Nasdaq Index: Dow Gains as Tech Stocks Wait on Alphabet and Tesla

Dow Gains but Tech Rolls Over Before Earnings

The Dow is higher Wednesday but the rally is coming from the wrong side of the market for anyone betting on technology. Materials gained 1.6% and utilities rose 1.2% while information technology is the weak sector and chips are fading ahead of the two reports that matter most this week. Alphabet and Tesla report after the close tonight with oil near a six-week high, rate-hike odds climbing and a semiconductor group that has closed lower in five of the last ten sessions. Secretary of State Rubio said Iran is not serious about talks and crude is trading the fighting, not the diplomacy.

At 16:36 GMT, the Dow is trading 52,432.37, up 207.73 or +0.40%. The S&P 500 Index is at 7,524.02, up 14.82 or +0.20%. The Nasdaq Composite is trading 25,820.991, down 16.215 or -0.06%.

The Nasdaq is barely lower but that understates the pressure underneath. Money is rotating out of growth and into sectors that can handle higher energy costs and a Fed that has not backed down.

Daily Nasdaq Composite Index Technical Analysis

The Nasdaq Composite Index is edging lower at the mid-session on Wednesday. Volume is on the light side with most major players likely sitting on the sidelines ahead of earnings reports from Tesla and Alphabet after the closing bell.

The swing chart indicates that the Nasdaq Composite is in a weak downtrend with the series of lower tops weighing on rallies, while a mixed bag of slightly higher bottoms are propping the index up.

The immediate resistance is a short-term retracement zone at 26085.30 to 26346.05. Inside this area is the 50-day moving average at 26125.46. This is the area that has to be overcome to flip momentum.

Persistent selling pressure in front of this zone could drive the index into the swing bottoms at 25250.62, 25014.96 and 24980.38. If these levels start to fail then sellers may take aim at the value area described as 23490.23 to 23173.24. Another potential target is the 200-day MA at 23921.72.

Alphabet Needs Cloud Revenue Tonight

Wall Street expects Alphabet to post about $2.88 per share on revenue near $116.9 billion, roughly 25% earnings growth and 21% revenue growth from a year ago. Google Cloud is the number that matters with analysts looking for revenue near $20 billion as corporate customers ramp AI workloads. The stock was flat ahead of the report, which tells you nobody wants to chase it before management explains where the estimated $45.1 billion in AI infrastructure spending is going and when it starts showing up in the bottom line. Search and YouTube advertising are still paying for the expansion and any sign that Gemini delays are pressuring search retention or forcing even heavier spending changes the math on the whole capital plan.

Alphabet is slightly better ahead of the close on Wednesday. Over the last month, investors have shown respect for the retracement zone at $340.36 to $324.25. This support zone sits just above the 200-day moving average at $323.22. The key area under downside pressure after the report is the support cluster at $324.25 to $323.22.

On the upside, the key indicator to keep an eye on is the 50-day moving average. Overcoming this with conviction may create the momentum needed to challenge the record high at $408.61.

Tesla Reports Into Margin Pressure

Wall Street expects roughly $26.3 billion in second-quarter revenue and adjusted earnings between $0.50 and $0.54 per share. Deliveries rose 25% from a year ago but the spending is the problem. The capital plan is running near $25 billion across price cuts, AI, robotics and factories, which raises the risk of the first negative free cash flow quarter in more than two years. Robotaxi expanded into Tampa, Orlando and Miami recently and traders want to see that moving beyond a headline into something that generates revenue. SpaceX merger speculation is still sitting in the background and strong numbers keep that story alive while weak margins or cash burn put the focus back on costs.

Tesla shares are going into today’s earnings reports on the weak side of the 50-day and 200-day moving averages at $407.56 and $415.98, respectively. The stock also appears to be vulnerable under $364.

Bullish news could lead to higher prices after the earnings numbers are released, but there will still be work to do to get investors to bite over $415.98. Meanwhile, bearish news could lead to a breakdown under $364.00. This would put the April low at $337.24 on the radar.

Stocks in the News

Super Micro Computer surged 22.4% after reporting more than $60 billion in new fourth-quarter orders and raising its gross-margin outlook. That is the strongest demand signal the AI hardware trade has gotten in weeks. Texas Instruments slipped 0.3% before its report as chip weakness continued and the company’s outlook will show whether the selling pressure in semiconductors is spreading beyond the AI names. AT&T rose 3.8% on a wireless subscriber beat and is helping the Dow hold its bid.

What to Watch

Alphabet and Tesla decide whether the Nasdaq gets a bid after the close or whether the chip weakness turns into a broader technology selloff. Both reports land with oil near six-week highs and rate-hike odds that have climbed all week. The Dow can hold on materials and defensives but the S&P 500 needs technology to participate and tonight determines whether it does. The diplomacy with Iran is going nowhere based on Rubio’s comments and as long as crude stays elevated the rate conversation keeps working against growth stocks.

The Nasdaq is in a weak downtrend with lower tops weighing on every rally attempt and volume thinning ahead of tonight’s numbers. The retracement zone and 50-day average overhead are the barrier that has to break for momentum to shift. Tesla is trading below both major moving averages heading into its report. Tonight forces the resolution in both directions.

More Information in our Economic Calendar.