Dow Jones futures edged higher overnight, along with S&P 500 futures and Nasdaq futures, as Netflix subscribers focus on Tesla results. Major indices rebounded above some key levels on Tuesday after hitting resistance on Monday.
Gains were broad-based, but there were some fresh buying opportunities.
Netflix (NFLX) rose overnight with better-than-expected revenue and subscriber additions. The trucking giant JP Hunt Transport Services (JBHT) and egg producer Cal- Maine (peace) also topped EPS views on Tuesday night.
The chip-equipment giant ASML (ASML) reports early Wednesday.
Tesla (D.S.L.A) Wednesday night’s headline earnings. Tesla earnings should show an increase in Q2 vs. 2021, but will fall significantly vs. Q1, reflecting Covid-related impacts on Shanghai production. Tesla shares rose 2.1% to 736.59 on Tuesday, above its 50-day line and below some short-term resistance. But TSLA stock is well below its late-2021 peak of 1,243.49.
Dow Jones Futures Today
Dow Jones futures rose 0.3% versus fair value. S&P 500 futures rose 0.35%. Nasdaq 100 futures rose 0.4%, with NFLX stock giving a boost.
Crude oil prices fell 1%.
Elon Musk has failed at Twitter
Meanwhile, Delaware Chancery Court Judge Allowed speedy trial of Twitter (TWTR) lawsuit against Tesla CEO Elon Musk over his attempt to stop the Twitter acquisition. The trial will begin in October. Musk sought a delay to 2023, which would have put pressure on Twitter to settle. While the ruling is not on the merits of the case, it is a positive sign for Twitter. Musk could face a hefty penalty — a breakup fee of more than $1 billion — or close the $44 billion, $54.20-a-share deal. That could force Musk to sell more TSLA stock.
Twitter stock rose 2.8% to 39.49, moving above its 50-day line for the first time in two months.
Stock market rally
The stock market’s rally gained momentum at the open, ending with big gains near session highs.
The Dow Jones industrial average rose 2.4% on Tuesday Stock market tradingEven with the Dow giants IBM (IBM) and Johnson & Johnson (J.N.J) falls on revenue. The S&P 500 index rose 2.8%. The Nasdaq composite rose 3.1%. The small-cap Russell 2000 rose 3.5%.
US crude oil prices rose 1.6% to $104.22 a barrel. Natural gas futures fell 2.9% amid reports that Russia will restart its Nord Stream natural gas pipeline project to Europe as planned. Russia’s Vladimir Putin signaled possible new delays late Tuesday.
The 10-year Treasury yield rose 6 basis points to 3.02%. The 2-year Treasury yield rose 8 basis points to 3.24%, with the yield curve inverting from the 2-year and 10-year benchmarks.
in the middle Best ETFsInnovator IBD 50 ETF (FFTY) rose 1.6%, while the Innovator IBD Breakout Opportunities ETF (Bot) advanced 1.4%. iShares Expanded Technology-Software Sector ETF (VAT) gained 2.9%. VanEck Vectors Semiconductor ETF (SMH) ASML stock rose a remarkable 4.6%.
SPDR S&P Metals & Mining ETF (XME) advanced 2.7% and the Global X US Infrastructure Development ETF (sidewalk) 3.7% US Global Jets ETF (JETS) rose 4.1%. SPDR S&P Homebuilders ETF (XHB) increased by 3.4%. Energy Select SPDR ETF (XLE) at 3.1% and fund choice SPDR ETF (XLF) 3%. Health Care Select Sector SPDR Fund (XLV1.7% up.
Netflix revenues topped second-quarter views, while revenue missed slightly. Netflix subscribers fell by 970,000. 2 million loss against the company. The Internet TV streaming giant sees a gain of 1 million subscribers in the current quarter, even as it guided for lower Q3 revenue. The latest season of “Stranger Things” aired in late Q2 and early Q3, which should help subscriber numbers.
Netflix shares rose 8% in overnight trading. Shares of NFLX rose 5.6% to 201.63 on Tuesday, following gains over the past few days but still in range from the Q1 earnings report.
JB Hunt revenue and earnings growth were better than expected as shipping stocks struggled amid weak freight rates and demand while diesel prices hit record highs. JBHT shares fell 1% in extended trade. Shares rose 3.8% to 174.46 on Tuesday, after retracing its 50-day line last week.
Quarter-mine revenue easily beat fiscal fourth-quarter targets, while revenue rose 69%, the fourth straight quarter of accelerating growth amid strong egg prices.
CALM stock rose 1% late. Shares fell 1.7% to 52.33 on Tuesday, but bounced back from a 21-day streak. CALM stock has a 60.05 cup-basis Point to buyAccording to MarketSmith analysisBut simply creating a handle.
ASML earnings are due early Wednesday morning, which kicks off results for semiconductor makers. Investors are also seeing weakening demand for chip equipment as chip demand is dampened by slower PC and smartphone sales. ASML shares rose 5.25% to 498.36 on Tuesday, continuing a two-week bounce from a 52-week low, but still below the 50-day line.
Few chip-related plays are above their 50-day lines. But chip design software makers Synopsys and Cadence design settings (CDNS) above their 50-day and 200-day lines, near glowing buy signals.
Market rally analysis
After declining from key resistance on Monday, the market rally rebounded strongly on Tuesday from Monday’s highs. The Nasdaq breached its 50-day line and Monday’s intraday high, hitting its late-June and early-July highs. Same with the small-cap Russell 2000.
The Dow Jones and the S&P 500 rose above their 50-day lines and neared their late-June highs.
Can the market rally now decisively clear these resistance levels? Doing so would indicate that the market is at least in a tradable rally. Remember that the next big hurdle is the early June high.
Market breadth remained strong on Tuesday, but many new stocks did not exit or show strong action. It was a day for bottom fishing, with hard-hit stocks rallying but still a long way below old highs.
However, it was nice to see chip (SMH) and software (IGV) ETFs returning above their 50-day lines. Like major indices, chip and software stocks have briefly peaked above their 50-day lines at times this year.
Medical leaders rebounded on Tuesday after reversing lower Monday. AstraZeneca (AZN) shifted to the buy side, albeit at a lower level.
What to do now
It’s a tricky time. Major indices are starting to break resistance. If that continues, investors may feel more confident about incremental exposure. However, earnings season heats up with the Federal Reserve meeting next week.
Those news events can push the market higher or lower the indices sharply – or whipsaw back and forth. In either case individual stocks may fall in earnings.
So if you add exposure, be prepared to back off quickly.
Be sure to work on your watch lists and spend extra time on prime candidates for new entries.
According to Big picture Each day should be in sync with the direction of the market and the leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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