Dow Jones futures rose Wednesday morning, along with S&P 500 futures and Nasdaq futures. MSFT stock led the gains as Microsoft and Google parent Alphabet headlined overnight earnings.
The stock market tumbled Tuesday, with the Nasdaq breaking below its March lows as Tesla plunged in reaction to CEO Elon Musk's Twitter deal.
In addition to Microsoft and Google stock, General Motors, Edwards Lifesciences, Visa and Juniper Networks were among the many notable companies reporting late Tuesday. Early Wednesday, General Dynamics beat views while Boeing reported a big loss and disappointing revenue.
Tesla stock and Microsoft are on IBD Leaderboard. MSFT stock and Google are on the IBD Long-Term Leaders list.
The video embedded in this article discusses Tuesday's market sell-off and analyzes Tesla stock, Waste Management and Cheniere Energy, another Leaderboard stock.
Dow Jones Futures Today
Dow Jones futures rose 0.9% vs. fair value. S&P 500 futures climbed 0.6%. Nasdaq 100 futures advanced 0.5%. Those are off morning highs, but are firming up again. Microsoft stock is a Dow Jones, S&P 500 and Nasdaq giant. Visa and Boeing are Dow and S&P 500 components while Google stock is on the S&P 500 and Nasdaq.
Shanghai Covid cases are falling, but lockdowns aren't going away anytime soon. Meanwhile, dozens of infections have been found in Beijing, raising expectations of a lockdown in the capital.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Key Earnings
Microsoft earnings topped fiscal Q3 results amid strong cloud-related growth. Microsoft stock initially fell but rebounded as the tech titan guided for strong cloud growth. MSFT stock rose 4% before the open. Shares fell 3.7% on Tuesday to 270.22, matching its March low of 270 intraday.
Google earnings fell short while revenue was just a hair below estimates. The internet giant announced a $70 billion Google stock buyback. Google stock fell 4% early Wednesday, though that was off their worst levels. Google sank 3.6% to 2,373 on Tuesday, at 10-month lows.
Edwards Lifesciences earnings narrowly topped views while the medical products maker reaffirmed guidance. EW stock skidded nearly 4% in extended trade. Shares sank about 3% to 116.27 on Tuesday. Edwards stock broke out last week, but tumbled back below a buy point on Friday.
GM earnings fell but topped views, while revenue came in light. GM stock rose modestly before the open. Shares fell 4.5% on Tuesday to 38.04, the lowest close since late 2020.
Visa earnings comfortably beat consensus Visa stock rose solidly in overnight action. Shares retreated 4.2% on Tuesday to 201.10, losing sight of its 50-day and 200-day lines.
Juniper earnings just missed while revenue only edged past targets. JNPR stock fell sharply in extended action. Shares slid nearly 3% on Tuesday to 33.60, falling back from its 50-day line. Juniper stock had been holding up better than most tech stocks.
General Dynamics earnings and revenue topped Q1 views, part of a big week for defense earnings. General Dynamics stock was not yet active after dipping 0.9% to 236.96 on Tuesday, just above its 50-day line. GD stock is working on a flat base with a 255.09 buy point.
Boeing reported a large loss and a big cash burn, while revenue came in light. The aerospace giant in Q1 submitted a plan to the FAA to resume 787 Dreamliner shipments later this year, but will halt 777 production through 2023. BA stock fell 4%.
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Stock Market Tuesday
A one-day stock market rally quickly fell apart as the major indexes sold off sharply. The Dow Jones Industrial Average fell 2.4% in Tuesday's stock market trading. The S&P 500 index retreated 2.8%, with Tesla stock and General Electric the biggest losers. The Nasdaq composite crumbled nearly 4%. The small-cap Russell 2000 tumbled 3.15%.
U.S. crude oil prices jumped 3.2% to $101.70 a barrel.
The 10-year Treasury yield fell 5 basis points to 2.77%.
Among the best ETFs, the Innovator IBD 50 ETF gave up 2.9%, while the Innovator IBD Breakout Opportunities ETF rose 0.7%. The iShares Expanded Tech-Software Sector ETF retreated 3.7%, with Microsoft stock a major IGV holding. The VanEck Vectors Semiconductor ETF skidded 4.3%.
