The Dow Jones Industrial Average futures declined 0.15% overnight on Wednesday morning along with S&P 500 futures and Nasdaq futures. This comes after a mixed day on Wall Street Tuesday where the major indexes closed narrowly mixed but small caps surged higher.
The recent choppy trading reflects an uncertain market outlook as investors weigh strong corporate earnings and a still-resilient U.S. economy against rising inflation, higher interest rates and recession worries.
While the major indexes remain stuck in a trading range, some leading growth stocks are flashing buy signals near potential entry points. Fair Isaac Corp (NYSE: FICO), Super Micro Computer Inc (NASDAQ: SMCI), Woodward Inc (NASDAQ: WWD), DraftKings Inc (NASDAQ: DKNG) and Arista Networks Inc (NYSE: ANET) are setting up constructively ahead of upcoming earnings.
Meanwhile, all eyes are turning to electric vehicle leader Tesla Inc (NASDAQ: TSLA), which reports Q3 results after the close Wednesday. TSLA stock has held key support levels despite analysts lowering earnings estimates. Investors will look for clues on future growth drivers and demand trends when Tesla reports.
Here’s why the market looks rangebound for now, what to watch with Tesla earnings and five stocks flashing buy signals according to market analysis.
Market Rangebound As Yields, Earnings Eyed
The stock market rally slid Tuesday morning as chip giant Nvidia sank on new U.S. semiconductor export curbs aimed at limiting China’s access to artificial intelligence computing power. But indexes pared losses intraday as small caps charged higher.
The Dow Jones rose 0.1%, closing just above its 200-day moving average. The S&P 500 dipped 0.07% while the tech-heavy Nasdaq composite fell 0.2%.
A shift into small caps reflects investors seeking relative strength as the overall market struggles for direction. The Russell 2000 climbed 1.1%, although it remains below its 21-day exponential moving average.
Surging Treasury yields are a near-term headwind for stocks, especially higher-valuation growth names. The 10-year Treasury yield leaped 14 basis points to 4.85% Tuesday, near its 2022 peak. Rapidly rising rates raise borrowing costs across the economy.
But third-quarter earnings season is proving better than feared so far. According to FactSet, nearly 80% of S&P 500 companies have topped Q3 views. Earnings growth is tracking 2.3% year-over-year despite dire pre-season forecasts for an outright decline.
This week brings results from leading chip stocks and Tesla that may impact market direction. After next week’s mega-cap tech earnings, investors should have a clearer picture of overall corporate health.
Until then, technical levels point to rangebound action. The S&P 500 and Nasdaq are hovering near their 21-day moving averages. Brief breaks above or below these key levels have failed to hold in recent weeks.
Tesla Earnings Due As Analysts Temper Views
Electric vehicle leader and Wall Street darling Tesla is slated to report third quarter results after Wednesday’s closing bell. The EV pioneer has often beat estimates in the past, but analysts have grown increasingly cautious heading into Q3 results.
Consensus forecasts call for Tesla earnings per share to sink 31% year-over-year to $0.72 as revenue grows 10% to $22.1 billion. This would mark Tesla’s lowest quarterly EPS since Q3 2020. Gross automotive margins are seen falling substantially to 26.1% from 30.5% a year ago.
Demand and margin worries have intensified after Tesla slashed vehicle prices several times this month in China, the U.S. and Europe. CEO Elon Musk has indicated prices may have gotten too high. Battery supply constraints also lurk as a headwind.
But TSLA stock has held key support levels near its 50-day moving average thanks to diehard bulls betting on Tesla’s long-term growth trajectory.
All eyes will be on Tesla’s Q3 earnings call for clues about future profitability, new factories and products like the delayed Cybertruck and long-awaited $25,000 model. Any increased transparency around Tesla’s Full Self Driving beta or new 4680 batteries could also boost sentiment.
Five Growth Stocks Flash Buy Signals
While the major indexes trade sideways, savvy investors should hunt for leading stocks carving consolidations near potential buy points. Buying breakouts near sound entry levels — when a stock clears a prior high — can offer an optimal risk-to-reward scenario.
Here are five stocks showing constructive technical action that are worth putting on your watchlist.
– Fair Isaac just reclaimed its 50-day moving average and broke out past a 916.41 buy point Tuesday in strong volume. Shares of the credit analytics software firm are extended from the new entry. Long-term investors could view pullbacks to the 50-day/10-week line as attractive opportunities.
– Super Micro Computer is moving tightly along its 10-week moving average as it forms a flat base with a 317.50 official buy point. But the server & storage solutions provider is in buy range above its recent highs around 300.
– Woodward is shaping a flat base with a 133.15 entry. The aircraft & industrial controls maker found support near its rising 40-week line in recent weeks. Its relative strength line is right at new highs, a bullish indicator. Earnings are due in late January.
– DraftKings continues rebounding from its 50-day /10-week average, retaking its 21-day line Tuesday. The online betting platform has a 34.49 buy point from a nine-week cup base. But investors can use last week’s high of 31.10 as an early entry.
– Arista Networks has formed a seven-week cup base with a 198.70 buy point. The cloud networking leader recently found support near its 40-week line. Keep in mind Arista reports earnings on Oct. 31. Investors may want to hold off buying until after results.
While growth names like techs and discretionary stocks have lagged in 2022, looking for relative strength and constructive technical action can lead you to potential winners. But investors should stay nimble and flexible amid an uncertain market backdrop.
With Treasury yields rising and the Fed firmly hawkish, the long-running bull market faces significant near-term hurdles. Patience and discipline will be key in the coming weeks and months.
Focus on stocks holding key support levels with sound fundamentals. Let leading stocks come to you by waiting for proper buy points to flash rather than chasing extended runs. Keep honing your watchlists and target entry zones so you’re ready. The road ahead promises to be bumpy, but long-term winners will emerge over time.