Dow Jones futures rose modestly overnight, along with S&P 500 futures and Nasdaq futures fell slightly, all reversing Tuesday evening losses as Microsoft stock and Google parent Alphabet (GOOGL) moved on earnings.
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The stock market tumbled Tuesday, with the Nasdaq breaking below its March lows as Tesla (TSLA) plunged in reaction to CEO Elon Musk’s Twitter (TWTR) deal.
In addition to Microsoft (MSFT) and Google stock, General Motors (GM), Edwards Lifesciences (EW), Visa (V) and Juniper Networks (JNPR) were among the many notable companies reporting late Tuesday. Early Wednesday, General Dynamics (GD) and Boeing (BA) are on tap.
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 (WM) and Cheniere Energy (LNG), another Leaderboard stock.
Dow Jones Futures Today
Dow Jones futures rose 0.5% vs. fair value. S&P 500 futures climbed 0.3%. Nasdaq 100 futures advanced 0.1%. Futures improved from Tuesday evening lows as Microsoft stock raced higher and Google cut overnight losses. Microsoft is a Dow Jones, S&P 500 and Nasdaq giant. Visa is a Dow and S&P 500 component while Google stock is on the S&P 500 and Nasdaq.
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 then rose 4.5% as the tech titan guided for strong cloud growth. 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 more than 2% overnight, 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 5% 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 after hours. Shares fell 4.5% on Tuesday to 38.04, the lowest close since late 2020.
Visa earnings comfortably beat consensus Visa stock rose 5% 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.
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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 (GE) 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 (FFTY) gave up 2.9%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 3.7%, with Microsoft stock a major IGV holding. The VanEck Vectors Semiconductor ETF (SMH) skidded 4.3%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) plunged 6.75% and ARK Genomics ETF (ARKG) 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 (XME) lost 1.75% and the Global X U.S. Infrastructure Development ETF (PAVE) fell 2.2%. U.S. Global Jets ETF (JETS) descended 4.2%. SPDR S&P Homebuilders ETF (XHB) declined 2.3%. The Energy Select SPDR ETF (XLE) edged up 0.1% and the Financial Select SPDR ETF (XLF) slumped 2.5%. The Health Care Select Sector SPDR Fund (XLV) 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 (AAPL). 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.
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 (BYDDF), 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. The others are closing in on their 2022 lows. The Dow Jones did not fall below Monday’s lows, so its stock market rally attempt is still hanging on, for now.
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 (WCN) 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.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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