Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures. Tesla fell on mixed earnings even as  CEO Elon Musk hinted at a TSLA stock buyback, but also admitted that the EV giant is seeing weakness in China and Europe.

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The stock market rally attempt lost ground Wednesday, as the 10-year Treasury yield jumped to a fresh 14-year high.

Netflix (NFLX) led generally strong earnings results, providing some support for stocks, but there were some big losers too.

Tesla (TSLA) slightly topped earnings views but fell short on revenue. TSLA stock declined solidly overnight as Musk’s demand admission overrode buyback hints.

Lam Research (LRCX), Alcoa (AA), IBM (IBM) and Las Vegas Sands (LVS) and Steel Dynamics (STLD) reported late Wednesday.

Lam Research earnings and revenue topped fiscal Q1 views, but the chip-gear maker said it’ll lose up to $2.5 billion in sales from U.S. curbs on China exports. LRCX stock fell modestly in overnight trade after climbing 2.5% Wednesday, boosted by strong ASML (ASML) earnings and guidance before Wednesday’s open.

Alcoa reported a surprise loss while sales came in short. AA stock plunged in extended action. Shares already fell 5.3% on Wednesday.

IBM earnings and revenue both topped. IBM stock rose modestly overnight after dipping 0.35% on Wednesday.

Las Vegas Sands reported a quarterly loss and revenue that were slightly weaker than expected. LVS stock was little changed in extended trade after slipping 0.7% on Wednesday. Sands stock briefly broke out from a bottoming base in early October, but the market sell-off and rising Covid cases in China sent shares plunging.

Steel Dynamics earnings and revenue topped. STLD stock edged up in overnight action. Shares fell 1.3% to 80.68 on Wednesday, but held above its 50-day line. Steel Dynamics stock has an 88.72 consolidation buy point, according to MarketSmith. But it’s close to a trendline early entry.

Nucor (NUE) and American Airlines (AAL) are due Thursday morning. NUE stock tilted higher late on STLD earnings, after hitting resistance at the 50-day and 200-day lines in Wednesday’s session. AAL stock ascended 2.1% Wednesday, extending a win streak to seven sessions after strong guidance from United Airlines (UAL) late Tuesday and Delta Air Lines (DAL) last week.

Dow Jones Futures Today

Dow Jones futures dipped 0.1% vs. fair value, with IBM stock helping. S&P 500 futures fell 0.3%. Nasdaq 100 futures retreated 0.5%. Tesla stock is a big S&P 500 and Nasdaq component.

Dow futures are becoming more volatile overnight, much like trading during the regular session.

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

Stock Market Rally

The stock market rally attempt briefly added to recent gains, but then reversed lower amid soaring Treasury yields. The major indexes pared losses somewhat by the close. A tepid beige book report, offering some Fed-positive signals on labor markets and inflation, may have helped.

The Dow Jones Industrial Average dipped 0.3% in Wednesday’s stock market trading. The S&P 500 index gave up 0.7%. The Nasdaq composite retreated 0.85%. The small-cap Russell 2000 fell 1.7%.

The 10-year Treasury yield surged 13 basis points to 4.13%, a fresh 14-year high. U.K. inflation moving back to a 40-year high helped push yields higher. The 10-year yield is on track for a 12th straight weekly gain.

U.S. crude oil prices rose 3.3% to $85.55 a barrel, even with the Biden administration set to release more crude from the Strategic Petroleum Reserve. Natural gas prices extended sharp recent losses, down 3.9%.

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ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 2.1%. The iShares Expanded Tech-Software Sector ETF (IGV) declined 1.15%. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.8%, with ASML and LRCX stocks helping.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) slumped 4.2% and ARK Genomics ETF (ARKG) tumbled 5.5%, to a four-month closing low. Tesla stock is the top holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) retreated 2.4%. U.S. Global Jets ETF (JETS) closed flat, despite UAL, AAL and DAL all advancing. SPDR S&P Homebuilders ETF (XHB) sold off 4.8%. The Energy Select SPDR ETF (XLE) jumped 3%. The Health Care Select Sector SPDR Fund (XLV) dropped 1.4%.

