Dow futures rose overnight, along with S&P 500 futures and especially Nasdaq futures. Microsoft (MSFT) and the parent of Google the alphabet (Google) Big night title for earnings.
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The stock market rally fell sharply on Tuesday, with investors heading into headline earnings Tuesday night and beyond. First Republic Bank (FRC) crashed during the deposit trip that revived banking concerns. Concerns about growth in China, exacerbated by reports of a new wave of Covid-19 there, also weighed on stocks, as well as Treasury yields and commodity prices. The risk of default for the US government looms large.
Microsoft stock jumped late with strong results and guidance, indicating a return to buy territory. Google, visa (Fifth) And Chipotle Mexican Grill (CMG) also rose after hours. but Enphase energy (ENPH) dive on mixed results and tips.
Boeing (Bachelor’s) reports early Wednesday.
Microsoft stock is in IBD Long-Term Leaders.
The video embedded in this article discussed and analyzed the market action on Tuesday rambus (RMBS), service now (now) And Wholesale BJ’s (BJ).
Dow jones futures today
Dow Jones futures rose 0.2% against fair value, with Microsoft and Visa both components of the Dow Jones. S&P 500 futures rose 0.5%. Nasdaq 100 futures jumped 1.4%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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Microsoft, Google earnings
Microsoft’s earnings comfortably topped third-quarter financial views as Azure cloud computing growth slowed but may have been better than feared. Tech giant Dow Jones was also guided by an uptick in fourth-quarter revenue.
MSFT stock is up more than 8% in late trading. Shares fell 2.25 percent to 275.42 in Tuesday’s regular session. Microsoft again closed below 276.86 a firm buy point, according to MarketSmith analysis, but points to a move above that level on Wednesday.
In fact, MSFT stock may even surpass the April 6 high of 292.08. Investors could look at the latest action as an indication of consolidation going back to August or even late 2021.
Google’s earnings topped the views with the internet giant also authorizing up to $70 billion in share buybacks. Google Cloud revenue increased by 28%.
GOOGL stock rose 1.7% overnight. The shares closed down 2% at 103.85 on Tuesday. Google stock has 106.69 cups with a buy point handle.
Microsoft and Google earnings and guidance, along with Meta platforms (meta) And Amazon.com (AMZN) later in the week, it will have major implications for cloud software, networking, artificial intelligence, and many other technical plays. meta, amazon, nvidia (NVDA) and several cloud software names also rose modestly to flat overnight.
Other major earnings
Visa’s earnings exceeded expectations, buoyed by strong cross-border payments. Shares rose 1.7% on the extended measures. Visa stock fell 1.4% to 229.59 on Tuesday, holding the 230.15-cup range with a buy handle.
Chipotle’s earnings topped the views with strong same-store sales growth and profit margins. CMG stock rose nearly 8% after hours. Shares fell 0.9% to 1,780, on the edge of buy territory from the bottom of the cup.
Enphase topped earnings but missed revenue slightly and directed the solar inverter maker to lower second-quarter revenue. ENPH stock fell nearly 17% overnight. Shares fell 1.8% on Tuesday to 220.60, and have paused in recent days after reclaiming the 50-day line. Enphase stock is well below its 200-day line and all-time highs in December. group leader First Solar (FSLRThursday reports.
Stock market rise
The stock market rally suffered major damage on Tuesday, with fundamental work worse than the major indexes.
The Dow Jones Industrial Average fell 1% in stock market trading on Tuesday. The S&P 500 lost 1.6%, with FRC stock just off its worst performance. The Nasdaq Composite fell 2%. Small capital Russell 2000, with large exposure to regional banks, fell 2.4%.
US crude oil prices fell 2.15% to $77.07 a barrel, a new low for the month of April.
Copper futures fell 2.7% to the lowest close since Jan. 5. The major industrial metal is down nearly 6% in a five-session losing streak. China’s metals demand has not recovered as much as hoped, with fears of the Covid-19 outbreak adding to downward pressure.
The 10-year Treasury yield cut 12 basis points, to 3.4%. The two-year Treasury yield fell 19 basis points, to 3.95%. The odds of another rate hike on May 3 eased modestly on Tuesday but remained elevated. Markets are increasingly confident that the May rate hike will be the last.
Exchange Traded Funds
Among the ETFs, the Innovator IBD 50 ETF (fifty(down 2.7%, while the Innovator IBD Breakout Opportunities ETF)fit) decreased by 1.2%. iShares Expanded Technology and Software ETF (IGV) fell 3%, with a large share of MSFT shares. VanEck Vectors Semiconductor Corporation (SMH) decreased by 3.2%.
