Dow Jones Futures: GME Stock Rockets On Elon Musk Tweet; Microsoft, AMD, Palantir Are Key Movers

Dow Jones futures and S&P 500 futures fell slightly late Tuesday, while Nasdaq futures rose modestly, lifted by MSFT stock. The stock market rally had fractional losses Tuesday on the surface, but many leaders had a tough session. Microsoft (MSFT) and Advanced Micro Devices (AMD) announced earnings late Tuesday, while Palantir Technologies (PLTR) held its much-anticipated Demo Day.

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Apple (AAPL) and Tesla stock are due Wednesday night.

Tesla CEO Elon Musk kept GameStop (GME) frenzy going overnight, tweeting out “Gamestonk!!” in reference to the Reddit-led mass short squeeze. GME stock skyrocketed more than 40% overnight in still-massive trade. That’s after soaring 93% to 147.98 in Tuesday’s session, a record close. GME stock hit an intraday all-time high of 159.18 on Monday. GameStop is up 685% already this year.

Bed Bath & Beyond (BBBY) and Dillard’s (DDS), two other short-squeeze plays, jumped 20% Tuesday. BBBY stock kept running overnight.

Tech giants and Tesla stock generally had modest gains, providing support for the major indexes. However, that masked some losses among leading chip, software, genomics and mining and materials firms. That’s the latest warning for the stock market rally, and one that’s already having an impact on active investors’ portfolios.

10 Heavily Shorted Stocks Set For GameStop-Like ‘Squeeze’ Rallies

Key Earnings

Microsoft earnings and sales easily beat views. Microsoft stock rose overnight, signaling a breakout after flirting with a buy point in Tuesday’s session. Amazon.com (AMZN) rose slightly on Microsoft’s cloud-driven quarter, with AMZN stock near possible early entries.

AMD earnings also easily beat, with the chipmaker also guiding higher. AMD stock tilted lower overnight after some up and down action.

Palantir Demo Day

Palantir Technologies held its much-anticipated Demo Day, where it showcased what its technology could do, including supply chain and data integration. PLTR stock fell nearly 4% overnight. Palantir stock closed down 2.4% to 35.37, just out of range of a 33.60 buy point. But that followed Friday’s 25% spike and Monday’s 11% jump.

Apple, Tesla Earnings On Tap

Looking ahead to Wednesday, Apple stock, Tesla (TSLA), Facebook (FB) and ServiceNow (NOW) are among those reporting. Apple and Tesla stock are in buy range. Facebook stock has crossed over a very early entry. ServiceNow stock is finding support at its 50-day line in a new flat base.

Also, the Federal Reserve meeting concludes Wednesday, with a policy announcement due at 2 p.m. ET. The central bank is expected to leave interest rates and asset purchases unchanged and is likely to signal that will remain so for quite some time. It may be a nonevent. Investors will look for hints — if any — about when Fed policymakers might taper bond buys down the road. Commentary about stock and other asset prices would get close attention.

Tesla stock, Apple, AMD, Microsoft, ServiceNow and Palantir stock are on IBD Leaderboard. Apple stock is on SwingTrader. Microsoft stock and ServiceNow are on IBD Long-Term Leaders. AMD and NOW stock are on IBD 50.

Dow Jones Futures Today

Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures lost 0.1%. Nasdaq 100 futures rose 0.5%. Microsoft stock is providing a lift to futures, with several other tech giants also climbing.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

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

Coronavirus News

Coronavirus cases worldwide reached 100.82 million. Covid-19 deaths topped 2.16 million.

Coronavirus cases in the U.S. have hit 26,01 million, with deaths above 435,000. New coronavirus cases and hospitalizations  have fallen sharply over the last couple of weeks, though they remain high. Covid deaths appear to have topped.

The U.S. late Tuesday said that it will buy another 200 million doses from Pfizer (PFE) and Moderna (MRNA). It’ll also boost coronavirus vaccine supply to the states by 20% to 10 million a week. After a rocky start, vaccinations have been averaging more than 1 million a day recently, with expectations that this can ramp up.

Pfizer said it can deliver 200 million doses of its coronavirus vaccine two months earlier than planned. That would be by the end of May.

Johnson & Johnson (JNJ) expects final-stage coronavirus vaccine data by early next week. CFO Joseph Wolk told CNBC that he’s expecting “robust” results. The J&J Covid vaccine takes just one shot and is easier to store than the two-shot vaccines from Pfizer/BioNTech (BNTX) and Moderna. If efficacy and safety data are strong, the FDA could approve the J&J vaccine by early March.

Stock Market Rally

The stock market rally saw slim losses on the major indexes, a quiet session after Monday’s whipsaw action.

The Dow Jones Industrial Average lost about 0.1% in Tuesday’s stock market trading. The S&P 500 index dipped 0.15%. The Nasdaq composite edged down 0.1%, while the big-cap Nasdaq 100 edged higher.

Apple and Microsoft, the two biggest megacaps and members of the Dow Jones, S&P 500 index and Nasdaq composite, provided support for the major indexes. Amazon stock, Facebook, Tesla and AMD also helped.

Growth Stocks Struggle

Despite the solid performance in tech giants and the continued mania in GME stock and other speculative names, leading stocks tended to lag somewhat.

