futures fall as yields continue to rise; Tesla skate

Overnight Dow Jones futures fell, along with S&P 500 and Nasdaq futures, as Treasury yields continued to rise and Asian markets fell to new lows. Tesla slipped on a mixed earnings basis even as CEO Elon Musk hinted at a “meaningful” TSLA share buyback, predicting an “epic” fourth quarter. But he also admitted that the electric car giant is seeing weakness in China and Europe.




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The stock market’s bullish bid lost steam on Wednesday, as the 10-year Treasury yield jumped to a 14-year high. Netflix (NFLX) led with strong earnings results overall, and provided some support for stocks, but there were some big losers as well.

earnings

Tesla (TSLA) slightly topped earnings watchers but didn’t generate revenue. Musk said the fourth quarter would be “epic” even as he acknowledged the issues of China and Europe. Selling TSLA stock overnight.

L research (LRCX), Alcoa (AA), IBM (IBM) and Las Vegas Sands (LVS) and steel dynamics (STLD) reported late Wednesday.

Lam Research’s earnings and earnings beat financial views for the first quarter, but the chip maker said it would lose up to $2.5 billion in sales from US restrictions on Chinese exports. LRCX stock fell slightly in overnight trading. Shares rose 2.5% on Wednesday, buoyed by strength ASML (ASML) Earnings and Guidelines Before Wednesday Open.

Alcoa reported a surprise loss while sales came in short. AA stock fell in extended actions. Shares fell 5.3 percent on Wednesday.

It topped both IBM’s earnings and revenue. IBM stock is up slightly after falling 0.35% on Wednesday.

Las Vegas Sands posted a quarterly loss and revenue was slightly weaker than expected. LVS stock was little changed in extended trade after falling 0.7% on Wednesday. Sands shares broke out briefly from their bottom in early October, but shares slid due to a massive market sell-off and another spike in Chinese Covid cases.

Steel Dynamics’ earnings and revenue topped the list. STLD stock rose in action overnight. Shares fell 1.3% to 80.68 on Wednesday, but held above the 50-day line. According to MarketSmith, Steel Dynamics stock has a consolidation buying point of 88.72. It is close to entering the trend line.

Nokor (NUE) and American Airlines (AAL) delivery date Thursday morning. NUE stock tilted higher late in the STLD earnings, after hitting resistance at the 50-day and 200-day lines in the Wednesday session. AAL stock rose 2.1% on Wednesday, extending its winning streak to seven sessions after strong guidance from United Airlines (UAL) late on Tuesday and Delta Airlines (DAL) last week.

Dow jones futures contracts today

Dow Jones futures are down 0.2% against fair value, even as IBM stock supported. S&P 500 futures were down 0.5%. Nasdaq 100 futures are down 1%. Tesla stock is a large component of the S&P 500 and the Nasdaq.

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

Hong Kong’s Hang Seng Index fell again to its lowest level in 13 years. The Japanese yen approached 150 against the dollar as the Bank of Japan bought non-scheduled bonds to rein in Japanese yields. The offshore Chinese yuan hit a record low.

Remember that overnight action in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.


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stock market rise

A brief attempt to rally the stock market added to recent gains, but it reversed lower amid rising Treasury yields. Major indices pared losses somewhat at the close. The tepid Beige Book report, which provides some positive signals for the Fed on labor markets and inflation, may be helpful.

The Dow Jones Industrial Average was down 0.3% in stock market trading on Wednesday. The S&P 500 lost 0.7%. The Nasdaq Composite Index fell 0.85%. Small cap Russell 2000 fell 1.7%.

The 10-year Treasury yield rose 13 basis points to 4.13%, its highest level in 14 years. The return of UK inflation to its highest level in 40 years helped push yields higher. The 10-year yield is on track for 12 consecutive weekly gains.

US crude oil prices rose 3.3% to $85.55 a barrel, even as the Biden administration prepared to release more crude from the Strategic Petroleum Reserve. Natural gas prices extended their recent sharp losses, down 3.9%.


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ETFs

Among the top ETFs, the Innovator IBD 50 ETF (FFTY) is up 0.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) is down 2.1%. The iShares Expanded Tech-Software ETF (IGV) was down 1.15%. The VanEck Vectors Semiconductor ETF (SMH) was up 0.8%, helped by ASML and LRCX stocks.

Reflecting speculative stories stocks, the ARK Innovation ETF (ARKK) fell 4.2% and the ARK Genomics ETF (ARKG) fell 5.5%, to its lowest closing level in four months. Tesla stock is the highest stake in Ark Invest ETFs.

