Dow Jones Futures Rise on Google, Microsoft Earnings After Stocks Screw; Fed interest rate hike looms
Dow Jones futures rose overnight, along with S&P 500 futures and especially Nasdaq futures. Google and Microsoft grabbed the headlines overnight, and the announcement from the Federal Reserve meeting looms large on Wednesday. The stock market rise continued to slide on Tuesday as Walmart (WMT) plunged on an earnings warning while Shopify (SHOP) announced major layoffs as growth disappoints.
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Google Parent Alphabet (GOOGL) missed Q2 earnings while the Dow Jones giant Microsoft (MSFT) fell short on the top and bottom lines, kicking off a big week for tech titans. Meta platforms (META) has term Wednesday and apple (AAPL) and Amazon.com (AMZN) on Thursday.
Google rose modestly overnight while Microsoft shares jumped on strong guidance, after both slipped in earnings.
Enphase Energy (ENPH), meanwhile, reported stronger-than-expected Q2 results. ENPH appeared in extended trade, signaling a move beyond key resistance.
Chipotle Mexican Grill (CMG) and Texas Instruments (TXN) rose overnight on earnings, but both are well off highs.
early Wednesday, Boeing (BA) and Bristol Myers Squibb (BMY) report.
In other news, activist investor Elliott Management has taken an undisclosed stake PayPal (PYPL), Dow Jones reported. PYPL shares rose 7.5% late.
The video embedded in this article highlighted Tuesday’s market action and analyzed BJ’s Wholesale (BJ), Cheniere energy (LNG) and Fortinet (FTNT). The video also took a quick look at Google stock, Microsoft and Enphase Energy.
Cool meeting
All eyes will be on the Federal Reserve on Wednesday afternoon when the two-day Fed meeting concludes with a policy announcement at 2:00 p.m. The markets expect a new interest rate increase of 75 basis points. A big question is what Fed chief Jerome Powell signals for the Fed meeting in September and beyond. Markets are fairly divided between a half-point move in September or 75 basis points. In November, investors are betting on another 25-50 basis points, but that’s about it.
Overall inflation has almost certainly peaked, given the drop in petrol prices, but price pressures remain high. However, investors expect the Fed to end rate hikes within a few months, in large part because they see a recession that may already be underway.
New home sales in June fell from a downwardly revised May, the Commerce Department said Wednesday, the latest gloomy economic report. On Thursday morning, trade is likely to report a second straight quarter of falling GDP. Although not officially a recession, it is highly likely that the NBER will eventually declare a US recession.
Before the Fed meeting in September, investors and policymakers will get CPI readings for July and August and jobs reports.
Dow Jones Futures today
Dow Jones futures rose 0.2% relative to fair value. S&P 500 futures rose 0.65%. Nasdaq 100 futures rose 1.3 percent. Microsoft is a Dow Jones, S&P 500 and Nasdaq 100 component, while Google and ENPH shares are S&P 500 and Nasdaq 100 stocks.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock rally suffered further losses, especially among technicians.
The Dow Jones Industrial Average lost 0.7 percent in Tuesday’s trading. The S&P 500 retreated 1.15%, with Fortinet and WMT shares the top two losers. The Nasdaq composite fell 1.9%. Small-cap Russell 2000 lost just 0.6%
U.S. crude oil prices fell 1.8% to $94.98 a barrel, with recession fears adding to worries about demand. President Biden plans to release an additional 20 million barrels from strategic petroleum reserves. It was also negative for crude oil prices.
The prices of natural gas rose by 3.1 per cent. Russia’s curbs on natural gas flows to Europe are sending prices soaring there, increasing demand for American LNG.
The 10-year Treasury yield fell 3 basis points to 2.89% after falling to 2.71% intraday, matching the May low. The two-year yield rose slightly to 3.06%, with the widening yield curve highlighting inflation risks.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) and the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 0.2%, led by medical aid. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 3.1%, with Fortinet and other securities stocks. The MSFT share is an important IGV component. The VanEck Vectors Semiconductor ETF ( SMH ) retreated 1.5%.
The SPDR S&P Metals & Mining ETF ( XME ) was down 0.15% and the Global X US Infrastructure Development ETF ( PAVE ) was up 0.35%. The US Global Jets ETF (JETS) fell 2%. The SPDR S&P Homebuilders ETF ( XHB ) gave up 1%. The Energy Select SPDR ETF (XLE) fell 0.9% and the Financial Select SPDR ETF (XLF) fell 1.4%. The Health Care Select Sector SPDR Fund ( XLV ) rose 0.5%.
ARK Innovation ETF ( ARKK ) reflected more speculative story stocks, falling 4.8% and ARK Genomics ETF ( ARKG ) fell 1%.
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Microsoft revenue
Microsoft’s revenue and earnings both came up to reduced fiscal Q4 views, with EPS up 3% and revenue up 12%.
The Dow tech titan guided low on revenue growth in the first quarter of 2023, but cloud revenue should be strong, with Azure sales up 43%. Microsoft sees double-digit sales growth in the new fiscal year 2023.
Microsoft shares fell 4% in overnight trading after retreating modestly initially. Shares fell 2.7% Tuesday to 251.90, falling noticeably from the 50-day line on a tough day for software.
Google earnings
Google revenue fell 11%, missing consensus, while gross revenue rose 16%, just topping out. Digital advertising fared well, although cloud computing and YouTube revenue missed out.
Google shares rose 5% in overnight trading. Shares fell 2.3% on Tuesday to 105.02. It did not subdue the May 24 intraday low, but was the worst industry since April 2021. GOOGL stock has plunged 8.2% over three days in the wake of Snap (SNAP) and Twitter (TWTR) revenue reports highlighting problems with online advertising.
Enphase earnings
Enphase revenue doubled as revenue rose 68%, easily beating both views. The maker of solar inverters led the way for Q3 earnings.
ENPH shares rose 9% in late trading. Shares fell 1.1% to 216.10 in Tuesday’s session. Enphase shares are set to clear the early April high of 220.99. It can be an aggressive entry or additional purchase point. But ENPH stock already closed 13% above its 50-day line.
Market Rally Analysis
The stock rally took a step back on Tuesday as profit warnings again fueled the sell-off, especially with big earnings, economic data and the Fed meeting decision on tap.
The S&P 500 fell back to its 50-day moving average, with the Dow Jones and Nasdaq moving toward that level.
Perhaps the recent action is just a short-lived, constructive pullback, setting the stage for bullish gains. But perhaps the major indexes will sell off further after the Fed meeting and Apple earnings.
The action of the leading stocks has not been inspiring. Not many flashed buy signals as the market moved higher. Those who did were often subject to shakeouts or shakedowns. Now there is a rotation back towards energy names, especially natural gas and LNG plays. But that can change quickly.
Health insurance companies and some medics continue to show strength.
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What to do now
Other than possibly nabbing an energy play, there is no good reason to make new purchases until after the Fed meeting and other big news in the next couple of days. Investors should reject modest exposure, take at least partial profits and reduce losses.
But stay engaged. The market can quickly improve over the next few days, offering many buying opportunities. So work on these watch lists.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
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