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Tesla Earnings

Tesla earnings surged 69% to $1.05 a share, with revenue up 56% to $21.45 billion. Analysts had expected Tesla earnings of $1 a share on sales of $23.3 billion, both up 62%.

Musk, on the Tesla earnings call, said “it’s likely we will do some sort of buyback.” Some institutional holders had called for that. But he added that TSLA stock buyback won’t happen this year.

But, in response to a question about backlogs, Musk said that China and Europe are experiencing some weakness. He suggested that weakness is temporary and reflecting broader economic woes.

Q3 deliveries, already reported earlier this month, easily set a record at 343,830 but missed views of roughly 360,000. That also fell short of production by just over 22,000.

Tesla argued that high logistics costs spurred it to tone down the end-of-quarter rush, and signaled that it’ll build more inventory for that reason in Q4. But Tesla doesn’t appear to be smoothing out deliveries at the start of Q4.

Shanghai plant output will soar in Q4 vs. Q3 thanks to recent upgrades. Tesla may boost Q4 sales in large part by drawing down European backlogs even as inventories swell, raising questions about 2023.

All that is raising speculation that Tesla could cut prices, at least in China, to try to spur demand. Tesla raised prices several times over the past year.

In the U.S., new EV tax credits should help Tesla in 2023, though it’s not clear which vehicles would be eligible. The upcoming tax credits could spur potential buyers to hold off on purchases until next year.

Automotive gross margins came in at 27.9%, even with Q3, but down from 30.5% a year earlier. Excluding regulatory credits, auto margins were 26.8%, slightly below views.

Tesla Semi deliveries will begin on Dec. 1, as Musk previously tweeted. But it’s unclear how many will be made now or in 2023. Despite the limited production, Semi will not use 4680 batteries for now.

Tesla said that 4680 battery cell production tripled in Q3 vs. Q2. But that still equates to a small number of battery packs. The larger form-factor batteries are still not being mass produced, making cost savings elusive.

Musk said on the call that Tesla is not a battery company.

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Tesla Stock

Tesla stock fell 6% in overnight trade. TSLA stock pared losses on Musk’s buyback comment, but widened as he conceded demand issues. Shares rose 0.8% to 222.04 in Wednesday’s regular session. TSLA stock is up 8.3% so far this week, but that’s after tumbling to a 15-month low last week. Tesla stock needs to get back above its falling 50-day and 200-day lines, as well as crossing above its Aug. 16 short-term high of 314.64, before looking interesting. The EV giant’s stock hit a record 414.46 in November 2021.

One key issue is whether or not Musk needs to sell more TSLA stock to help finance the Twitter (TWTR) deal. At least one analysis had Musk needing to unload $8 billion worth of Tesla shares.

Musk didn’t speak to that, but said he’s “excited” about buying Twitter even as he admitted that he is “overpaying.”

TWTR stock rose more than 1% overnight. Shares edged up 0.1% to 51.83 on Wednesday, close to the $54.20 takeover price.

Market Rally Analysis

The stock market rally attempt tried to make further progress Wednesday. But the surging 10-year Treasury yield weighed on the major indexes, overshadowing generally strong earnings.

Netflix and a few other big-cap names flattered the major indexes. But decliners outpaced winners by nearly 3-to-1 on the NYSE and Nasdaq. The small-cap Russell 2000 and S&P MidCap 400 fell sharply, while the Nasdaq composite fared far worse than the Nasdaq 100.

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

The indexes are still looking for a follow-through day to confirm the new uptrend. The market rally attempt will remain in place unless the major indexes undercut their Oct. 13 lows.

It’s possible that the market has bottomed, or nearly so, but the major indexes could move sideways for an extended period.

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What To Do Now

It’s still a bear market, despite the ongoing rally attempt. The whipsaw action in the major indexes and leading stocks during regular and extended trading makes it hard to play stocks, even for very short periods.

If you do take any positions, make them small and be quick to take profits and losses. There’s nothing wrong with staying all or partly in cash.

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

If they do trigger entries, that doesn’t mean you have to do anything. That may mean you let some stocks pass by that turn out to big winners. But that also keeps you from buying a stock that reverses quickly and possibly sells off hard.

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

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

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