Microsoft to the rescue after Nasdaq hits new low
Dow Jones futures rose slightly overnight, as well as S&P 500 and Nasdaq futures fell slightly, all reversing Tuesday night’s losses as Microsoft stock and parent company from google Alphabet (GOOGL) moved on profits.
The stock market fell on Tuesday, with the Nasdaq falling below its March lows as You’re here (TSLA) plunged in reaction to CEO Elon Musk Twitter (TWTR).
In addition to Microsoft (MSFT) and Google stocks, General Engines (GM), Edwards life sciences (EW), Visa (V) and Juniper Networks (JNPR) were among many notable companies reporting late Tuesday. Early Wednesday, General dynamics (GD) and Boeing (BA) are listening.
Tesla and Microsoft shares are on the IBD ranking. MSFT and Google stocks are on the IBD’s list of long-term leaders.
The video embedded in this article discusses Tuesday’s market sell-off and analyzes Tesla stocks, Waste Management (WM) and Energy Cheniere (LNG), another ranking action.
Dow Jones Futures Today
Dow Jones futures were up 0.5% from fair value. S&P 500 futures rose 0.3%. Nasdaq 100 futures advanced 0.1%. Futures improved from Tuesday night lows as Microsoft shares rose and Google pared losses overnight. Microsoft is a giant of the Dow Jones, S&P 500 and Nasdaq. Visa is a component of the Dow and S&P 500 while Google stock is on the S&P 500 and Nasdaq.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Microsoft’s earnings outpaced fiscal third-quarter results amid strong cloud-related growth. Microsoft stock first fell, then rose 4.5% as the tech titan guided strong cloud growth. Shares fell 3.7% on Tuesday to 270.22, matching its March low of 270 intraday.
Google’s revenue fell short while revenue was just a hair below estimates. The internet giant has announced a $70 billion Google share buyback. Google shares fell more than 2% overnight, although that was off their worst levels. Google fell 3.6% to 2,373 on Tuesday, the lowest in 10 months.
Earnings from Edwards Lifesciences narrowly beat views as the medical products maker reaffirmed its forecast. EW stock slipped 5% in extended trade. Shares fell about 3% to 116.27 on Tuesday. Edwards stock broke last week, but fell back below a buy point on Friday.
GM’s revenue fell but topped views, while earnings were spotlighted. GM’s stock rose slightly after hours. Shares fell 4.5% on Tuesday to 38.04, the lowest close since late 2020.
Visa’s earnings far exceeded consensus Shares of Visa rose 5% in stock overnight. The shares fell 4.2% on Tuesday to 201.10, losing sight of its 50- and 200-day lines.
Juniper revenue narrowly missed while revenue only exceeded targets. JNPR stock fell sharply in extended action. Shares slid nearly 3% on Tuesday to 33.60, falling back from their 50-day line. Juniper shares held up better than most tech stocks.
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Stock market tuesday
A one-day stock market rally quickly crumbled as major indices sold off sharply. The Dow Jones Industrial Average fell 2.4% in Tuesday’s stock trading. The S&P 500 index fell 2.8%, Tesla stock and General Electric (GE) the biggest losers. The Nasdaq composite tumbled almost 4%. The small cap Russell 2000 fell 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 top ETFs, the Innovator IBD 50 ETF (FFTY) fell 2.9%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 3.7%, with Microsoft stock a major IGV holding. ETF VanEck Vectors Semiconductor (SMH) slipped 4.3%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) plunged 6.75% and ARK Genomics ETF (ARKG) 6%. Both hit their lowest levels since April 2020. ARKK and ARKG’s relative strength lines are at their lowest point in nearly five years, meaning investors would have been better off holding the S&P 500. Tesla stock is Ark Invest’s No. 1 stock. AND F.
The SPDR S&P Metals & Mining ETF (XME) lost 1.75% and the Global X US Infrastructure Development ETF (PAVE) fell 2.2%. The US Global Jets ETF (JETS) fell 4.2%. The SPDR S&P Homebuilders ETF (XHB) fell 2.3%. ETF Energy Select SPDR (XLE) edged up 0.1% and ETF Financial Select SPDR (XLF) fell 2.5%. SPDR healthcare sector fund (XLV) fell 1.8%
Five best Chinese stocks to watch now
Tesla stock plunged 12.2% on Tuesday to 876.42, falling below its 50-day moving average and even its 200-day.
Investors seem concerned that CEO Elon Musk will sell a significant portion of his TSLA stock holdings to pay for his Twitter deal. Musk is funding the $44 billion Twitter takeover with $12.5 billion backed by a portion of his TSLA stock as well as another $21 billion in funding that he personally guaranteed but provided little details. Twitter stock fell 3.9% to 49.68 on Tuesday, creating a bigger gap to the buyout price of $54.20.
Tesla shares had been trading around the 1,000 mark for two weeks, which was encouraging. But during a market correction, stocks will sometimes hold for a few days or even weeks before breaking sharply.
Tesla shares still look better than other EV and auto stocks and all megacaps except maybe Apple (AAPL). But that doesn’t mean much.
Shares have not returned to mid-March levels, but have retraced all or most of the gains since TSLA stock broke above its 200- and 50-day lines.
Technically, TSLA stock still has a buy point of 1,152.97 cups with handle, according to MarketSmith analysis. But the graph does not look correct. It would be better if Tesla’s handle became its own base.
Tuesday’s Ford F-150 Lightning production event signals new U.S. competition for Tesla, which won’t start manufacturing 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 for BYD (BYDDF), although the Chinese EV and battery giant does so through combined EVs and hybrids.
When it’s time to sell your favorite stock
The Nasdaq, S&P 500 and finally the Dow Jones broke Monday’s intraday lows, ending their one-day rally attempts. The Nasdaq cut its March 14 low to its worst level in 13 months. The rest are nearing their 2022 lows. The Dow did not fall below Monday’s lows, so its bid for a stock market rally is still on hold, for now.
Major indexes are rocked by widespread damage across the market and do not appear to be signaling a bottom yet.
The CBOE volatility index, linked to the S&P 500 index, jumped to its highest level since mid-March, but the VIX is still well off its February highs. However, the CBOE Nasdaq Market Volatility Index hits its highs in late February/early March.
With Microsoft stocks plummeting and Google falling overnight, fear could start to skyrocket, especially with the major indices falling as Tesla and Apple drop below their 200-day lines.
Energy stocks tried to rebound on Tuesday as crude oil prices rallied back to the $100 a barrel level. Fertilizer plays find key support ahead of next week’s results. Health insurers and pharmaceutical companies are still holding their own, although a number of drug stocks will report over the next few days. Defense values seem to find support not far from the buy points.
Waste Management sent buy signals on its good results, while waste connections (WCN) revolves around a buy point.
But in most cases, even the strong groups have trended lower over the past two weeks.
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What to do now
The stock market is in a correction and has shown no real signs that the bleeding will stop soon. Investors must keep their exposure to minimal levels or be all cash.
Tuesday’s big selloff after Monday’s bounce shows why investors shouldn’t jump on the first upside of a correction. This is the time to look for stocks that are holding up and have strong or rising RS lines. But as the sudden drop in Tesla stock has shown, resilient names and sectors can suddenly snap. This is the time to create watchlists, not to run new purchases.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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