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Dow Jones Futures Drop as Yields Continue to Rise; Tesla Slips In Earnings, Elon Musk Comments

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Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures, Treasury yields are still rising and Asian markets hit new lows. Tesla fell on mixed earnings despite CEO Elon Musk hinting at a “meaningful” TSLA share buyback and predicting an “epic” fourth quarter. But he also admitted that the electric car giant sees weakness in China and Europe.




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The stock market rally venture lost ground Wednesday as the 10-year Treasury yield rose to a 14-year high. Netflix (NFLX) provided some support for equities overall with strong earnings results, but there were also some big losers.

Earning

tesla (TSLA) slightly exceeded earnings outlooks but fell short in revenue. Musk said the fourth quarter will be “epic” despite acknowledging China and Europe issues. TSLA stock was sold overnight.

Slide Research (LRCX), alcohol (AA), IBM (IBM) and Las Vegas Sands (LVS) and Steel Dynamics (STLD) reported late Wednesday.

Lam Research earnings and revenue beat its first-quarter financial outlook, but the chip gear maker said it would lose up to $2.5 billion in sales from the U.S. restrictions on Chinese exports. LRCX stock fell modestly in overnight trading. Shares up 2.5% on Wednesday, bolstered by strong gains ASML (ASML) Earnings and guidance ahead of Wednesday’s opening.

Alcoa reported a surprise loss as sales came in short. AA stock fell in a prolonged move. Shares fell 5.3% on Wednesday.

IBM earnings and revenue peaked. IBM stock rose modestly after falling 0.35% on Wednesday.

Las Vegas Sands reported quarterly losses and revenue that were slightly weaker than expected. LVS stock was little changed in extended trading after falling 0.7% on Wednesday. Sands stock briefly broke from the bottom in early October, but shares fell amid market sell-off and another spike in Chinese Covid cases.

Steel Dynamics earnings and revenue peaked. STLD stock rallied overnight. Shares fell 1.3% to 80.68 on Wednesday, but remained above the 50-day line. Steel Dynamics stock has 88.72 consolidation buy points, according to MarketSmith. Near the trendline entry.

Nukor (NUE) and American Airlines (AAL) to be delivered on Thursday morning. NUE stock rallied late in STLD gains after meeting resistance on the 50-day and 200-day lines in Wednesday’s session. AAL stock rose 2.1% on Wednesday, extending its winning streak to 7 sessions. United Airlines (UAL) late Tuesday and Delta Airlines (DAL) last week.

Dow Jones Futures Today

Dow Jones futures fell 0.2% to fair value, even as IBM stock gave an increase. S&P 500 futures fell 0.5 percent. Nasdaq 100 futures fell 1 percent. Tesla stock is a major S&P 500 and Nasdaq component.

The 10-year Treasury yield rose 2 basis points to 4.15%.

Hong Kong’s Hang Seng index fell again to a 13-year low. The Japanese yen was close to 150 against the dollar as the Bank of Japan made unplanned bond purchases to rein in Japanese yields. China’s offshore yuan fell to a record low.

Keep in mind that an overnight move in Dow futures and elsewhere does not necessarily translate into real trading in the next regular stock market session.


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Stock Rally

The stock market rally venture briefly contributed to recent gains, but later bounced back amid rising Treasury yields. Major indices cut losses a little at the close. A warm beige book report with positive signals from the Fed on labor markets and inflation may have helped.

The Dow Jones Industrial Average fell 0.3% in Wednesday’s trading. The S&P 500 index rose 0.7 percent. The Nasdaq composite fell 0.85%. Small-cap Russell 2000 fell 1.7%.

The 10-year Treasury yield rose 13 basis points to a 14-year high of 4.13%. The return of UK inflation to a 40-year high has helped boost yields. The 10-year yield is on track for the 12th consecutive week of earnings.

US crude oil prices rose 3.3% to $85.55 a barrel despite the Biden administration’s decision to release more crude from the Strategic Petroleum Reserve. Natural gas prices fell 3.9%, increasing the recent sharp losses.


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ETFs

Among the top ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 2.1%. The iShares Extended Technology-Software Industry ETF (IGV) fell 1.15%. The VanEck Vectors Semiconductor ETF (SMH) rose 0.8%, helped by ASML and LRCX stocks.

Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) fell 4.2% and the ARK Genomics ETF (ARKG) fell 5.5% to a four-month low. Tesla stock is the largest holding among Ark Invest’s ETFs.

