Dow Jones futures fell modestly early Wednesday, along with S&P 500 futures and Nasdaq futures. McDonald's tumbled after being tied to an E. coli outbreak, while Arm Holdings and Qualcomm fell amid a contract dispute. AI data center play Vertiv fell sharply on sales guidance.
Tesla earnings are due Wednesday night, along with ServiceNow and many others.
The stock market rally showed resilience Tuesday as Treasury yields kept rising after surging Monday and over the past several weeks. The major indexes came off lows to close narrowly mixed as Microsoft made a solid gain off key levels. Other megacap techs generally advanced, including Meta Platforms and Amazon.com, or held their ground.
Housing and construction stocks are tumbling on rising rates and mixed earnings. Insurance stocks also fell back.
General Motors broke out powerfully on strong earnings Tuesday. But many leading stocks are extended or have earnings soon.
Tesla earnings are due Wednesday night, with the EV giant loading up incentives for a year-end sales push.
Microsoft stock is on IBD Long-Term Leaders. GM was Tuesday's IBD Stock Of The Day.
The video embedded in this article discusses Tuesday's market action and reviews GM stock, Microsoft and Duolingo.
Dow Jones Futures Today
Dow Jones futures fell 0.5% vs. fair value, with MCD stock a Dow component. S&P 500 futures lost 0.2% and Nasdaq 100 futures declined 0.35%.
The 10-year Treasury yield rose to 4.23%.
Crude oil futures sank nearly 2%.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze leading stocks and the market on IBD Live
McDonald's Plunges On E. coli Outbreak
McDonald's stock tumbled nearly 7% early Wednesday — though off Tuesday night lows — after the Centers for Disease Control and Prevention tied an E. coli outbreak to the fast-food giant's Quarter Pounder burgers. The outbreak, which has hit 10 states, has hospitalized 10 and led to one death, the CDC said. Shares of the Dow Jones giant had closed slightly extended from a buy zone, but could test the 292.21 buy point on Wednesday.
Arm Vs. Qualcomm
Arm Holdings is cancelling a license that let Qualcomm design chips using Arm's intellectual property, Bloomberg reported Tuesday night. That escalates an ongoing contract dispute between the chip giants. Qualcomm, in a response, said Arm's is making more "unfounded threats designed to strongarm a longtime partner." Qualcomm stock fell solidly early Wednesday. Arm stock retreated as well, signaling a move below a buy point.
Earnings
Memory play Seagate Technology fell solidly and AI data center cooling company Vertiv tumbled despite beating quarterly views overnight, with Vertiv guiding low on sales. GE Vernova and Indian travel site MakeMyTrip retreated on mixed results.
Boston Scientific, Evercore and AT&T on solid Q3 earnings.
Stock Market Rally
The stock market rally fought back from modest intraday losses, with the major indexes closing little changed. Some of that reflected Microsoft and Meta offsetting weak breadth.
The Dow Jones Industrial Average lost a fraction in Tuesday's stock market trading, as did the S&P 500 index. The Nasdaq composite rose 0.2%.
The small-cap Russell 2000 edged down 0.4%, finding support at the 21-day line.
The Invesco S&P 500 Equal Weight ETF fell 0.45%, underperforming the S&P 500 once again. The First Trust Nasdaq 100 Equal Weighted Index ETF slid 0.35%, lagging the Nasdaq 100 and Nasdaq again. Both also found 21-day support.
U.S. crude oil prices rose 2.2% to $72.09 a barrel.
The 10-year Treasury yield climbed two basis points to 4.2% after jumping 11 basis points on Monday. The yield has surged since hitting a 52-week low of 3.6% on Sept. 17, just before the big Fed rate cut. Yields initially rebounded on stronger economic data since the Fed rate cut, but now are rising on market bets that former President Donald Trump will regain the White House.
The stock market rally over the past six months has benefited greatly from the April-September slide in Treasury yields. So far the major indexes have held up well despite rebounding yields, but can that trend continue?
ETFs
Among growth ETFs, the Innovator IBD 50 ETF dipped 0.7%. The iShares Expanded Tech-Software Sector ETF eased 0.2%, with Microsoft stock a key level. The VanEck Vectors Semiconductor ETF dropped 0.45%.
Reflecting more-speculative story stocks, ARK Innovation ETF slid 0.5% and ARK Genomics ETF skidded 1.15%. Tesla is a major holding across Ark Invest's ETFs
SPDR S&P Metals & Mining ETF fell 0.6%. SPDR S&P Homebuilders ETF tumbled 2.6%. The Energy Select SPDR ETF edged up 0.2% and the Health Care Select Sector SPDR Fund edged down 0.15%.
The Industrial Select Sector SPDR Fund declined 1.2%. The Financial Select SPDR ETF was down 0.2%.
Time The Market With IBD's ETF Market Strategy
Microsoft Stock, Megacaps
Microsoft, a Dow Jones, S&P 500 and Nasdaq giant, popped 2.1% to 427.51, rebounding from its 21-day, 50-day and 200-day lines. While still well below its consolidation high of 468.35 and its Sept. 19 high of 441.85, investors could have used Tuesday's move as an early entry or as a Long-Term Leader buy. However, Microsoft earnings are on Oct. 30. Also, while MSFT stock has had a track record of outperformance, its sliding relative strength line shows that it's been an S&P 500 laggard in 2024.
Meta stock rose 1.2% to 582.01, bouncing off its 21-day line within a shelf consolidation above a longer base. That could be an add-on opportunity, but Meta earnings also are on Oct. 30. Unlike Microsoft, Meta stock has a strong RS line.
Amazon stock and Google parent Alphabet edged higher. Both are around early entries but the internet giants also have earnings next week.
Nvidia dipped 0.1%, but that's after jumping 4.1% Monday to a new high. Nvidia earnings aren't for a few weeks, but AI comments and capital spending plans from Microsoft, Meta, Amazon and Google could have a big impact on NVDA stock and other hardware plays.
Tesla Earnings
Tesla earnings are due Wednesday night. The EV giant is expected to report a fifth straight quarter of lower earnings vs. a year earlier. Revenue should climb 9%, buoyed by strong China sales. Core auto margins are seen dropping yet again.
This week, Tesla has announced 0% financing for Model 3 and Model Y purchases in the U.S., while stepping up inventory incentives to as high as $4,000. That could put further pressure on margins.
Elon Musk's comments on the post-earnings call will be key. Investors will want to know more about the upcoming "affordable" EV and Model Y refresh. China social media chatter suggests Tesla Shanghai is about to start small-scale production of the "Juniper" Model Y, which might mean China deliveries could start in early 2025.
Tesla stock edged down 0.4% to 217.97 on Tuesday, still below the 50-day line. Shares are working on a 264.86 cup-with-handle buy point. TSLA stock is down 16.7% in October, tumbling on Q3 delivery figures and the Oct. 10 robotaxi event.
Futures: Tesla Earnings Stun After Stock Market Retreat
What To Do Now
The stock market rally is still doing well, shrugging off higher Treasury yields and the related retreat in housing and construction sectors. But rising rates are a headwind, while earnings season and the presidential election are huge unknowns. Meanwhile, not a lot of stocks are flashing buy signals right now
For those reasons, investors should be cautious about adding exposure in the short term. If you are fully invested or on margin, you could consider making some proactive trims, based on your risk tolerance as well as the action of your individual holdings and upcoming earnings.
However, a number of stocks are setting up with earnings on tap, so have watchlists up to date. Have your exit strategies ready too.
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