Dow Jones futures and S&P 500 futures rose slightly early Thursday, while Nasdaq futures wavered Tesla fell on mixed earnings even as CEO Elon Musk hinted at a "meaningful" TSLA stock buyback, and predicted an "epic" fourth quarter. But he also admitted that the EV giant is seeing weakness in China and Europe.
The stock market rally attempt lost ground Wednesday, as the 10-year Treasury yield jumped to a fresh 14-year high. Netflix led generally strong earnings results, providing some support for stocks, but there were some big losers too.
Earnings
Tesla slightly topped earnings views but fell short on revenue. Musk said Q4 will be "epic," even as he acknowledged China and European issues. TSLA stock sold off overnight.
Lam Research, Alcoa, IBM and Las Vegas Sands and Steel Dynamics reported late Wednesday.
Lam Research earnings and revenue topped fiscal Q1 views, but the chip-gear maker said it'll lose up to $2.5 billion in sales from U.S. curbs on China exports. LRCX stock tilted higher early Thursday. Shares climbed 2.5% Wednesday, boosted by strong ASML earnings and guidance before Wednesday's open.
Alcoa reported a surprise loss while sales came in short. AA stock plunged in extended action. Shares fell 5.3% on Wednesday.
IBM earnings and revenue both topped. IBM stock rose modestly after dipping 0.35% on Wednesday.
Las Vegas Sands reported a quarterly loss and revenue that were slightly weaker than expected. LVS stock rose modestly in extended trade after slipping 0.7% Wednesday, perhaps on reports that China may reduce Covid quarantine times for visitors. Sands stock briefly broke out from a bottoming base in early October, but shares have plunged on the market sell-off and another rise in China Covid cases.
Steel Dynamics earnings and revenue topped. STLD stock edged lower before the open. Shares fell 1.3% to 80.68 on Wednesday, but held above its 50-day line. Steel Dynamics stock has an 88.72 consolidation buy point, according to MarketSmith. It's close to a trendline entry.
American Airlines earnings topped views early Thursday with revenue just above consensus. It also gave upbeat Q4 forecasts. AAL stock ascended modestly Thursday morning. Shares rose 2.1% Wednesday, extending a win streak to seven sessions after strong guidance from United Airlines late Tuesday and Delta Air Lines last week
Nucor also topped views Thursday morning, but the Steel Dynamics rival sees Q4 earnings below Q3 EPS. NUE stock fell solidly before the open, after hitting resistance at the 50-day and 200-day lines in Wednesday's session.
Dow Jones Futures Today
Dow Jones futures rose 0.5% vs. fair value, even with IBM stock providing a boost. S&P 500 futures climbed 0.35%. Nasdaq 100 futures rose 0.2% after being down more than 1% overnight. Tesla stock is a big S&P 500 and Nasdaq component.
Futures remain volatile, as they have been in the past few weeks, as global bonds and markets add to the uncertainty.
The 10-year Treasury yield dipped 1 basis point to 4.12% as it trades up and down.
There's also fresh speculation that embattled new U.K. Prime Minister Liz Truss may soon be out.
Hong Kong's Hang Seng index tumbled to a 13-year low, though it pared losses. The Japanese yen hit its lowest level vs. the dollar since 1990, as the Bank of Japan made unscheduled bond buys to rein in Japanese yields. China's offshore yuan hit a record low.
China could reduce Covid quarantine times for visitors, according to reports overnight. That could ease economic concerns in China.
Crude oil futures rose 2%. Copper prices climbed 2%.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally attempt briefly added to recent gains, but then reversed lower amid soaring Treasury yields. The major indexes pared losses somewhat by the close. A tepid beige book report, offering some Fed-positive signals on labor markets and inflation, may have helped.
The Dow Jones Industrial Average dipped 0.3% in Wednesday's stock market trading. The S&P 500 index gave up 0.7%. The Nasdaq composite retreated 0.85%. The small-cap Russell 2000 fell 1.7%.
The 10-year Treasury yield surged 13 basis points to 4.13%, a fresh 14-year high. U.K. inflation moving back to a 40-year high helped push yields higher. The 10-year yield is on track for a 12th straight weekly gain.
U.S. crude oil prices rose 3.3% to $85.55 a barrel, even with the Biden administration set to release more crude from the Strategic Petroleum Reserve. Natural gas prices extended sharp recent losses, down 3.9%.
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ETFs
Among the best ETFs, the Innovator IBD 50 ETF rose 0.7%, while the Innovator IBD Breakout Opportunities ETF fell 2.1%. The iShares Expanded Tech-Software Sector ETF declined 1.15%. The VanEck Vectors Semiconductor ETF climbed 0.8%, with ASML and LRCX stocks helping.
Reflecting more-speculative story stocks, ARK Innovation ETF slumped 4.2% and ARK Genomics ETF tumbled 5.5%, to a four-month closing low. Tesla stock is the top holding across Ark Invest's ETFs.
