Dow Jones futures edged higher Wednesday morning, while S&P 500 futures and Nasdaq futures rose slightly. Apple stock, Microsoft (MSFT) and Google parent Alphabet (GOOGL) dominated overnight trading. U.S.-listed China stocks bounced back modestly.
The stock market rally slumped Tuesday, led by techs, as a China crackdown continued, UPS (UPS) signaled the e-commerce boom is over and the CDC recommended wearing masks indoors.
Apple (AAPL), Microsoft and Google stock headlined a mammoth night for earnings, along with Advanced Micro Devices (AMD) and Visa (V).
The earnings crush continues Wednesday, with Shopify (SHOP) and Generac (GNRC) among those reporting before the open. Facebook (FB) and PayPal (PYPL) headline among the many companies reporting late. But during Wednesday’s session investors will pay close attention to the Federal Reserve. A two-day Fed meeting ends Wednesday. Will Fed policymakers officially begin talking about tapering massive asset purchases?
The stock market rally had a down session, led by techs. The Dow Jones, S&P 500 index and Nasdaq composite closed off lows and still look healthy a day after hitting all-time intraday highs. But many leading stocks struggled.
Dow Jones Futures Today
Dow Jones futures were just above fair value. S&P 500 futures rose 0.1%. Nasdaq 100 futures climbed 0.4%. Apple, Microsoft and Google stock are all trillion-dollar stocks, along with Facebook.
Apple stock, Microsoft and Visa are Dow Jones components, with Boeing (BA) and McDonald’s (MCD) also reporting earnings early Wednesday. Boeing stock jumped on its first earnings in two years.
U.S.-listed China stocks generally rose in the premarket after massive selling in recent days on Beijing crackdowns on private businesses in a variety of sectors. But the early gains for Alibaba (BABA), Nio (NIO), Futu Holdings (FUTU) and more are just a fraction of what has been lost over the past week and in 2021.
Bitcoin jumped, moving toward $41,000. That’s the highest in weeks and at at the top of a range going back to late May.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
The Fed meeting announcement at 2 p.m. ET on Wednesday could declare that policymakers are officially discussing reining in asset purchases down the road. The recent wave of Covid cases in the U.S. and worldwide, along with travel and other restrictions, could give the Fed reason to hold off on taper talk yet again. The key phrase to watch is whether “sufficient economic progress” has been made.
Fed chief Jerome Powell, who will speak at 2:30 p.m. ET, will likely offer greater clarity. Powell said after the June meeting that that gathering was the “talking about talking about” meeting. Still, taper talk may not happen until the September Fed meeting.
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Apple earnings easily beat, with overall revenue far above estimates amid strong iPhone sales and services revenue. The company sees strong year-over-year revenue growth in the current fiscal Q4, but not as strong as in the third quarter.
Apple stock retreated about 1% before the open, off overnight lows. AAPL stock fell 1.5% to 146.77 on Tuesday, still above a prior base’s buy zone.
Apple results also are key for iPhone chipmakers such as Skyworks Solutions (SWKS), which reports Thursday and Qorvo (QRVO), due next week. SWKS stock edged higher and Qorvo stock rose modestly in premarket trade, not far from buy points.
Microsoft earnings handily topped fiscal Q4 views. Azure cloud-computing revenue grew 51%.
Microsoft and Google are cloud-computing giants, trying to catch up to industry leader Amazon Web Services.
But Microsoft stock rose 1% before the open, reversing from a 3% loss, after execs gave bullish guidance on the earnings call. Shares dipped 0.9% to 286.54 on Tuesday. MSFT stock is extended from prior buy points.
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Google earnings crushed views on booming advertising revenue, while the cloud-computing business also topped views. Google stock popped 4% early Wednesday. Shares retreated 1.6% to 2,638, well extended from a buy zone. Facebook stock advanced 1.5% on Google earnings results.
AMD earnings beat views while the graphics and data-center chip maker guided higher on Q3 revenue.
AMD stock climbed 3% before the open. Shares gave up 0.95% on Tuesday to 91.03. AMD stock is working on a 95.54 buy point from a cup-with-handle base.
Visa earnings cleared expectations. Visa stock fell less than 1% early Wednesday. Shares edged up 0.3% on Tuesday to 250.93, just extended from a buy zone.
Visa foreshadows Mastercard (MA), which reports Thursday morning. MA stock declined slightly overnight.
Shopify earnings more than doubled vs. analyst views for a small decline, with revenue also beating. The e-commerce software giant says its outlook for the rest of 2021 is little changed vs. its February projections.
SHOP stock rose 2% before the open. Shopify stock sank 1.7% to 1,550.10 on Tuesday.
Generac earnings modestly beat views. The generator and solar-power storage systems maker guided slightly higher on full-year revenue, but trimmed margin expectations somewhat.
