Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, with Netflix subscribers and Tesla results taking center stage. Major indices recovered above some key levels on Tuesday after running into resistance on Monday.
Profits were broad, but there were few new buying opportunities.
Netflix (NFLX) jumped overnight thanks to higher-than-expected earnings and subscriber numbers. Freight giant JB Hunt Transport Services (JBHT) and egg producer Kal-Man (CALM) also topped EPS views on Tuesday night.
Chip Hardware Giant ASML (ASML) reports early Wednesday morning.
Tesla (TSLA) reports earnings on Wednesday evening. Tesla’s profit should show growth compared to the second quarter of 2021, but decline significantly compared to the first quarter, reflecting the impact of Covid on manufacturing in Shanghai. Tesla shares rose 2.1% on Tuesday to 736.59, above the 50-day line and just below some near-term resistance. But TSLA stock is well below its end-2021 peak of 1243.49.
The video embedded in this article analyzes the action of a market rally and discusses Lee Auto (LI), Flex LNG (FLNG) and Synopsis (SNPS).
Dow Jones futures today
Dow Jones futures were up 0.3% compared to fair value. S&P 500 futures rose 0.4%. Futures on the Nasdaq 100 rose 0.6%, while NFLX shares led the way.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into real trading in the next regular stock market session.
Elon Musk lost round to Twitter
Meanwhile, the Delaware Chancery Judge expedited the trial of the case. Twitter (TWTR) v Tesla CEO Elon Musk for his efforts to end the takeover of Twitter. The trial will begin in October. Musk sought a delay until 2023, which would force Twitter to agree. While the decision was not made on the merits, this is a positive sign for Twitter. Musk could end up having to pay a hefty fine – more than $1 billion for the gap – or possibly even close out a $44 billion deal at $54.20 a share. This could force Musk to sell more TSLA shares.
Shares of Twitter rose 2.8% to 39.49, breaking the 50-day mark for the first time in two months.
Join IBD experts as they analyze valuable stocks in the stock market rally in IBD Live.
stock market rally
The stock market rally rose strongly at the open and gained momentum, closing with a big gain near the session highs.
The Dow Jones Industrial Average rose 2.4% in stock trading on Tuesday, even with the Dow giants. IBM (IBM) and Johnson and Johnson (JNJ) falls in profit. The S&P 500 rose 2.8%. The Nasdaq composite index jumped 3.1%. Small-cap Russell 2000 shares jumped 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 gas pipeline to Europe as scheduled. However, late on Tuesday evening Vladimir Putin announced possible new delays.
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 still inverted compared to 2-year and 10-year bonds.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) was up 1.6%, while the Innovator IBD Breakout Opportunities (BOUT) ETF was up 1.4%. iShares Advanced Technology & Software ETF (IGV) added 2.9%. The VanEck Vectors Semiconductor (SMH) ETF rose 4.6%, with ASML shares prominent.
The SPDR S&P Metals & Mining ETF (XME) was up 2.7% and the Global X US Infrastructure Development ETF (PAVE) was up 3.7%. The US Global Jets ETF (JETS) climbed 4.1%. The SPDR S&P Homebuilders ETF (XHB) added 3.4%. The Energy Select SPDR (XLE) ETF added 3.1%, while the Financial Select SPDR (XLF) ETF added 3%. The Health Care Select Sector SPDR Fund (XLV) rose 1.7%.
Reflecting more speculative stocks, shares of the ARK Innovation ETF (ARKK) jumped 4.2% and the ARK Genomics (ARKG) ETF jumped 5.2%. TSLA shares make up the bulk of the Ark Invest ETF.
Top 5 Chinese stocks to watch now
Netflix’s earnings topped viewing numbers in the second quarter, with revenue lagging slightly behind. Netflix subscribers are down 970,000 compared to the company’s forecast of a loss of 2 million. The Internet TV streaming giant added 1 million subscribers this quarter despite poor third-quarter earnings. The final season of Stranger Things aired at the end of the second quarter and the beginning of the third quarter, which likely helped boost subscriber numbers.
Shares of Netflix jumped 8% in overnight trading. NFLX shares rose 5.6% to 201.63 on Tuesday, gaining ground over the past few days but still in a range after the first quarter earnings report.
Netflix subscriber data is good news for streaming players like Roku (ROCU) and Disney (DIS).
JB Hunt’s earnings and top line growth came in better than expected as shipping companies’ inventories struggle amid falling freight rates and demand, and diesel fuel prices hit record highs. JBHT shares fell 1% in extended trading. Shares rose 3.8% to 174.46 on Tuesday after reclaiming their 50-day milestone last week.
Fellow trucking company Swift Knight (KNX) and railway giant COAG (CSX) should take place on Wednesday evening.
Cal-Maine’s earnings easily beat its fiscal fourth quarter targets, while revenue rose 69%, the fourth quarter of accelerating growth amid strong egg prices.
CALM shares belatedly rose 1%. Shares fell 1.7% to 52.33 on Tuesday but bounced off the 21-day line. According to MarketSmith analysis, CALM shares have an underlying buy point of 60.05 cups, but would ideally form a handle.
ASML’s earnings are due out very early on Wednesday morning, with results for semiconductor manufacturers. As demand for chips declines due to slower sales of PCs and smartphones, investors are also seeing a decline in demand for chip hardware. ASML shares rose 5.25% to 498.36 on Tuesday, extending a two-week bounce off a 52-week low but still below the 50-day line.
Few chip related games exceed their 50 day lines. But chip design software makers Synopsys and Cadance Design Systems (CDNS) is above its 50-day and 200-day lines, close to flashing buy signals.
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Market Rally Analysis
After reversing down from key resistance on Monday, the market rally rebounded sharply on Tuesday on higher volume compared to Monday. The Nasdaq rebounded above its 50-day line and Monday’s intraday high, surpassing late June and early July highs. The same thing happened with the small cap Russell 2000.
The Dow Jones and S&P 500 have risen above their 50-day lines and are approaching their late June highs.
Can the market rally now decisively overcome these resistance levels? This suggests that the market is at least in a tradable rally. Keep in mind that early June highs are the next big hurdle.
Market breadth was strong on Tuesday, but there weren’t many new stocks showing strong moves. It was a bottom fishing day when hard hit stocks were up but still well below old highs.
However, it was good to see chip (SMH) and software (IGV) ETFs climb above their 50-day lines again. As with the major indices, stocks in chips and software have at times briefly topped their 50-day lines this year, only to retreat quickly.
Medical leaders who reversed the decline on Monday bounced back on Tuesday. AstraZeneca (AZN) moved into the buying zone, although in a small volume.
Beauty promotions such as elf beauty (ELF), Ulta Beauty (ULTA) and Olaplex (OLPX) show strength even if their charts aren’t perfect.
Market Time with IBD ETF Market Strategy
What to do now
This is a difficult time. Major indices are starting to break through resistance. If this continues, investors may feel more confident about the gradual increase in risk exposure. However, reporting season is heating up and the Fed will meet next week.
These news events can push the market higher or cause the indices to plummet—or swing back and forth. Individual shares may fall in price in any case.
So if you’re adding exposure, be prepared to give up quickly.
Definitely work on your watchlists by spending extra time on top candidates for new entries.
Read The Big Picture every day to stay up to date with market direction and leading stocks and sectors.
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