Beneath the surface, many chip, software and genomics stocks suffered significant losses, though it was bloodletting, not a bloodbath.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) retreated 2.3%. The iShares Expanded Tech-Software Sector ETF (IGV) sank 0.6%, with MSFT stock and ServiceNow notable components. The VanEck Vectors Semiconductor ETF (SMH) slid 1.7%, with AMD stock an exception to the downward shift.

ARK Innovation ETF (ARKK) sank 3.3% and ARK Genomic Revolution ETF (ARKG) tumbled 4.9%. SPDR S&P Metals & Mining ETF (XME) pulled back 2.3%, extending losses since spiking on Jan. 6.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Microsoft Earnings

Microsoft earnings rose 34% to $2.03 a share in fiscal Q2, accelerating for a second straight quarter. Revenue grew 17% to $43.08 billion, the best gain in at least two quarters. Wall Street expected Microsoft earnings of $1.64 a share on sales of $40.18 billion.

The Azure cloud-computing services saw 50% revenue growth, better than expected. Intelligent Cloud revenue, which includes Azure public cloud, server products, GitHub and enterprise services, advanced 23% to $14.6 billion, also topping consensus.

Microsoft provided upbeat sales guidance on the conference call.

Microsoft stock rose 4% in overnight trade, signaling a breakout. Shares rose 1.2% to 232.33 on Tuesday, briefly clearing a 232.96 buy point, according to MarketSmith analysis. MSFT stock closed in buy range of some early entries.

Amazon stock advanced 1.5% in extended trade. Shares rose 1% to 3,326.13 on Tuesday, closing right around a downward-sloping trend line. Clearing that trend line would be an early entry for AMZN stock, along with 3350.75. Amazon stock has an official buy point of 3,552.35. Earnings are next week.

Apple stock and Google parent Alphabet (GOOGL) also rose about 1% overnight. Both are already in buy zones.

AMD Earnings

AMD earnings jumped 62.5% to 52 cents a share, with sales up 52% to $3.24 billion. Analysts forecast AMD earnings of 47 cents on sales of $3.02 billion.

The graphics and data center chipmaker sees Q1 revenue up 79% to $3.2 billion, with full-year sales up 37%.

AMD stock initially rose overnight, then reversed to trade 1%.

AMD rival Nvidia (NVDA) was little changed overnight.

Texas Instruments (TXN) and Maxim Integrated Products (MXIM) also beat views late Tuesday. But the two chipmakers fell modestly late.

Apple, Tesla, Facebook Earnings

Wednesday night will be busier than Tuesday, with Apple, Tesla, Facebook and ServiceNow among the big names reporting.

Apple earnings will not only have a big impact on AAPL stock, but on the broader iPhone ecosystem, notably chipmakers. Tesla earnings are important, but the focus will likely be on 2021 delivery targets and updates on the Cybertruck and two factories under construction. For the Facebook earnings report, commentary about political headwinds will be key for FB stock and other social media names. ServiceNow is the first business software pure play that has held up well at a time when many software makers have lost ground.

Apple, Tesla, Facebook and ServiceNow stock are all at or near buy points, raising the stakes. Along with Microsoft and AMD, these leaders could have a huge influence on the stock market rally direction.

Stock Market Rally Analysis

The Nasdaq is now 7.8% above its 50-day moving average, down slightly from Monday’s 8.2%.

The rule of thumb is that when the Nasdaq is more than 6% above the 50-day line, the odds of a pullback are relatively high. But, as the stock market rally has shown in recent days and many times over the past several months, the Nasdaq can keep getting more extended. But the more extended the Nasdaq gets, the higher the risk of a pullback, with greater odds that the retreat will be larger.

In late August, Apple and Tesla stock helped push the Nasdaq higher and higher, finally peaking at 11.6% above the 50-day line on Sept. 2. The Nasdaq then plunged 10% over the next three sessions, closing below the 50-day line, with further losses in the next few weeks.

Meanwhile, bullish sentiment is high, while froth is evident in GME stock and others. It’s possible that hot money, at least among retail investors, is concentrating in GME stock and other squeeze plays, moving away from a wider array of leading stocks and even “traditional” Dow Jones and Nasdaq speculative names.

Margin debt is up substantially vs. a year earlier, but the increase is still well below extreme levels associated historically with foreshadowing bear markets. However, leveraged ETFs and the explosion of call options suggests that retail investors are more exposed than margin debt alone would indicate.

An extended market rally, high bullish sentiment, crazy stock moves are warning signs. But weakness in leading stocks is the first one that stings.

Sideways action or a modest pullback over a few weeks would be ideal for the stock market rally. But earnings season in the current environment seems likely to be a catalyst for big market gains or losses — or both. As always, the market is going to do what the market is going to do.

What You Should Do Now

Along with the earnings crush, risks are relatively high for leading stocks and the overall market rally. Monday’s short-lived market reversal spurred some sharp losses in growth stocks. They generally fared OK before lagging Tuesday. But if the Nasdaq fell 5% in a day or 10%-15% over a week or two, the losses in many growth stocks, especially IPOs and more speculative names, could be intense. How would your portfolio handle that action?

Continue to analyze your holdings and overall portfolio. Create a game plan for dealing with negative action in your stocks or the overall market rally.

Keep in mind that despite rising warning signs, the stock market rally has been faring well overall, though leading stocks bear watching. Investors may want to be more cautious about adding exposure, sell some shares into strength and quickly cut laggards, but it’s not time to be defensive overall. However, dust off those defense plans.

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

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