The SPDR S&P Metals & Mining ETF (XME) fell 2.4%. The US Global Jets ETF (JETS) closed flat despite the progress of UAL, AAL and DAL. SPDR S&P Homebuilders ETF (XHB) sold 4.8%. The Energy Select SPDR ETF (XLE) is up 3%. The Healthcare Selected Sector SPDR Fund (XLV) fell 1.4%.


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Tesla Earnings

Tesla earnings rose 69% to $1.05 per share, and revenue rose 56% to $21.45 billion. Analysts had expected Tesla to earn $1 per share on sales of $23.3 billion, both up 62%.

“We’re probably going to do some kind of buyback,” Musk said in his Tesla earnings call in 2023.

Tesla’s CEO predicted an “epic” Q4, but with caveats. Answering a question about backlogs, Musk said that China and Europe are experiencing some weaknesses. He suggested that this was temporary and reflected broader economic woes.

Q3 deliveries, reported earlier this month, easily broke the record at 343,830, but missed nearly 360,000 views. This lagged behind production with approximately 22,000 vehicles.

Tesla argued that logistics costs spurred curbing the end-of-quarter rush. The EV giant said it will create additional inventory in Q4 to help with this change.

However, there is widespread speculation that China’s weakness was a major factor in the lack of third-quarter delivery. Even with some new incentives, waiting times have dropped significantly as local savings have dropped to zero.

And despite saying it wants to fix the logistics, Tesla’s local deliveries in China and key European markets are too low to start Q4.

Thanks to recent upgrades, Shanghai plant output is up in the fourth quarter. Berlin and Austin are also slowly getting into production. So Tesla may have an “epic” Q4 for deliveries, but there are demand concerns for 2023. This is especially true if the backlog in Eurasia declines by the end of the year.

In the US, new EV tax credits should help Tesla in 2023, but it’s not clear which vehicles will be eligible. Upcoming tax credits may encourage potential buyers to delay purchases until January. Cybertruck could also help in the US if mass production starts next year.

Tesla Semi deliveries will begin on December 1, as Musk previously tweeted. It is unclear how much will be produced now or in 2023. Despite limited production, the Tesla Semi will not use 4680 batteries for now.

Tesla said its 4680 battery cell production tripled in Q2 to Q3. But this still equates to a small number of battery packs. Larger form factor batteries are still not mass produced, making cost savings difficult.

Musk said that new Tesla drivers will soon have access to the Full Self-Driving Beta. However, FSD Beta will remain a Level 2 driver support system for now.


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Tesla Stock

Tesla stock fell 6% in overnight trading. TSLA stock trimmed losses on Musk’s buyback comment but expanded as it acknowledged weakness in Europe and China. Shares rose 0.8% to 222.04 in Wednesday’s regular session. TSLA stock is up 8.3% so far this week, but that’s after falling to a 15-month low last week. Tesla stock hit a record 414.46 in November 2021.

One of the key issues is whether Musk should sell more TSLA shares to help finance it. excitement (TWTR) agreement. At least one analysis has said that Musk should vacate $8 billion worth of Tesla shares.

Musk didn’t say anything about it, but said he was “excited” about buying Twitter, although he admitted to “overpaying”.

TWTR stock rose more than 1% overnight. Shares rose 0.1% to $51.83 on Wednesday, approaching the takeover price of $54.20.

Market Rally Analysis

The stock market rally initiative tried to make further progress on Wednesday. But rising 10-year Treasury yields weighed on major indices, eclipsing overall strong gains.

Netflix and a few other big names have made major indexes proud. But the declines on the NYSE and Nasdaq almost beat the winners 3 to 1. The small-scale Russell 2000 and S&P MidCap 400 fell sharply, while the Nasdaq composite performed much worse than the Nasdaq 100.

The Dow Jones remained above the 21-day line, but the S&P 500 fell below this short-term level. So do Russell and S&P MidCap. The Nasdaq only briefly surpassed that level on Tuesday and lost more ground Wednesday.

Indices are still looking for a follow-up day to confirm the new uptrend. The market rally attempt will remain in place unless the major indices drop to October 13 lows.


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what to do now

It’s still a bear market despite the ongoing rally attempt. The whiplash movement in major indices and leading stocks during regular and extended trading makes it difficult to play stocks even for very short periods of time.

If you take any positions, shrink them and be quick to take profits and losses. There’s nothing wrong with staying fully or partially cashed.

Work on these watchlists. Many stocks are not far from flashing buy signals.

If they trigger entries, that doesn’t mean you have to do anything. This could mean you let some stocks pass that turned out to be big winners. But this also prevents you from buying a stock that bounces back quickly and possibly sells hard.

Read the Big Picture daily to stay in tune with the market direction and leading stocks and industries.

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

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