Dow Jones futures fell slightly early on Wednesday, while S&P 500 futures and particularly Nasdaq futures lost more ground, with Microsoft (MSFT) and parent company of Google Alphabet (GOOGL) headlining a big night of winnings.
The stock market rally had another strong session on Tuesday as Treasury yields and the dollar retreated. But the S&P 500 and the Nasdaq are hitting a key resistance level. Investors should participate in the confirmed uptrend, but not rush.
Intel (INTC) has set the IPO price for its mobileye (MBLY) self-driving car unit on Tuesday evening, slightly above the expected range. Twitter (TWTR) moved closer to its buyout price on the latest signs that You’re here (TSLA) CEO Elon Musk will close the deal by Friday.
Microsoft and Google kicked off megacap tech earnings on Tuesday night. Enphase Energy (ENPH) and Chipotle Mexican Grill (CMG) also reported.
Microsoft’s earnings and revenue beat, but MSFT stock fell sharply overnight on disappointing cloud revenue and weak forecasts. Google stock fell after missing views. The news also sent many other tech stocks lower.
Enphase relied on solid results and guidance. CMG stock initially rose, but then fell slightly.
Boeing (BA), General dynamics (GD), Waste Management (WM) and Hilton around the world (HLT) report early Wednesday.
Hilton’s revenue topped, but revenue narrowly missed. HLT stock was not yet traded.
Microsoft and Google stocks are on IBD’s list of long-term leaders. ENPH stock is on the IBD Big Cap 20.
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Intel sold 41 million shares of Mobileye at $21 apiece, up from the expected $18-20 range, raising $861 million. This valued Mobileye at $16.7 billion, well below the $50 billion that Intel had hoped for. The chipmaker paid $15.3 billion for Mobileye in 2017.
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Equity investors in Tesla CEO Elon Musk’s proposed takeover of Twitter received documents today, CNBC reported Tuesday, the latest sign that Musk will close the $44 billion deal by now. Friday.
Bloomberg reported that Musk told banks he intended to close the Twitter takeover on Friday. Twitter stock added to intraday gains, closing up 2.6% at 52.84, not far from the deal price of $54.20. Tesla stock briefly pared gains on Tuesday afternoon, but ended up 5.3% at 222.41.
Concerns that Musk will have to sell more shares to pay for the Twitter deal weighed on TSLA shares.
The video embedded in this article discusses Tuesday’s market rally and analyzes medical shock wave (SWAV), excel energy (EE) and General dollar (DG).
Dow Jones Futures Today
Dow Jones futures fell 0.2% from fair value. S&P 500 futures fell 0.8%. Nasdaq 100 futures fell 1.7%. Microsoft stock is a giant of the Dow Jones, S&P 500 and Nasdaq. Google stock and Enphase are components of the S&P 500 and Nasdaq.
The 10-year Treasury yield fell 4 basis points to 4.07%.
Crude oil futures fell slightly, while natural gas prices rose more than 1%.
Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally continued on Tuesday, with tech and small caps leading a strong session.
The Dow Jones Industrial Average rose 1.1% in trading on Tuesday. The S&P 500 index gained 1.6%. The Nasdaq composite jumped 2.25%. The small-cap Russell 2000 jumped 2.7%.
The 10-year Treasury yield fell 13 basis points to 4.11%. Falling Treasury yields also weighed on the US dollar. Yet the two-year Treasury yield, more closely tied to Fed policy, fell just 3 basis points to 4.47%.
U.S. crude oil prices rose 0.9% to $85.32 a barrel. Natural gas futures jumped 8%, continuing to rebound after falling 23% last week.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) edged up 0.55%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 2.5%. The MSFT stock is a huge IGV holding. The VanEck Vectors Semiconductor (SMH) ETF rose 1.6%.
SPDR S&P Metals & Mining (XME) climbed 1.8%. SPDR S&P Homebuilders (XHB) jumped 4.35%. ETF Energy Select SPDR (XLE) edged up 0.1%. SPDR Health Care Fund (XLV) added 0.8%.
