Dow Jones futures were little changed early Wednesday, along with S&P 500 futures and Nasdaq futures. Microsoft (MSFT), Google parent Alphabet (GOOGL), Snap (SNAP) and Visa (V) reported late Tuesday, with Boeing earnings and the Fed meeting decision on tap Wednesday.
X
The stock market rally had another session of decent gains Tuesday, though the major indexes pared gains into the close. The Dow Jones winning streak rose to 12 straight sessions. The S&P 500 rose to a fresh 15-month high. The Nasdaq composite led Tuesday, fueled by Nvidia (NVDA) and MSFT stock, but it’s still working back toward last week’s rally peaks. A number of tech leaders bounced off key support levels.
After-Hours Earnings
After hours, Microsoft earnings topped views, but MSFT stock fell late on guidance. Google stock jumped, signaling a breakout. Alphabet earnings beat, led by Google Cloud and YouTube ads. The Microsoft and Google earnings reports have huge implications for artificial intelligence, cloud computing and the tech sector broadly.
Visa edged lower as the payments giant slightly topped views. Visa stock lost a fraction Tuesday, holding in a buy zone.
Snap earnings topped views but the Snapchat parent dived late on revenue guidance, signaling a plunge back below key moving averages. SNAP stock had hit its best level in nearly a year on July 13, but has fallen for seven of the last eight sessions.
Bank News
Meanwhile Banc of California (BANC) late Tuesday agreed to buy PacWest Bancorp (PACW) in an all-stock merger of two California-based financials. Both also were reporting Q2 results after the close. PacWest struggled with deposit outflows during the regional banking crisis.
PACW stock plunged to close down 27% Tuesday on a Wall Street Journal report that a deal was imminent. However, its stock jumped more than 30% in late trading after the announcement. BANC stock closed 11% higher and leapt another 8% in extended trading.
Some other regional bank stocks fell, but generally gave up only a portion of their recent gains.
Money-center giant Wells Fargo (WFC) announced a $30 billion buyback after hours. Wells also hiked its quarterly dividend 17% to 35 cents a share. WFC stock rose overnight.
Boeing (BA) reports early Wednesday. So does Rio Tinto (RIO). BA stock dipped 0.8% to 214.12 on Tuesday, but found support at the 50-day line, not far from an official 223.91 buy point. RIO stock bounced 4.8% to 69.81 on Tuesday, flashing an aggressive entry along with several other mining stocks. China stimulus pledges are lifting metal ore prices.
Nvidia stock is on IBD Leaderboard. Microsoft stock is on the IBD Long-Term Leaders list.
The video embedded in this article discussed the market rally action as well as analyzing Miniso (MNSO), Nucor (NUE) and Synopsys (SNPS).
Dow Jones Futures Today
Dow Jones futures edged lower vs. fair value. MSFT stock and Visa are Dow components, as well as Boeing. S&P 500 futures were flat. Nasdaq 100 futures retreated 0.2%, reversing initial Google-led gains as Microsoft retreated.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Fed Meeting
The two-day Fed meeting concludes Wednesday, with a policy announcement due at 2 p.m. ET. Markets have a quarter-point Fed rate hike locked, but see only a modest chance of yet another move before the year’s end. The question is how strongly will policymakers make the case for an additional rate hike.
Fed chief Jerome Powell will speak at 2:30 p.m. ET.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally had a decent, tech-led session, though the indexes gave up some gains in the final hour. The Dow Jones Industrial Average edged up 0.1% in Tuesday’s stock market trading. The S&P 500 index rose 0.3%. The Nasdaq composite advanced 0.6%. The small-cap Russell 2000 closed just above break-even.
Megacap techs, notably Nvidia stock and Microsoft, outperformed Tuesday.
The Invesco S&P 500 Equal Weight ETF (RSP) rose about 0.1%
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) climbed 0.4% vs. the Nasdaq 100’s 0.7% gain.
The market rally clearly doesn’t want to go down. The S&P 500 hasn’t even touched its 21-day line in two months. The Nasdaq also hasn’t done so since early May.
U.S. crude oil prices rose 1.1% to $79.63 a barrel, up 5.7% over the past four sessions. Copper prices climbed 1.6% on Tuesday, following Monday’s 1% gain. China’s pledges to revive the property sector are boosting industrial commodities.
The 10-year Treasury yield popped about 6 basis points to 3.91%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) climbed 0.6%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 0.8%, with MSFT stock a huge IGV holding. The VanEck Vectors Semiconductor ETF (SMH) popped 1.6%, with NVDA stock the top holding. SNPS stock is a member of the IGV and SMH holdings.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) edged down 0.3% and ARK Genomics ETF (ARKG) advanced 0.4%.
SPDR S&P Metals & Mining ETF (XME) jumped 2%. NUE stock is a notable XME holding. U.S. Global Jets ETF (JETS) descended 2.2%. SPDR S&P Homebuilders ETF (XHB) rose 1%. The Energy Select SPDR ETF (XLE) climbed 0.5% and the Health Care Select Sector SPDR Fund (XLV) just edged lower.
The Industrial Select Sector SPDR Fund (XLI) dipped 0.1%, with Boeing stock a big XLI component.
The Financial Select SPDR ETF (XLF) retreated 0.65%. The SPDR S&P Regional Banking ETF (KRE) slid 1.9% Tuesday, but then jumped after hours. PACW stock is a KRE holding.
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Microsoft Earnings
Microsoft earnings topped fiscal Q4 views forecasts, with revenue up 8% to $56.19 billion, slowly accelerating for a second straight quarter. Azure cloud-computing growth rose 26% vs a year earlier, edging past views though below the prior quarter’s 27% advance.
On the conference call, Microsoft said Intelligent Cloud revenue, which includes Azure, will fall slightly sequentially in Q1 2024. The Dow Jones tech titan, which last week announced AI pricing for enterprise customers, said AI revenue growth will be “gradual.”
The Dow Jones tech giant also said it expects “increased capital spending on AI initiatives,” with capex rising sequentially in each quarter of fiscal 2024.
MSFT stock lost nearly 4% in extended action, mostly on the earnings call. Shares rose 1.7% to 350.98 on Tuesday, continuing Monday’s modest bounce from the 21-day line. Microsoft stock hit a record 366.78 on July 18.
NVDA stock rose fractionally overnight, as Microsoft’s AI spending spree will likely mean more Nvidia chip sales.
Google Earnings
Google earnings climbed 19%, ending a four-quarter string of year-over-year declines. Revenue climbed 7%, the second straight quarter of slightly faster growth. Google said cloud computing revenue rose 28% to $8.03 billion.
On the earnings call, Google remained bullish about incorporating AI features with advertising.
Google stock jumped 6% to nearly 130 in overnight action, signaling a breakout. Shares edged up 0.6% to 122.21 on Tuesday. GOOGL stock has a 127.10 buy point from a cup-with-handle base. A move above Monday’s high of 123 could offer an early entry within the handle and from the 50-day.
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What To Do Now
Earnings season is now at fever pitch, while the Fed rate hike announcement is due Wednesday afternoon.
A few stocks are flashing buy. With growth names in particular facing so much news in the next few days, investors could consider adding exposure in the industrial, commodity or other non-tech areas. But if the market plunges on earnings and the Fed announcement, there will be few safe havens.
There’s nothing wrong with standing pat in the short run, holding on to sizable existing exposure.
Investors should pay close attention to market action, and keep working on watchlists.
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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