The stock market’s rally attempt gained ground on Tuesday amid steady Treasury yields, and earnings reactions were generally positive. Major indexes ended with good gains, this time as the S&P 500 returned above the 200-day line.
Investors should be more cautious. The rally effort is ongoing and proves nothing.
Microsoft stock rose on earnings, but profit missed guidance. Google stock plummeted.
Microsoft’s earnings and guidance, along with Google’s, are critical to the technology industry, particularly in artificial intelligence and cloud computing. Meta platforms (Meta) and Amazon.com (AMZN) to follow this weekend. Meta shares and Amazon fell overnight.
visa (V) posted on Tuesday night as its earnings fell.
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Dow Jones futures rose 0.3% vs. fair value, thanks to a boost from MSFT and Boeing. S&P 500 futures fell 0.2%. Nasdaq 100 futures fell 0.4%, helped by Microsoft but also Google Stock and other techs, including Meta and Amazon.
The 10-year Treasury yield was slightly higher at 4.86%, after falling on Tuesday evening.
China’s government has approved a RMB 1 trillion ($136.7 billion) bond to fund the stimulus, an unexpected move. Hong Kong’s Hang Seng rose solidly, up 0.55%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Stock market rally attempt
A stock market rally attempt saw some nice gains on Tuesday. For the second consecutive session, the major indices rallied and then retreated. But unlike Monday, they rebounded to close in the upper third of their daily ranges.
After a mostly negative reaction last week, Tuesday’s earnings reactions were generally positive. Most of those earnings gains were in battered stocks like the Dow components Verizon (VZ), 3M (Mmm) and Coca Cola (There is)
The Dow Jones industrial average rose 0.6% in stock market trading on Tuesday. The S&P 500 index rose 0.7%, moving above its 200-day line. The Nasdaq composite advanced 0.9%.
Tuesday marked the second day of a stock market rally attempt for the Nasdaq and the first for the Dow Jones and S&P 500. One or two moderately bullish days is not much of a market correction. But if the rally attempts to build momentum — amid massive returns — investors could look for a follow-up day later this week to confirm a new rally.
The S&P 500 index is hitting resistance at the 200-day line.
Market breadth was positive, but weeks or months were terrible. New lows continue to crush new highs.
The small-cap Russell 2000 rose 0.8% but hit a 52-week low on Monday.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 0.96% versus 0.97% for the Nasdaq 100. But the QQEW is below its 200-day. The Nasdaq 100, Meta, Microsoft and Google all broke above their 50-day lines and never neared its 200-day mark.
The 10-year Treasury yield stood at 4.84%. The 10-year bond yield rose to 4.89%, but that was after falling from 5% on Monday.
US crude oil prices fell 2.1% to $83.74 a barrel.
Among growth ETFs, the innovator IBD 50 ETF (FFTY) rose 1.9% in stock market trading on Tuesday. iShares Expanded Technology-Software Sector ETF (VAT) rose 0.91%, MSFT stock was with a key IGV hold. VanEck Vectors Semiconductor ETF (SMH) rose 1.2%.
SPDR S&P Metals & Mining ETF (XME) rose 1.5% and the Global X US Infrastructure Development ETF (sidewalkincreased by 0.5%. US Global Jets ETF (JETSDown 0.33%. SPDR S&P Homebuilders ETF (XHBfell 0.2%. Energy Select SPDR ETF (XLE) fell 1.4% and the Health Care Sector SPDR Fund (XLV) yielded a gain of 0.3%.
Meanwhile, the Industry Select Sector SPDR Fund (XLIUp 0.75%.
Fund Selection SPDR ETF (45Up 0.7%. Visa shares with CME are a key component in the ETF.
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Microsoft revenue easily beat fiscal Q1 2024 estimates, while revenue also topped the charts. Azure cloud computing revenue grew 28%, slightly above views.
In the conference call, the administration mentioned AI repeatedly, while also citing cybersecurity gains. Overall, Microsoft guided for a modest rise in Q2 revenue, though that included newly acquired Activision. It sees Azure growth of 26.5% with roughly steady growth in the second half.
MSFT stock rose more than 4% early Wednesday, indicating potential buying opportunities on Wednesday. Shares have an official buy point of 366.78, but investors can use the Oct. 19 high of 336.88 or the Sept. 14 high of 340.86 as initial entries.
After crushing a 50-day line on Monday, Microsoft shares rose 0.4% to 330.53 on Tuesday.
Google revenue and revenue beat Views moderately. Ad revenue was strong, but Google Cloud revenue slightly missed forecasts.
Google is making a big AI push, so its comments are important too.
Google shares fell more than 6% in premarket trading. Shares rose 1.7% to 138.81 on Tuesday, extending Monday’s bounce from the 50-day line. The line of relative strength is high.
Meta stock lost some ground early Wednesday following earnings from Google and Microsoft. Shares of Facebook and Instagram fell on Tuesday after 42 states sued the social media giant, saying its features were addictive and aimed at children. The meta has slowly retreated from the buy position set nearly two weeks ago.
AMZN stock fell slightly overnight, consolidating but below its 50-day low. Amazon shares rose 1.6% on Tuesday.
Visa revenue and earnings modestly beat Q4 views with Dow Card Corp. also gave upbeat guidance for fiscal 2024. But Visa also announced a $25 billion share buyback and a 16% dividend hike. Visa shares fell slightly in premarket trading. Shares rose 1.35% to 234.65 on Tuesday, trading between the 50-day and 200-day lines. According to MarketSmith analysis, Visa stock has a flat base with a buy point of 250.06.
Other major revenues
Vertiv earnings missed views with earnings below estimates, but a near-AI play lifted guidance. Shares rose 10% early Wednesday, marking a fresh high. VRT stock retook its 50-day line at a strong level on Tuesday.
CME stock fell modestly early Wednesday, but remains in buy territory, after the futures exchange narrowly topped EPS views with earnings.
BA stock rose modestly despite Boeing posting a bigger-than-expected loss, a bigger cash burn and a lowered 737 Max delivery target. Boeing beat revenue and affirmed cash flow targets. Dow Aerospace edged higher on Tuesday, but edged lower near 2023.
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What to do now
A handful of stocks flashed buy signals on Tuesday, but the market’s rally effort remains at best so far.
Earnings from Microsoft, Google, Meta, Vertiv, Amazon and others could be positive catalysts. But they can severely undercut the market. Or stocks and sectors may get mixed results.
Now is not the time to be bold on the long or short side. But pay close attention and keep updating your watch lists. If the market gains momentum, you need to be prepared.
Read the big picture every day to stay in tune with market direction and leading stocks and sectors.
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