Investors generally welcomed the first big salvo of earnings reports Tuesday with fresh buying as key stock market indexes gained ground in uniform fashion. Insurance stocks, meanwhile, regained some of their recently lost luster. But oil and gas stocks cooled further after light sweet crude futures finished a rough session of selling down more than 2%.
After the close, Microsoft shares rallied more than 4% on September-quarter results. Earnings per share rose 27% to $2.99 a share as revenue grew 13% to $56.5 billion, sharply beating analyst forecasts of $51.4 billion. The CapitalIQ earnings estimate was $2.65 a share.
Details on Microsoft's results can be found here.
Microsoft's strong extended-hours move pushed shares past a 340.86 buy point within a double-bottom base. The middle peak in between a pair of sell-offs in late July to early August and in September produced this timely entry.
Watch to see how MSFT stock acts at the open on Wednesday.
Not all the "Magnificent Seven" tech giants, however, joined Microsoft's bullish action.
Google operator Alphabet got whaled by sellers for a 6% decline after hours. IBD noted in this earnings story that the company missed expectations on cloud computing revenue.
In markets, the Nasdaq's 0.9% gain did not exceed other index moves by much, but it did help the composite index remain above 13,000, perhaps a key psychological price level. At 13,139, the Nasdaq boasts a megacap tech-driven year-to-date gain of 25.5%.
The S&P 500 rallied 0.7%, gnawing a little more at last week's 2.4% slide. Closing at 4,247 in the stock market today, the S&P reclaimed its key 200-day moving average.
Small caps, lagging their large-cap brethren for virtually all of 2023 so far, also held their own. The Russell 2000 gained 0.8% to 1,679.
Techs And Small Caps Up, Oil Drops
Breadth in Tuesday's stock market advance also proved fairly bullish.
Advancers outpaced decliners on the Nasdaq by a nearly 5-3 margin, according to early data shown on Thinkorswim. On the NYSE, winners topped losers by easily more than 2 to 1.
Elsewhere, crude oil futures on the Nymex sank more than 2% and hit as low as $82.94 a barrel before finishing at $83.65.
On the Dow Jones Industrial Average, Chevron sold off for a second straight session, down 2.5% to 156.65. That pulled the integrated oil-and-gas giant further below its 50-day moving average. The stock has been forming a long base since November and trades nearly 18% below the base's left-side peak of 189.68.
The yield on the key U.S. Treasury 10-year bond edged up 2 basis points to 4.84%, following two straight days of buying by institutions. When bond prices go up, the corresponding yield, or return, on the securities falls.
Monday's peak closing yield of 4.99%, however, represents a strong jump in the cost of borrowing in 2023. The 10-year bond yield began the year at 3.88%.
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Stock Market Today: Small Caps Rebound
The iShares Russell 2000 exchange traded fund rose almost 0.9% to halt a four-session slide. As seen on a daily chart on MarketSmith, IWM is still well below its 50-day line and 200-day moving average. Recently, the 50-day line crossed below the long-term 200-day average, a negative sign.
IWM also owns a poor 40 Relative Strength Rating, meaning it is outperforming only 40% of the entire database of IBD stocks and ETFs over the past 12 months.
Meanwhile, the Dow Jones Industrial Average rebounded 0.6% on Tuesday after a four-day, 3.1% sell-off. The Dow has fallen 7% from its year-to-date high of 35,679.
Within the Dow industrials, component Travelers did not participate in the rebound. The commercial and personal property insurance giant sank 0.8% to 157.92 for its fifth loss in a row in above-average volume. Last week, the company reported a disappointing 11% fall in earnings to $1.95 a share, even as revenue boosted 14% higher to $10.64 billion.
TRV stock was among three that fell 1 point or more. Chevron and Home Depot (56 Composite Rating, 77 EPS Rating, 44 Relative Strength) also fell 1 point or more.
This Oct. 20 Big Picture notes a key change in IBD's stock market outlook. IBD revised its take on current conditions to "market in correction." The meaning? Investors should tread carefully and keep exposure at 0% to 20%.
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Insurer Everest Attempts A New Breakout
One stock gaining ground, however, is Everest Group, which rallied 2% to close at 397.10 in heavy turnover. Shares climbed back above longtime upside resistance at 393 to 395.
Volume came in at 481,000 shares, 75% higher than the stock's 50-day average turnover. The strong gain in heavier-than-normal turnover suggests continued institutional accumulation in Everest shares. Tuesday's action also marked the highest volume since a 1% drop on Sept. 27.
Everest has been moving sideways since topping at 395 in February. Its pattern has elements of a saucer base. A continued strong move past a 395 buy point, ideally in heavy volume, would spell a new breakout attempt. The 5% buy zone goes up to 414.75.
The Bermuda-based giant in global insurance and reinsurance markets reports third-quarter results Wednesday. Wall Street expects a big turnaround in the bottom line, going from a net loss of $5.28 a share a year earlier to a profit of $10.60. Analysts forecast a revenue rise of 17% to $3.6 billion.
Other leading stocks within the insurance sector including Kinsale Capital, a member of IBD Long-Term Leaders; small-cap growth stock Goosehead Insurance, which reports Q3 results on Wednesday; and blue chip Progressive, the property and casualty insurance firm that recently marked a breakaway gap past a 144.31 cup-with-handle buy point after reporting an 845% surge in third-quarter earnings to $1.89 a share.
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