Reflecting more speculative stories, the ARK Innovation ETF (ARK)ark(down 3.3% and ARK Genomics ETF)ARKG) 3.35%.
SPDR S&P Metals & Mining ETFs (XME(slipping 3% and the US Global Infrastructure Development Fund X)cradle) 1.7%. US Global Gates Foundation ETF (Planes) fell 2.3%. SPDR S&P Homebuilders ETF (XHB) returned 1.5%. Energy Defined Fund SPDR ETF (xle(gives up 1.9% and the SPDR fund)XLV) sank 1.1%
Bank stocks
FRC stock collapsed 49% to a record low. First Republic Bank reported late Monday that deposits fell 41%, or $72 billion, in the first quarter. That’s more than $100 billion excluding the banking giants depositing $30 billion in March. Deposits were much worse than expected, and much worse than other regional banks that reported first-quarter results.
First Republic will cut staff by up to 25% and is seeking strategic alternatives. It is exploring selling up to $100 billion in assets in a desperate bid to avoid an FDIC forfeiture. This may require additional incentives, perhaps even government guarantees, to find buyers who will pay above market value and closer to book value. A solution should come soon.
First Republic’s problems could spur a flight of deposits from other regional banks, even though regulators have sent strong signals that they will protect all deposits. But bank stocks will not get a bailout. More broadly, regional bank woes could cool lending as recession fears mount. In the long run, regional banks may face much higher financing costs, putting pressure on profitability.
Backwest Bancorp (PACW), among the hardest hit in March, jumped a late 14% after saying deposits had leveled off at the end of March. PACW stock closed down 8.9%.
SPDR S&P Regional Banking ETF (Creates) fell 4.2% on Tuesday, hitting its lowest level since late 2020. Shares of FRC and PacWest are components of KRE.
SPDR Financial Selection Fund (45) decreased by 1.7%. XLF, which is dominated by financial giants including Visa, is very far from its March lows.
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Market rally analysis
The stock market rally showed more nervousness on Tuesday.
The Nasdaq Composite fell below the 21-day line and the 12,000 level, undermining the past few weeks of trading. It is now just above the 50-day line. Notably, the Nasdaq closed below its follow-up day low on March 29, which is a very bearish sign of a market rally.
The S&P 500 has lowered its 21-day moving average, not far from the 50-day as well. But the S&P 500 is above its March 29 FTD low.
The Dow Jones fell to the 21-day line.
The damage was worse below the surface. First Trust Nasdaq-100 Equal Weighted Index Fund (QQEW) slipped 2.1%, below the 50-day line. Invesco S&P 500 Equal Weight Fund (RSP) is down 1.7%, back below the 50-day line and right at the 200-day mark.
Chip stocks look weak, with many of the new winners fading or selling off. The SMH ETF is decisively below the 50-day line, erasing all of its gains in late March.
The program is struggling again. The IGV ETF is also below the 50-day line, with technical action much worse than many cloud software plays.
Homebuilders look strong, as well as many meds, some shoe games, discounts, and restaurants like CMG stock. But many of those have now been extended, and even some of those names received a hit on Tuesday. General Command has been greatly narrowed
The losers overwhelmingly beat the winners on Tuesday.
The market rally could rebound over the next several days if earnings are strong and there is a positive reaction to economic data and the Fed meeting.
Futures are currently rising, but they are only recouping a portion of Tuesday’s losses. Even if it continues on Wednesday, the bounce won’t be meaningful if it bounces back pretty much with a few beats.
But it wouldn’t take much for the indices to drop decisively. A Whipsaw action is entirely possible, with earnings and other news spurring big gains or losses one day followed by a reversal the next.
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What are you doing now
Investors should have cut exposure somewhat in recent days, if only because of the performance of individual holdings. The recent market downturn has triggered sell signals in some recent buying, with pillow-cutting for the biggest winners on their way into earnings season.
If the market rebounds again in the coming days, buying opportunities will return, but perhaps not immediately. Many stocks remain near buy points, although most have pulled back somewhat in recent days.
In this scenario, investors can try to gradually add exposure again. But don’t get excited by overnight actions or bounce when the market opens.
But you also have to be prepared for the market to continue to deteriorate, resulting in a significant move towards liquidity.
It is always important to stay engaged, flexible and prepared, but especially in the current environment.
Read the big picture every day to stay in sync with the market trend, leading stocks and sectors.
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