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, with Microsoft (MSFT) and parent Google Alphabet (GOOGL) heavy earnings night.




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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 coming up to a critical resistance level. Investors should be participating in the confirmed uptrend, but not rushing in.

Intel (INTC) to price its IPO Mobile (MBLY) self-driving car unit on Tuesday. Twitter (TWTR) closer to its takeover price on the latest signs that Tesla (TSLA) CEO Elon Musk will close the deal by Friday.

Microsoft and Google kicked off tech megacap earnings on Tuesday night. Enphase Energy (ENPH) and Chipotle Mexican Grill (CMG) report also.

Microsoft’s earnings and revenue hit, but MSFT stock fell sharply overnight on disappointing cloud revenue and weak guidance. Google stock plummeted when views were missing. Emphasized strong results. CMG stock initially rose, but then turned slightly lower.

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

Intel Set To Price Mobileye IPO

Intel has decided to offer 41 million Mobileye shares at $18 to $20 per share. That would raise $820 million at the top of its range. Intel is targeting a $16 billion valuation, just above the $15.3 billion it paid to buy Mobileye in 2017.


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Musk-Twitter Latest Deal

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

Bloomberg reported that Musk told the banks he intended to close the Twitter takeover on Friday. Twitter stock added to intraday gains, closing up 2.6% to 52.84, not far from the $54.20 feed price. Tesla stock briefly pared gains Tuesday afternoon, but ended 5.3% higher at 222.41.

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

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

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Dow Jones futures today

Dow Jones futures declined 0.3% vs. fair value. S&P 500 futures fell 1%. Nasdaq 100 futures lost 2%. Microsoft stock is a Dow Jones, S&P 500 and Nasdaq giant. Google and Enphase stock are components of the S&P 500 and Nasdaq.

Remember that overnight activity 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 Rally

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

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

The 10-year Treasury yield fell 13 basis points to 4.11%. Treasury yields also fell on the US dollar. Still, the two-year Treasury yield, which was 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 jumped 8%, continuing to bounce back after last week’s 23% drop.

ETFs

Among the top ETFs, the Innovator IBD 50 ETF (FFTY) gained 0.55%. The iShares Advanced Technology Software Sector ETF ( IGV ) rose 2.5%. MSFT stock is a huge IGV holding. 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 Selective SPDR Fund (XLV) added 0.8%.

Reflecting stocks with more speculative stories, the ARK Innovation ETF (ARKK) jumped 6.7% and ARK Genomics (ARKG) popped 5.4%. Tesla stock is a large holding across Ark Invest’s ETFs.


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Key Earnings

Microsoft’s earnings and revenue slightly topped Q1 fiscal views. Cloud computing revenue was ahead but at least some targets were missed. The software giant then warned of Q2 revenue on advertising, computer and currency heads.

MSFT stock sold off in overnight trade. Shares rose 1.4% to 250.66 on Tuesday, coming up to 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’s results.

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Both Google’s earnings and revenue earned. YouTube revenue fell, while online advertising rose just 2.5%. Cloud computing revenue exceeded estimates. GOOGL stock fell in extended action. Shares rose 1.9% on Tuesday to 104.48, also closing above the 50-day line. But, like Microsoft, Google stock is not far from bear market lows, with some distance to the 200 day.

Microsoft and Google’s cloud computing results could mirror Amazon Web Services’ growth Amazon.com (AMZN) earnings Thursday night. AMZN stock fell slightly overnight.

Enphase earnings beat comfortably as revenue crushed comments. ENPH stock rose solidly overnight. Enphase stock rose 4.85% to 265.59 on Tuesday, moving back above the 21-day line. Shares may be starting to build on the right side of a new base but are still below the 50-day line.

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

Chipotle’s earnings hit, with same-store sales and margins taking a hit. CMG stock turned slightly lower in extended trading amid concerns about future margins. Shares advanced 2.5% on Tuesday to 1,584.02. Chipotle stock is approaching the 50-day line as it works to the right of a short base with a 1,754.66 buy point, according to MarketSmith analysis.

Boeing (BA), General Dynamics (GD), Waste Management (WM) and Hilton around the world (HLT) report early Wednesday.


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Market Rally Analysis

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

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

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It is not yet clear if this is just another mark-market rally. Can the S&P 500 and then the Nasdaq move decisively above their 50-day moving average. And if so, can the major indexes clear the 200 day?

On the plus side, several growth stocks showed bullish activity, including Shockwave, Double Verify (dv) and Roblox (RBLX).

Those join medical leaders, including biotechnologists, 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 that rising crowd.

Microsoft and Google reported on Tuesday night, with Meta Platforms (META), Apple (AAPL) and Amazon’s earnings later this week.

It’s no coincidence that Microsoft, Google, Amazon and Apple stock closed on 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.

Microsoft, Google and Amazon are ready to withdraw from that key level. Futures signal the S&P 500 and so will Nasdaq at Wednesday’s open.


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What To Do Now

The stock market’s assured rally is making headway, with several leading stocks flashing buy signals or breaking out, including some high-growth names.

Investors should therefore be cautiously involved in this market crowd, taking positions in quality stocks or broad market ETFs. Step in slowly. If your positions and the market rally are working, you can gradually add exposure.

The major indexes facing a series of resistance levels is yet another reason to step, not run.

But be prepared to take profits or cut losses quickly.

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

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

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

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