are components of the S&P 500 and Nasdaq.

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


Join IBD’s experts as they analyze the stock market rally on IBD Live


Stock Market Rally

The stock market rally continued on Tuesday, with tech and small caps leading the strong session.

The Dow Jones Industrial Average rose 1.1% in the stock market on Tuesday. The S&P 500 index gained 1.6%. The Nasdaq composite gained 2.25%. The small-cap Russell 2000 jumped 2.7%.

10-year Treasury yields fell 13 basis points to 4.11%. Falling Treasury yields also weighed on the US dollar. However, the two-year Treasury yield, which is more closely tied to Fed policy, fell just 3 basis points to 4.47%.

US crude oil prices rose 0.9% to $85.32 a barrel. Natural gas futures were up 8%, continuing their retreat after last week’s 23% decline.

ETFs

Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 0.55%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 2.5%. MSFT stock is a large IGV holding. The VanEck Vectors Semiconductor ETF ( SMH ) advanced 1.6%.

SPDR S&P Metals & Mining (XME) rose 1.8%. SPDR S&P Homebuilders ( XHB ) jumped 4.35%. The Energy Select SPDR ETF ( XLE ) rose 0.1%. The Health Care Select Sector SPDR Fund ( XLV ) added 0.8%.

Reflecting stocks with more speculative stories, ARK Innovation ETF (ARKK) rose 6.7% and ARK Genomics (ARKG) rose 5.4%. Tesla stock is the top holding in Ark Invest’s ETF.


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Key earnings

Microsoft’s earnings and revenue slightly beat its fiscal Q1 outlook. Cloud computing revenues advanced, but missed at least some targets. The software giant warned on Q2 revenue on ad, PC and currency headwinds.

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MSFT shares were sold off in overnight trading. Shares rose 1.4% to 250.66 on Tuesday, touching the 50-day line. But Microsoft shares are well below their 200-day line and still not far from market lows. Cloud software stocks fell on Microsoft’s results.

Google lost profits and revenue. YouTube revenue fell, while online advertising grew just 2.5%. Above Cloud Computing Revenue Estimates. GOOGL stock has fallen on the extended run. Shares rose 1.9% to 104.48 on Tuesday, also closing at the 50-day line. But, like Microsoft, Google shares are not far from the lows of the overall market, with a 200-day range.

Microsoft’s and Google’s cloud computing results may foretell the growth of Amazon Web Services Amazon.com (AMZN) earnings Thursday night. AMZN shares fell slightly overnight.

Enphase’s earnings have comfortably beaten revenue views as it has been crushed. ENPH shares rose strongly overnight. Enphase shares rose 4.85% to 265.59 on Tuesday, retreating above the 21-day line. Shares may be starting to build the right side of a new base, but are still below the 50-day line.

First Sun ( FSLR ), reporting Thursday night, was little changed on Enphase’s earnings.

It beat Chipotle’s earnings, as same-store sales and margins were surprising. CMG shares edged lower in extended trade amid concerns about future margins. Shares advanced 2.5% on Tuesday to 1,584.02. Shares of Chipotle are moving closer to the 50-day line as it works to the right of a short base with a buy point of 1,754.66, according to MarketSmith analysis.

Boeing (BA), General Dynamics (GD), Waste Management (WM) and Hilton Worldwide (HLT) report early Wednesday morning.


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Market rally analysis

The stock market rally continued to gain momentum, with falling Treasury yields and the US dollar providing a tailwind for stocks.

The Nasdaq and small caps led Tuesday’s gains. The Dow Jones retreated on Tuesday, but remains a rally leader, rising above the 50-day line. The S&P 500 and Russell 2000 are approaching that key level. The Nasdaq still has some distance to go to reach 50 days. But the S&P, Russell and Nasdaq are all above their 10-week lines.

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It’s not yet clear if this is another bear market rally. The S&P 500 and then the Nasdaq may decide above their 50-day moving averages. And if so, can the major indices clear the 200-day?

On the plus side, some breeding stocks saw bullish action, including Shockwave, Double check (DV) and Roblox (RBLX).

These include medical leaders, including biotechs, health insurers and drug distributors. Auto parts dealers are doing well.

Energy stocks continue to perform well.

Treasury yields, earnings and economic data could undermine that nascent rally.

Microsoft and Google made the announcement Tuesday night Meta platforms (GOAL), Apple ( AAPL ) and Amazon earnings earlier this week.

It’s no coincidence that Microsoft, Google, Amazon and Apple stocks all closed at or below their 50-day lines on Tuesday. Even Meta stock, which nearly hit a bear market low on Friday, is making a comeback to its 50-day high.

Microsoft, Google and Amazon are poised to pull back from that key level. Futures are indicated by the S&P 500 and so will the Nasdaq at Wednesday’s open.


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What To Do Now

The renewed stock market rally is taking profits, with some major stocks flashing or breaking buy signals, including some high-growth names.

Therefore, investors should be cautious in participating in this market rally by taking positions in quality stocks or broad market ETFs. Go in slowly. If your positions and the market rally are working, you can gradually add exposure.

Major indices facing resistance levels is another reason to enter, not run.

But be prepared to take profits or cut losses quickly.

Keep working on the watch lists. Several days of market gains are placing more stocks.

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

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

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