Mirroring stocks with more speculative histories, ETF ARK Innovation (ARKK) jumped 6.7% and ARK Genomics (ARKG) jumped 5.4%. Tesla stock is a major holding in Ark Invest’s ETFs.
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Microsoft’s earnings and revenue edged higher than fiscal first-quarter views. Cloud computing revenues led the way but missed at least some targets. The software giant then warned on second-quarter earnings on advertising, PC and currency headwinds.
MSFT stock sold 6% in overnight trade. Shares rose 1.4% to 250.66 on Tuesday, hitting the 50-day line. But Microsoft stock is well below the 200-day line and still not that far from bear market lows. Cloud software stocks fell on Microsoft results.
Revenue and Google revenue both missed. YouTube revenue fell, while online advertising grew only 2.5%. Cloud computing revenues exceeded estimates. GOOGL stock fell 6% in extended action. Shares rose 1.9% on Tuesday to 104.48, also closing in on the 50-day line. But, like Microsoft, Google stock is not far from bear market lows, with some distance from the 200 days.
Microsoft and Google cloud computing results could herald Amazon Web Services growth Amazon.co.uk (AMZN) results Thursday night. AMZN stock fell more than 4% overnight.
Enphase’s earnings comfortably beat as revenue crushed views. The solar energy company also drove fourth quarter revenue. ENPH stock rose 5% in premarket trading. Enphase stock jumped 4.85% to 265.59 on Tuesday, returning above the 21-day line. Stocks could start building the right side of a new base but are still below the 50-day line.
First Solar (FSLR), which reports Thursday evening, rose 1% after Enphase earnings.
Chipotle’s earnings beat, with impressive same-store sales and margins. The price increases offset a 1% drop in transactions. Initially higher, CMG stock fell 1.5% in extended trade amid concerns over future margins. Shares advanced 2.5% on Tuesday to 1,584.02. Chipotle stock is approaching the 50-day line as it operates on the right side of a short base with a buy point of 1,754.66, according to MarketSmith analysis.
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Market rally analysis
The stock market rally continued to gather momentum, with falling Treasury yields and the US dollar providing a tailwind to equities.
The Nasdaq and small caps led Tuesday’s gains. The Dow fell behind on Tuesday but remains the leader of the rally, pushing higher above the 50-day line. The S&P 500 and the Russell 2000 are approaching this key level. The Nasdaq still has some way to go to hit 50 days. But the S&P, Russell and Nasdaq are all above their 10-week lines.
It is still unclear if this is just another bearish rally. Can the S&P 500 and then the Nasdaq decisively exceed their 50-day moving averages. And if so, can the major indices erase the 200 days?
On the positive side, a number of growth stocks showed bullish action, including Shockwave, DoubleVerify (DV) and Roblox (RBLX).
These reach medical leaders, including biotechs, health insurers and drug distributors. Auto parts retailers are doing well.
Energy stocks continue to perform well.
Treasury yields, earnings and economic data could undermine this nascent rally.
Microsoft and Google reported Tuesday evening, with Metaplatforms (META), Apple (AAPL) and Amazon earnings later this week.
It’s no coincidence that shares of Microsoft, Google, Amazon and Apple all closed Tuesday just at or just below their 50-day lines. Even Meta stock, which nearly hit a bear market low on Friday, is heading back toward its 50-day mark.
Microsoft, Google and Amazon are all ready to withdraw from this key level. Futures contracts signal that the S&P 500 and Nasdaq will also do so at Wednesday’s open.
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What to do now
A confirmed stock market rally is making gains, with a number of top stocks giving buy signals or breaking out, including some high-growth names.
Investors should therefore be cautiously involved in this market rally, by taking positions in quality stocks or broad-market ETFs. Enter slowly. If your positions and the market rally are working, you can gradually add exposure.
Major indices facing a series of resistance levels are another reason to step in, not run.
But be prepared to take profits or cut losses quickly.
Keep working on watchlists. Several days of market gains bring more stocks into position.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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