Reflecting more-speculative story stocks, ARK Innovation ETF plunged 6.75% and ARK Genomics ETF 6%. Both hit their lowest levels since April 2020. The relative strength lines for ARKK and ARKG are at their lowest point in nearly five years, meaning investors would have been better off holding the S&P 500. Tesla stock is the No. 1 holding across Ark Invest's ETFs.
SPDR S&P Metals & Mining ETF lost 1.75% and the Global X U.S. Infrastructure Development ETF fell 2.2%. U.S. Global Jets ETF descended 4.2%. SPDR S&P Homebuilders ETF declined 2.3%. The Energy Select SPDR ETF edged up 0.1% and the Financial Select SPDR ETF slumped 2.5%. The Health Care Select Sector SPDR Fund declined 1.8%
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Tesla Stock
Tesla stock plunged 12.2% on Tuesday to 876.42, tumbling below its 50-day moving average and even its 200-day.
Investors appear concerned that CEO Elon Musk will sell a significant part of his TSLA stock holdings to pay for his Twitter deal. Musk is financing the $44 billion Twitter takeover with $12.5 billion backed by some of his TSLA stock as well as another $21 billion in funding that he's personally guaranteed but offered few details on. Twitter stock fell 3.9% to 49.68 on Tuesday, creating a bigger gap from the $54.20 takeover price.
Tesla stock had been trading around the 1,000 mark for the past two weeks, which was encouraging. But in a market correction, stocks will sometimes hold up for a few days or even a few weeks before suddenly breaking hard.
Tesla stock still looks better than other EV and auto stocks and all the megacaps with the possible exception of Apple. But that's not saying much.
Shares have not returned to mid-March levels, but have retraced all or nearly all of the gains since TSLA stock raced past its 200-day and 50-day lines.
Technically, TSLA stock still has a 1,152.97 cup-with-handle buy point, according to MarketSmith analysis. But the chart doesn't look right. It would be better if Tesla's handle developed into its own base.
TSLA stock edged higher Wednesday, while Twitter dipped.
The Ford F-150 Lightning production event Tuesday signals further U.S. competition for Tesla, which won't start making its Cybertruck until at least next year. Meanwhile, Tesla will almost certainly lose its EV crown in terms of vehicles sold in the second quarter to BYD, though the Chinese EV and battery giant will do so via EVs and hybrids combined.
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Market Analysis
The Nasdaq, S&P 500 and finally the Dow Jones undercut Monday's intraday lows, ending their one-day rally attempts.
The Nasdaq undercut its March 14 low to its worst level in 13 months. That marks a new leg in the Nasdaq's ongoing bear market, 23% below its November peak.
The Dow and S&P 500 are closing in on their 2022 lows.
The major indexes are reeling with widespread damage throughout the market and don't seem to be signaling a bottom yet.
The CBOE Volatility Index, tied to the S&P 500 index, jumped to its highest point since mid-March, but the VIX is still well of its February highs. However, the CBOE Nasdaq Market Volatility Index is getting up to its late February/early March highs.
With Microsoft stock falling and Google tumbling overnight, fear may start to spike, especially with the major indexes tumbling as Tesla and Apple move below their 200-day lines.
Energy stocks tried to bounce back Tuesday, as crude oil prices reclaimed the $100 a barrel level. Fertilizer plays are finding key support ahead of earnings next week. Health insurers and pharma are still holding up OK, though a number of drug stocks are reporting over the next several days. Defense stocks appear to be finding support not far from buy points.
Waste Management flashed buy signals on its strong results, while Waste Connections is hovering around a buy point.
But in most cases, even the strong groups have been trending lower over the past couple of weeks.
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What To Do Now
The stock market is in a correction, and hasn't shown any real signs that the bleeding will stop soon. Investors should keep exposure at minimal levels or be entirely in cash.
Tuesday's big sell-off after Monday's bounce shows why investors shouldn't jump at the first uptick in a correction. This is a time to be looking for stocks that are holding up and have strong or rising RS lines. But as Tesla stock's sudden plunge showed, resilient names and sectors can suddenly break. This is a time for building watchlists, not executing new buys.
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