Dow Jones futures, along with S&P 500 futures and Nasdaq 100 futures, signaled heavy losses ahead of the stock market open Wednesday. Tech giants Apple and Tesla were set to open with sharp declines. Microsoft tumbled on weak revenue guidance, while Boeing reported earnings ahead of the stock market open. First Solar soared 12% on strong earnings results.
Among the Dow Jones leaders, Apple (AAPL) was set to fall 1.5% early Wednesday, while Salesforce.com (CRM) rebounded back above its 50-day moving average line Tuesday. Meanwhile, Microsoft (MSFT) tumbled over 2% despite strong earnings late Tuesday. Boeing (BA) briefly jumped on earnings before erasing gains.
Tesla (TSLA) skidded nearly 2% in premarket trade.
JD.com, Microsoft and Tesla are all IBD Leaderboard stocks.
Dow Jones Futures Today
Early Wednesday, Dow Jones futures lost 2.3% vs. fair value, while S&P 500 futures dropped 2%. Nasdaq 100 futures moved down 1.6% vs. fair value. Remember that overnight action in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Amid the coronavirus stock market rally, the tech-heavy Nasdaq is up 27.4% for the year through Tuesday’s close. Meanwhile, the S&P 500 is up 5%, while the Dow is down 3.8% year to date, through the Oct. 27 close.
According to the Worldometer data tracker, the cumulative number of confirmed coronavirus cases in the U.S. topped 9 million on Wednesday. Total virus-related deaths rose past 232,000.
The cumulative total of worldwide Covid-19 cases confirmed since the start of the outbreak topped 44.3 million Wednesday, with more than 1.17 million virus-related deaths.
Coronavirus Stock Market Rally
According to IBD’s The Big Picture, the coronavirus stock market rally is starting to falter amid recent institutional selling.
Tuesday’s Big Picture commented that “The Nasdaq Composite’s 0.6% gain ate into Monday’s sell-off. That’s bullish. Yet it recouped well less than half of that day’s 1.6% pounding. Volume lightened vs. the prior day. This suggested institutional investors bought cautiously. And the Nasdaq itself, while holding above the 50-day moving average, is not far from testing that key technical level again.”
An uptrend under pressure means investors need to be much more cautious, but not go entirely to cash. Watch sell signals closely. Be sure to sell any stock that falls 7% or 8% from your purchase price, and maybe even 3% or 4% if you want to raise cash.
Avoid buying stocks for now, unless the breakout is exceptionally good. The best candidates are those that proved most resilient during the recent stock market weakness. Keep a close eye on stocks with strong relative strength lines. These ideas could become stock market leaders.
Use MarketSmith features like the RS Line Blue Dot to easily spot such stock candidates. The RS Line Blue Dot is assigned to stocks whose RS lines are making new highs while the stock is basing or breaking out.
Stocks to watch include IBD Long-Term Leaders, companies with stable earnings growth and price performance.
Dow Jones leader Microsoft smashed Wall Street’s targets for the September quarter. The company earned $1.82 a share on sales of $37.2 billion in its fiscal first quarter ended Sept. 30. Analysts expected Microsoft earnings of $1.54 a share on sales of $35.72 billion.
With respect to guidance, Microsoft expects $39.5 billion to $40.4 billion in fiscal second-quarter revenue. The middle of that range, at $39.95 billion, is below some analyst estimates for revenue of $40.43 billion.
Shares fell 2% premarket Wednesday after ending Tuesday just above its 50-day line amid a 1.5% gain. Shares are approaching a 225.31 buy point in a cup with handle.
Year to date, Microsoft is one of the top Dow Jones stocks, advancing 35.2% through Tuesday’s close.
Dow Jones Earnings: Boeing
Boeing topped third-quarter forecasts Wednesday and said it expects further employee reductions amid the coronavirus pandemic and its 737 Max grounding. The company plans to lay off an additional 11,000 by the end of 2021, bringing its total number of employees to 130,000 vs. over 160,000 at the start of this year.
Boeing stock fell over 1% ahead of the stock market open.
Stock Market Earnings: Enphase, First Solar
Enphase Energy jumped 3% early Wednesday before erasing gains. The company reported earnings of 30 cents a share on revenue of $178.5 million. Analysts expected Enphase earnings to fall to 24 cents a share on revenue of $169.7 million.
First Solar soared as much as 12% in premarket trade. The solar company’s earnings surged 400% to $1.45 per share, with revenue up 70% to $928 million. That blew out analyst views for First Solar earnings of 60 cents a share and sales of $707.7 million.
Stocks Near Buy Zones: JD.com, Shopify, Tencent
According to IBD Leaderboard commentary, “JD.com’s base has morphed into a cup with handle. It is a half position on Leaderboard. The relative strength line made new highs already, a bullish sign for the next breakout.”
JD.com was featured in this week’s Stocks Near A Buy Zone column.
Shopify is rapidly nearing a 1,130.10 buy point in a cup with handle. Shares jumped 4.3% Tuesday after the company announced a partnership with TikTok to help Shopify clients advertise on the Chinese social media platform.
According to the IBD Stock Checkup, SHOP stock boasts a best-possible 99 IBD Composite Rating. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.
Tuesday’s IBD Stock Of the Day, Tencent, is at the top of the 5% buy zone above a 73.05 buy point in a flat base. Shares jumped 5.7% Tuesday after the company received a favorable ruling from the 9th U.S. Circuit Court of Appeals protecting its wildly popular WeChat app from an immediate ban on downloads.
Bullishly, the stock’s relative strength line is approaching new highs, a sign of strong stock market outperformance. The RS line measures a stock’s price performance vs. the S&P 500.
Tesla stock continues to search for support around its 50-day moving average line. Shares fell 1.5% early Wednesday after Tuesday’s 1.05% gain. Shares are about 15% off their 52-week high, as they form a new base with a 502.59 buy point. The stock is currently trying to find support at its 50-day moving average line.
According to IBD Leaderboard commentary, “The new base is later stage, following advances from cup-with-handle bases and a high, tight flag that also counted as a base. So, the latest pattern has higher risk.”
Dow Jones Leaders: Apple, Salesforce
Among the top Dow Jones stocks, Apple fell more than 1% premarket Wednesday, on pace to snap a two-day win streak. Shares are looking to regain their 50-day moving average line. Meanwhile, the stock is forming the right side of a new cup-with-handle base, showing a 125.49 buy point, according to MarketSmith chart analysis.
The blue-chip giant is the No. 1 performing Dow Jones stock for 2020, with a 58.8% advance through Tuesday’s close. Recent Dow Jones 30 addition Salesforce is the No. 2 performer with a 54.3% year-to-date advance.
Salesforce jumped 3.4% Tuesday, and is retaking the 50-day line.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones futures.
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