SPDR S&P Metals & Mining ETF retreated 2.4%. U.S. Global Jets ETF closed flat, despite UAL, AAL and DAL all advancing. SPDR S&P Homebuilders ETF sold off 4.8%. The Energy Select SPDR ETF jumped 3%. The Health Care Select Sector SPDR Fund dropped 1.4%.
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Tesla Earnings
Tesla earnings surged 69% to $1.05 a share, with revenue up 56% to $21.45 billion. Analysts had expected Tesla earnings of $1 a share on sales of $23.3 billion, both up 62%.
Musk, on the Tesla earnings call, said "it's likely we will do some sort of buyback" in 2023, perhaps $5 billion to $10 billion.
Tesla's CEO predicted an "epic" Q4 and said demand is "excellent." But, responding to a question about backlogs and new orders, especially outside the U.S., Musk didn't directly answer the question.
But he said that China and Europe are experiencing some economic weakness, signaling that was affecting demand.
Q3 deliveries, reported earlier this month, easily set a record at 343,830 but missed views of roughly 360,000. That also fell short of production by some 22,000 vehicles.
But there's widespread speculation that China weakness was a big factor for the Q3 delivery shortfall. Wait times have fallen significantly, even with some new incentives, as local backlogs fall to zero.
Tesla argued that logistics costs spurred it to tone down the end-of-quarter rush. The EV giant said that it will build additional inventory in Q4 to help with that shift, with production "pedal to the metal," Musk said.
But despite saying it wants to smooth out logistics, Tesla's local deliveries in China and key European markets are once again very slow to start Q4.
Thanks to recent upgrades, Shanghai plant output is surging higher in Q4. Berlin and Austin also are slowly picking up production.
In the U.S., new EV tax credits should help Tesla in 2023, though it's not clear which vehicles would be eligible. The upcoming tax credits might spur potential buyers to hold off on purchases until January.
The Cybertruck also could help in the U.S., if volume production begins next year. Musk said that "early" production will start in mid-2023.
Tesla Semi deliveries will begin on Dec. 1, as Musk previously tweeted. It's unclear how many will be made now or in 2023. Despite the limited production, the Tesla Semi will not use 4680 batteries for now.
Tesla said that 4680 battery cell production tripled in Q3 vs. Q2. But that still equates to a small number of battery packs. The larger form-factor batteries are still not being mass produced, making cost savings elusive.
Musk said that new Tesla drivers will gain access to Full Self-Driving Beta soon. But FSD Beta will remain a Level 2 driver-assist system for now.
Further out, Musk said Tesla is working on a new, smaller, much-cheaper vehicle, that will be the EV giant's biggest-seller yet. But he didn't offer a timeline.
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Tesla Stock
Tesla stock fell 6% early Thursday, but off overnight lows. TSLA stock pared losses initially Wednesday night on Musk's buyback comment, but widened as he conceded weakness in Europe and China. Shares rose 0.8% to 222.04 on Wednesday's. TSLA stock was up 8.3% so far this week, but that's after tumbling to a 15-month low last week. Tesla stock hit a record 414.46 in November 2021.
One key issue is whether Musk needs to sell more TSLA stock to help finance the Twitter deal. At least one analysis had Musk needing to unload $8 billion worth of Tesla shares.
Musk didn't speak to that, but said he's "excited" about buying Twitter even as he admitted that he is "overpaying."
TWTR stock rose 1% overnight. Shares edged up 0.1% to 51.83 on Wednesday, close to the $54.20 takeover price.
Market Rally Analysis
The stock market rally attempt tried to make further progress Wednesday. But the surging 10-year Treasury yield weighed on the major indexes, overshadowing generally strong earnings.
Netflix and a few other big-cap names flattered the major indexes. But decliners outpaced winners by nearly 3-to-1 on the NYSE and Nasdaq. The small-cap Russell 2000 and S&P MidCap 400 fell sharply, while the Nasdaq composite fared far worse than the Nasdaq 100.
The Dow Jones remained above its 21-day line, but the S&P 500 fell back below that short-term level. So did the Russell and S&P MidCap. The Nasdaq only briefly topped that level on Tuesday and lost further ground Wednesday.
The indexes are still looking for a follow-through day to confirm the new uptrend. The market rally attempt will remain in place unless the major indexes undercut their Oct. 13 lows.
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What To Do Now
It's still a bear market, despite the ongoing rally attempt. The whipsaw action in the major indexes and leading stocks during regular and extended trading makes it hard to play stocks, even for very short periods.
If you do take any positions, make them small and be quick to take profits and losses. There's nothing wrong with staying all or partly in cash.
Work on those watchlists. A lot of stocks are not far from flashing buy signals.
If they do trigger entries, that doesn't mean you have to do anything. That may mean you let some stocks pass by that turn out to big winners. But that also keeps you from buying a stock that reverses quickly and possibly sells off hard.
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.