GNRC stock sank 4.5% early Wednesday. Generac fell 1.3% to 438.92 on Tuesday.
These are just a sliver of the companies reporting overnight in the busiest week of earnings season.
Microsoft, PayPal, Generac and Google stock are on IBD Leaderboard. PYPL stock is on SwingTrader. Microsoft stock and Google are on IBD Long-Term Leaders. Shopify stock, Facebook and Google are on the IBD 50.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Coronavirus cases worldwide reached 196.15 million. Covid-19 deaths topped 4.19 million.
Coronavirus cases in the U.S. have hit 35.34 million, with deaths above 627,000.
The Centers for Disease Control recommended that all Americans, even those that are fully vaccinated, wear masks in indoor locations in places with high Covid transmission rates. It also backed masks for K-12 schools as the the delta variant spreads. These are only guidelines, though Los Angeles County already reinstated an indoor mask mandate earlier this week.
President Joe Biden said he may impose a vaccine mandate for all federal employees. That follows several local governments and health care facilities announcing either vaccine mandates or a choice between vaccines and frequent testing.
Stock Market Rally
The stock market rally retreated Tuesday, led by tech stocks.
The Dow Jones Industrial Average edged down 0.2% in Tuesday’s stock market trading. The S&P 500 index dipped 0.5%. The Nasdaq composite skidded 1.2%. The small-cap Russell 2000 sank 1.1%.
U.S.-listed Chinese stocks continued to sell off hard as Beijing cracks down on an array of consumer-focused companies. On Tuesday, China signaled an even-tougher line on Hong Kong as well as gaming mecca Macau.
UPS (UPS) beat views, but shipment volumes declined, suggesting the e-commerce boom is over. UPS stock sold off 7% and FedEx (FDX) 5%, while several e-commerce plays came under pressure.
More broadly, the China crackdown, UPS news and mask guidelines raise some concerns about economic growth. While growth stocks were the biggest losers Tuesday, economic concerns are not healthy for cyclical names.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) lost just over 2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) sank 1.3%, with MSFT stock a major component. The VanEck Vectors Semiconductor ETF (SMH) gave up 1.8%, with AMD stock a top holding.
SPDR S&P Metals & Mining ETF (XME) slid 0.9% and Global X U.S. Infrastructure Development ETF (PAVE) edged down 0.4%. U.S. Global Jets ETF (JETS) descended 1.3%. SPDR S&P Homebuilders ETF (XHB) dipped 0.1%. The Energy Select SPDR ETF (XLE) retreated 0.9% and the Financial Select SPDR ETF (XLF) was just below break-even.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) skidded 2.45% and ARK Genomics ETF (ARKG) 1.6%. ARKK tumbled below its 200-day line and tested its 50-day. ARKG already undercut its 50-day line on Monday.
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Market Rally Analysis
The stock market rally had a setback on Tuesday, though it couldn’t have been too surprising.
The stock market rally had been looking somewhat extended again, at least on the Nasdaq 100, while market breadth remains weak. With so many massive earnings Tuesday night and the next few days, there are plenty of reasons for the market to retreat. The intensifying China crackdown and UPS results were easy catalysts, with the CDC mask guidelines not helping sentiment.
The Nasdaq 100 no longer looks extended, at 5.1% above its 50-day line vs. 6.6% on Monday. The Nasdaq, which tested support at its 21-day line, is just 3.4% above its 50-day. The S&P 500 and Dow Jones didn’t even touch their 10-day lines.
But while the major indexes look fine, leading stocks were hard hit. A number of recent breakouts or early entries struggled or worse. Market breadth, which improved slightly for a couple days last week, has been slumping again.
If Apple stock, Microsoft, Google and other tech titans rally on earnings Wednesday and beyond, that could shore up the major indexes, but the market rally would quickly look extended again. If these big caps slump, it’s not going to be a good time for growth stocks and probably the overall market rally.
Ideally, the megacap stocks would muddle along, while breadth improves and leading stocks outperform. But such a constructive scenario seems unlikely at the peak of earnings season.
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What To Do Now
The weekend Stock Market Today column suggested that investors should be cautious about further new buys given the mix of an extended market rally, narrow breadth and a tsunami of earnings. Investors would need to make decisions about whether or not to hold stocks with earnings due.
Investors buying growth stocks on Monday likely are down on those trades. Some promising buys from last week also are under pressure. Stocks that had decent cushions suddenly may be a little harder to hold with earnings on tap.
Remember, it’s not the news, it’s the reaction to the news. Apple, Microsoft and Google all topped views, but the stocks went in different directions overnight — some have already reversed course. And they may all switch direction by Wednesday’s open or close.
Investors probably should be reducing exposure simply by cutting losers and exiting trades ahead of earnings. It’s still a good idea to be extremely selective about new buys this week, to see how peak earnings week shakes out.
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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