Dow Jones futures rose Wednesday morning, along with S&P 500 futures and especially Nasdaq futures. Google and Microsoft headlined overnight earnings, with the Federal Reserve meeting announcement looming large Wednesday. The stock market rally continued to slide Tuesday as Walmart plunged on an earnings warning while Shopify announced big layoffs as growth disappoints.
Google parent Alphabet missed on Q2 earnings while Dow Jones giant Microsoft fell short on the top and bottom line but gave solid guidance, kicking off a big week for tech titans. Meta Platforms is due Wednesday night and Apple and Amazon.com on Thursday.
Google and Microsoft stock rose modestly, after both skidded into earnings.
Enphase Energy, meanwhile, reported stronger-than-expected Q2 results. ENPH leapt in extended trading, signaling a move beyond key resistance.
Chipotle Mexican Grill and Texas Instruments rose overnight on earnings, but both are well off highs.
Early Wednesday, Boeing reported a wider-than-expected loss while Q2 revenue also missed, but BA stock rose modestly as the Dow Jones giant says it still expects to be cash-flow positive in 2022. Bristol Myers Squibb and Humana topped views before the open, though Bristol cut full-year targets. BMY stock and Humana fell modestly before the open.
Shopify reported an unexpected small adjusted loss and missed on revenue, a day after abruptly cutting 10% of staff. SHOP stock fell sharply after plunging 14% on Tuesday.
In other news, activist investor Elliott Management has taken an unknown stake in PayPal, Dow Jones reported late Tuesday. PYPL stock rose more than 6% early Wednesday.
The video embedded in this article highlighted Tuesday's market action and analyzed BJ's Wholesale, Cheniere Energy and Fortinet. The video also took a quick look at Google stock, Microsoft and Enphase Energy.
Fed Meeting
All eyes turn to the Federal Reserve Wednesday afternoon as the two-day Fed meeting concludes with a 2 p.m. ET policy announcement. Markets expect another 75 basis-point Fed rate hike. A big question is what Fed chief Jerome Powell signals for the September Fed meeting and beyond. Markets are fairly split 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.
Headline inflation has almost certainly peaked, given the fall in gasoline prices, but price pressures remain high. However, investors expect the Fed to wrap up rate hikes in a few months, in large part because they see a recession that may already be underway.
June new-home sales tumbled from a downwardly revised May, the Commerce Department said Wednesday, the latest grim economic report. On Thursday morning, Commerce will likely report a second straight quarter of declining GDP. While not officially a recession, there's a strong likelihood that the NBER will eventually declare a U.S. recession.
Before the September Fed meeting, investors and policymakers will get the July and August consumer price index readings and jobs reports.
Dow Jones Futures Today
Dow Jones futures rose 0.45% vs. fair value. S&P 500 futures climbed 0.8%. Nasdaq 100 futures jumped 1.4%. Microsoft is a Dow Jones, S&P 500 and Nasdaq 100 component, Boeing is a Dow and S&P 500 stalwart while Google and ENPH stock are S&P 500 and Nasdaq 100 stocks.
Crude oil futures rose 1%.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally suffered further losses, especially among techs.
The Dow Jones Industrial Average lost 0.7% in Tuesday's stock market trading. The S&P 500 index retreated 1.15%, with Fortinet and WMT stock the two biggest losers. The Nasdaq composite shed 1.9%. The small-cap Russell 2000 lost just 0.6%.
U.S. crude oil prices fell 1.8% to $94.98 a barrel, with recession fears heightening demand concerns. President Biden is planning to release another 20 million barrels from Strategic Petroleum Reserves. That also was a negative for crude prices.
Natural gas prices rose 3.1%. Russia curbing natural gas flows to Europe is sending prices soaring there, boosting demand for U.S. LNG.
The 10-year Treasury yield fell 3 basis points to 2.79% after tumbling to 2.71% intraday, matching its May low. The two-year yield rose slightly to 3.06%, with the widening yield curve inversion highlighting inflation risks.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF and Innovator IBD Breakout Opportunities ETF edged up 0.2%, with medicals helping. The iShares Expanded Tech-Software Sector ETF slumped 3.1%, with Fortinet and other security stocks hammered. MSFT stock is a major IGV component. The VanEck Vectors Semiconductor ETF retreated 1.5%.
SPDR S&P Metals & Mining ETF edged down 0.15% and the Global X U.S. Infrastructure Development ETF advanced 0.35%. U.S. Global Jets ETF descended 2%. SPDR S&P Homebuilders ETF gave up 1%. The Energy Select SPDR ETF sank 0.9% and the Financial Select SPDR ETF 1.4%. The Health Care Select Sector SPDR Fund rose 0.5%.
Reflecting more-speculative story stocks, ARK Innovation ETF tumbled 4.8% and ARK Genomics ETF shed 1%.
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Microsoft Earnings
Microsoft earnings and revenue both came up short of lowered fiscal Q4 views, with EPS up 3% and revenue 12%.
The Dow tech titan guided low on Q1 2023 revenue growth, but cloud revenue should be strong, with Azure sales up 43%. Microsoft sees double-digit sales growth in the new fiscal 2023.
Microsoft stock popped 3% in overnight trade after initially retreating modestly before the upbeat guidance. Shares fell 2.7% on Tuesday to 251.90, falling noticeably from its 50-day line on a rough day for software.
Google Earnings
Google earnings fell 11%, slightly missing consensus, while gross revenue climbed 16%, just topping. Digital advertising fared well, even as cloud computing and YouTube revenue missed.
Google stock rose almost 4% in overnight trade. Shares fell 2.3% on Tuesday to 105.02. That didn't undercut the May 24 intraday low but was the worst close since April 2021. GOOGL stock has plunged 8.2% over three days in the wake of the Snap and Twitter earnings reports that highlight online advertising woes.
Enphase Earnings
Enphase earnings doubled as revenue leapt 68%, both easily beating views. The solar power inverter maker guided up for Q3 revenue.
ENPH stock leapt nearly 10% in premarket trading. Shares fell 1.1% to 216.10 in Tuesday's session. Enphase stock is set to clear the early April high of 220.99. That could be an aggressive entry or add-on buy point. But ENPH stock already closed 13% above its 50-day line.
Market Rally Analysis
The stock market rally took a step back Tuesday, as profit warnings again fueled selling, especially with big earnings, economic data and the Fed meeting decision on tap.
The S&P 500 fell back to the 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 hasn't been inspiring. Not many flashed buy signals when the market was moving higher. Those that did were often prone to shakeouts or shakedowns. Now there's a rotation back toward energy names, especially natural gas and LNG plays. But that could quickly change.
Health insurers and some medicals are still showing strength.
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What To Do Now
Except for possibly nibbling at an energy play, there's not a good reason to be making new buys until after the Fed meeting and other big news over the next couple of days. Investors should be paring modest exposure, taking at least partial profits and cutting losses.
But stay engaged. The market could quickly improve in the next few days, offering numerous buying opportunities. So work on those watchlists.
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