SPDR S&P Metals & Mining ETF (XME) is down 2.4%. The US Global Gates ETF (JETS) closed flat, although UAL, AAL and DAL advanced. SPDR S&P Homebuilders ETF (XHB) sold 4.8%. The Energy Select SPDR ETF (XLE) jumped 3%. Healthcare Sector Fund (XLV) SPDR Fund (XLV) is down 1.4%.


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Tesla earnings

Tesla’s earnings rose 69% to $1.05 per share, with revenue up 56% to $21.45 billion. Analysts expected Tesla earnings of $1 per share with sales of $23.3 billion, both up 62%.

“It’s possible that we’re going to do some kind of buyback” in 2023, Musk said on Tesla’s earnings call.

The Tesla CEO predicted an “epic” Q4, but with caveats. Asked about the backlog, Musk said that China and Europe have some weaknesses. He noted that they are temporary and reflect broader economic problems.

Third-quarter deliveries, reported earlier this month, easily set a record at 343,830 but missed views of nearly 360,000. This also fell short of producing around 22,000 cars.

Tesla argued that logistical costs prompted him to temper his quarter-end rush. The EV giant said it will build additional inventory in the fourth quarter to help with the turnaround.

But there is widespread speculation that weaker China was a big factor in the delivery shortfall in the third quarter. Wait times have dropped dramatically, even with some new stimulus, as domestic backlog has fallen to zero.

And while it says it wants to make logistics easier, Tesla’s domestic deliveries in China and key European markets are too low to start the fourth quarter.

Thanks to recent upgrades, Shanghai plant production is up in the fourth quarter. Berlin and Austin also began to slowly increase production. So the Tesla could have an “epic” Q4 to deliver, but it does have demand concerns for 2023. This is especially true if the total backlog in the Eurasia region is reduced by the end of the year.

In the US, new tax credits for electric vehicles should help Tesla in 2023, although it’s not clear which vehicles will qualify. The upcoming tax breaks may motivate potential buyers to postpone purchases until January. Cybertruck could also help out in the US, if volume production begins next year.

Tesla Semi deliveries will begin on December 1, Musk previously tweeted. It is unclear how many batteries will be made now or in 2023. Despite limited production, the Tesla Semi will not use 4,680 batteries for the time being.

Tesla said production of 4,680 battery cells tripled in Q3 versus Q2. But that still equates to a small number of battery packs. Larger form factor batteries are still not mass-produced, which makes cost savings elusive.

Musk said new Tesla drivers will get access to a full beta for autonomous driving soon. But the FSD Beta will remain a Level 2 driver assistance system for now.


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Tesla Stock

Tesla shares fell 6 percent in overnight trading. TSLA shares pared losses after Musk commented on the buyback, but widened as he acknowledged weakness in Europe and China. Shares rose 0.8 percent 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 high of 414.46 in November 2021.

One of the main issues is whether Musk needs to sell more TSLA shares to help fund Twitter (TWTR) Deal. There was at least one analysis that made Musk need to offload $8 billion worth of Tesla stock.

Musk didn’t talk about it, but said he was “excited” to buy Twitter even as he admitted it was “overpaid.”

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

Market Rise Analysis

The stock market rally attempt tried to make further progress on Wednesday. But rising 10-year Treasury yields weighed on the major indices, overshadowing the strong earnings in general.

Netflix and a few other big names have flattered the major catalogs. But the losers outperformed the winners by about 3 to 1 on the New York Stock Exchange and Nasdaq. The Russell 2000 and S&P MidCap 400 fell sharply, while the Nasdaq Composite was significantly worse than the Nasdaq 100.

The Dow Jones index remained above its 21-day line, but the S&P 500 fell back below that short-term level. So did Russell and S&P MidCap. The Nasdaq briefly crossed that level on Tuesday and lost further ground on Wednesday.

Indicators are still looking for a follow-up day to confirm the new uptrend. The market attempt to rally will remain unless the major indexes break their lows on October 13th.


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What are you doing now

The market is still bearish, despite the continuous attempt to rise. The choppy movement of major indices and leading stocks during regular and extended trading makes it difficult to play stocks, even for very short periods.

If you open any trades, keep them small and be quick to take profits and losses. There is nothing wrong with staying in full or in part cash.

Work on those watchlists. Lots of stocks are not far from flashing buy signals.

If they run the entries, that doesn’t mean you have to do anything. This could mean that you let some stocks pass and turn into big winners. But this also prevents you from buying stocks that reverse quickly and possibly sell hard.

Read the big picture every day to stay in sync with market trend, stocks and leading sectors.

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