Dow Jones futures rise on Google, Microsoft earnings after stock skid; Fed rate hike looms

Dow Jones futures rose Wednesday morning, as did S&P 500 futures and especially Nasdaq futures. Google and Microsoft made earnings headlines overnight, with news of the Federal Reserve meeting looming on Wednesday. The stock market rally continued to slide on Tuesday as walmart (WMT) plunged on a profit warning as Shopify (STORE) announced big layoffs as growth disappoints.




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ParentGoogle Alphabet (GOOGL) missed second-quarter results while the Dow Jones giant Microsoft (MSFT) didn’t hit the high and low, but gave solid advice, kicking off a big week for tech titans. Metaplatforms (META) is due Wednesday evening and Apple (AAPL) and Amazon.co.uk (AMZN) Thursday.

Shares of Google and Microsoft rose solidly after both slipped in earnings.

Enphase Energy (ENPH), meanwhile, announced Q2 results that beat expectations. ENPH surged in the extended trade, signaling a breach of key resistance.

Chipotle Mexican Grill (GCM) and Texas Instruments (TXN) rose overnight on earnings, but both are far from highs.

Early Wednesday, Boeing (BA) and Bristol Myers Squibb (BMY) are among the many reports.

In addition, activist investor Elliott Management took an unknown stake in PayPal (PYPL), Dow Jones reported Tuesday evening. PYPL stock rose 5% early Wednesday.

The video embedded in this article highlighted Tuesday’s market action and analyzed Wholesale BJ’s (bj), Energy Cheniere (LNG) and Fortinet (FTNT). The video also took a quick look at stocks from Google, Microsoft and Enphase Energy.

Fed meeting

All eyes are on the Federal Reserve on Wednesday afternoon as the Fed’s two-day meeting ends with a policy announcement at 2 p.m. ET. Markets are expecting another 75 basis point rate hike from the Fed. A big question is what Fed chief Jerome Powell announces September Fed meeting and beyond. Markets are pretty split between a half point move in September or 75 basis points. In November, investors bet on an additional 25-50 basis points, but that’s about it.

Headline inflation has almost certainly peaked, given falling gasoline prices, but price pressures remain elevated. However, investors expect the Fed to wrap up its rate hikes in a few months, largely because they see a recession that may already be underway.

New home sales in June fell from a lower-revised May, the Commerce Department said Wednesday, the latest grim economic report. Thursday morning, Trade will likely report a second straight quarter of GDP decline. Although it is not officially a recession, it is very likely that the NBER will eventually declare a recession in the United States.

Ahead of the September Fed meeting, investors and policymakers will receive July and August consumer price index readings and employment reports.

Dow Jones Futures Today

Dow Jones futures were up 0.4% from fair value. S&P 500 futures rose 0.9%. Nasdaq 100 futures jumped 1.5%. Microsoft is a component of the Dow Jones, S&P 500, and Nasdaq 100, while Google and ENPH stocks are S&P 500 and Nasdaq 100 stocks.

Remember that overnight action in Futures contracts on Dow and elsewhere does not necessarily translate into actual trading over the next stock Exchange session.


Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live


Stock market rally

The stock market rally suffered further losses, especially among tech.

The Dow Jones Industrial Average lost 0.7% on Tuesday stock market trading. The S&P 500 index fell 1.15%, with Fortinet and WMT shares the two biggest losers. The Nasdaq composite lost 1.9%. The small-cap Russell 2000 lost just 0.6%

U.S. crude oil prices fell 1.8% to $94.98 a barrel as recession fears heightened demand concerns. President Biden plans to release another 20 million barrels of strategic oil reserves. This was also negative for crude prices.

Natural gas prices rose 3.1%. Russia, which is curbing natural gas flows to Europe, is driving up prices there, boosting demand for US LNG.

The 10-year Treasury yield fell 3 basis points to 2.89% after falling to 2.71% intraday, matching its May low. The two-year yield rose slightly to 3.06% as the widening yield curve inversion underscored inflation risks.

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From best ETFsthe Innovator IBD 50 ETF (FFTY) and Innovator IBD Breakout Opportunities ETF (FIGHT) increased slightly by 0.2%, with the help of medical care. The iShares Expanded Tech-Software Sector ETF (VAT) fell 3.1%, with Fortinet and other security stocks hammered. The MSFT stock is a major component of the IGV. The VanEck Vectors Semiconductor ETF (SMH) fell 1.5%.

SPDR S&P Metals & Mining ETF (XME) edged down 0.15% and the Global X US Infrastructure Development ETF (PAVE) rose 0.35%. US Global Jets ETF (JETS) fell by 2%. ETF SPDR S&P Home Builders (XHB) lost 1%. The SPDR Energy Select ETF (XLE) fell 0.9% and the Financial Select SPDR ETF (45) 1.4%. SPDR Healthcare Sector Fund (XLV) increased by 0.5%.

Reflecting more speculative history stocks, ARK Innovation ETF (ARKK) fell 4.8% and ARK Genomics ETF (ARKG) lose 1%.


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Microsoft Benefits

Microsoft revenue and revenue fell short of the decline seen in the fiscal fourth quarter, with EPS up 3% and revenue down 12%.

Tech titan Dow guided Q1 2023 revenue growth low, but cloud revenue is expected to be strong, with Azure sales up 43%. Microsoft expects double-digit sales growth in the new fiscal year 2023.

Microsoft stock jumped nearly 4% in overnight trade after initially falling slightly. The shares fell 2.7% on Tuesday to 251.90, falling sharply from their 50-day line on a tough day for software.

Google revenue

Google’s revenue plummeted 11%, slightly missing consensus, while gross revenue climbed 16%, just ahead. Digital advertising performed well, although cloud computing and YouTube revenues were lacking.

Google stock rose 3.5% in overnight trading. Shares fell 2.3% on Tuesday to 105.02. This did not undermine the May 24 intraday low, but was the worst close since April 2021. GOOGL stock plunged 8.2% over three days following the Instantaneous (INSTANTANEOUS) and Twitter (TWTR) revenue reports that highlight problems with online advertising.

Enphase Earnings

Enphase Revenue doubled as revenue jumped 68%, both easily beating views. The solar inverter maker advanced for third-quarter revenue.

ENPH stock jumped 10% in premarket trading. The shares fell 1.1% to 216.10 in Tuesday’s session. Enphase stock is expected to break through the early April high at 220.99. This could be an aggressive entry or an additional buy point. But ENPH stock has already closed 13% above its 50-day line.

Market rally analysis

The stock market rally took a step back on Tuesday as profit warnings again fueled selling, especially with big profits, economic data and the Fed meeting decision ahead.

The S&P 500 fell back to the 50-day moving average, with the Dow Jones and Nasdaq approaching that level.

Perhaps the recent action is just a short-lived constructive pullback, paving the way for bullish gains. But perhaps the major indexes will sell off further after the Fed meeting and Apple earnings.

The action of the major stocks was uninspiring. Few buy signals were given when the market was moving higher. Those that did were often subject to jerks or shakedowns. There is now a rotation towards energy names, especially natural gas and LNG fields. But that could quickly change.

Health insurers and some doctors are still showing strength.


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What to do now

Other than to possibly nibble on an energy bet, there’s no good reason to make any new purchases ahead of the Fed meeting and other big news over the next few days. Investors should reduce their modest exposure, take at least partial profits and cut losses.

But stay engaged. The market could quickly improve in the coming days, providing plenty of buying opportunities. So work on those watchlists.

Lily The big picture every day to stay in tune with market direction and key stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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