Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, with Netflix subscribers concentrated and Tesla results glimmering. The major indexes recovered on Tuesday above several key levels after hitting resistance on Monday.
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Profits are widespread, but there are few new buying opportunities.
Netflix (NFLX) skyrocketed overnight thanks to better-than-expected earnings and increased subscribers. Huge trucking JB Hunt transport service (JBHT) and egg producer Cal-Maine (CALM) also topped EPS views Tuesday night.
Chip Device Giant ASML (ASML) reported early Wednesday.
Tesla (TSLA) earnings headlines Wednesday night. Tesla earnings will increase compared to Q2 2021 but decrease significantly from Q1, reflecting the Covid-related impacts on Shanghai’s manufacturing operations. Tesla shares rose 2.1% on Tuesday to 736.59, above the 50-day line and just below some short-term resistance. But TSLA stock is far below its late-2021 peak of 1,243.49.
The video embedded in this article analyzed the market recovery action and discussed Li Auto (LIFE), Flex LNG (FLNG) and Synopsis (SNPS).
Dow Jones Futures Today
Dow Jones futures contracts are up less than 0.1% above fair value. S&P 500 futures rose 0.15%. Nasdaq 100 futures are up 0.35%, with NFLX stock up.
Remember that action overnight in Dow futures contract and elsewhere it doesn’t necessarily translate into actual trading the next week stock market meeting.
Elon Musk lost to Twitter
Meanwhile, a judge of the Delaware Premier Court grant an express trial afterward Twitter (TWTR) sued Tesla CEO Elon Musk for trying to end the takeover of Twitter. The trial will begin in October. Musk has sought to delay it to 2023, which will put pressure on Twitter to work it out. While the ruling isn’t based on the merits of the case, it’s a positive sign for Twitter. Musk could end up having to pay a huge penalty — on top of $1 billion in breakup fees — or possibly even have to close the $44 billion, $54.20 a share deal. That could force Musk to sell more TSLA stock.
Twitter shares rose 2.8% to 39.49, breaking above the 50-day threshold for the first time in two months.
Join the IBD experts as they analyze the stocks that could act in the stock market rally on IBD Live
Rally stock market
The stock market rallied strongly at the start of the session and picked up momentum, closing with a big gain near the session high.
The Dow Jones Industrial Average rose 2.4% on Tuesday stock market tradingeven with the Dow giants IBM (IBM) and Johnson & Johnson (JNJ) based on income. The S&P 500 index rose 2.8%. The Nasdaq Composite Index rose 3.1%. The small-cap Russell 2000 jumped 3.5%.
US crude oil prices rose 1.6% to $104.22 per barrel. Natural gas futures prices fell 2.9% amid reports that Russia will restart the Nord Stream natural gas pipeline to Europe as scheduled. However, Russia’s Vladimir Putin signaled possible new delays late Tuesday.
The yield on the 10-year Treasury note rose 6 basis points to 3.02%. Yields on the 2-year Treasury note rose 9 basis points to 3.25%, with the yield curve remaining inverted versus the 2-year and 10-year bonds.
Among the Best ETFsThe Innovator IBD 50 ETF (FFTY) rose 1.6%, while the Innovator IBD Breakthrough Opportunity ETF (BOUT) increased by 1.4%. iShares Expanded Technology-Software Sector ETF (IGV) increased by 2.9%. VanEck Vectors Semiconductor ETF (SMH) rose 4.6%, with ASML stock notable.
SPDR S&P Metals & Mining ETF (XME) raised 2.7% and the US Global Infrastructure Development ETF X (SAVE) 3.7%. US Global Jets ETF (JETS) increased by 4.1%. SPDR S&P Homebuilders ETF (XHB) increased by 3.4%. SPDR Select Energy ETF (XLE) rose 3.1% and the financial SPDR ETF (XLF) 3%. SPDR Fund for the Healthcare Sector (XLV) increased by 1.7%.
Reflecting a more speculative narrative on stocks, the ARK Innovation ETF (ARKK) rose 4.2% and the ARK Genomics ETF (ARKG) 5.2%. TSLA stock is a large stock on Ark Invest ETFs.
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Main income
Revenue from Netflix topped second-quarter views while revenue fell slightly. Netflix subscribers fell by 970,000 compared to the company’s forecast of a loss of 2 million. The internet streaming TV giant hit 1 million subscribers in the current quarter, even as it guided Q3 earnings low. The latest season of “Stranger Things” debuted at the end of Q2 and the beginning of Q3, potentially helping to boost subscriber numbers.
Netflix shares rose 7.5% in overnight trading. NFLX stock rose 5.6% to 201.63 on Tuesday, up over the past few days but remaining range-bound since its Q1 earnings report.
Netflix subscriber data is good news for players who stream, such as Roku (ROKU) and Disney (DIS).
JB Hunt earnings and revenue growth were better than expected, as shipping stocks struggled amid weaker freight rates and demand while diesel prices hit record highs. JBHT stock fell more than 1% in extended trading. Shares rose 3.8% to 174.46 on Tuesday, after it hit the 50-day mark again last week.
Fellow trucking company Knight-Swift (KNX) and the railway giant CSX (CSX) will be due on Wednesday night.
Cal-Maine earnings easily beat fourth-quarter financial targets while revenue grew 69%, the fourth straight quarter of rapid growth, amid strong egg prices.
CALM stock rallied 2% late. Shares fell 1.7% to 52.33 on Tuesday, but were up from the 21-day threshold. CALM stock with 60.05 . cup base point of purchasebased on MarketSmith Analysisbut would ideally form a handle.
ASML earnings came very early on Wednesday morning, kicking off results for semiconductor makers. With chip demand weakening due to slower sales of computers and smartphones, investors see demand for chip equipment also weaken. ASML stock rose 5.25% to 498.36 on Tuesday, continuing its two-week rise from a 52-week low but still below the 50-day line.
Very few chip-related plays exceed their 50-day threshold. But chip design software makers Synopsys and Span Design System (CDNS) is above the 50-day and 200-day lines, close to a flashing buy signal.
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Market aggregation analysis
After reversing lower from a key resistance on Monday, the market rebounded strongly on Tuesday on higher volume than on Monday. Nasdaq rallied back above the 50-day line and Monday’s high to hit highs in late June and early July. So did the small-cap Russell 2000.
The Dow Jones and S&P 500 have risen above their 50-day lines and are nearing a late-June high.
Can the market recover strongly to clear these resistances? Doing so would indicate 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 not many new stocks broke out or showed strong action. It’s been a bottom-fishing day, with hard-hit stocks recovering but still a long way below old highs.
Still, it would be nice to see the chip (SMH) and software (IGV) ETFs move back above their 50-day levels. As with the major indexes, chip and software stocks peaked above the 50-day line briefly this year only to quickly fall back again.
Health leaders who reversed Monday’s lower bounced back on Tuesday. AstraZeneca (AZN) has moved into a buy zone, albeit on light volume.
Beauty stocks such as elf beauty (ELF), Ulta Beauty (ULTA) and Olaplex (OLPX) are showing strength, even if their charts aren’t perfect.
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What to do now
It was a difficult time. The major indices are starting to penetrate the resistance. If that continues, investors may feel more confident about gradually increasing their impression share. However, earnings season is heating up, with the Federal Reserve meeting next week.
Those news events can push the market higher or send indices significantly lower – or flip back. Individual stocks can plunge in earnings under any circumstances.
So if you have extra exposure, be ready to retreat quickly.
Definitely work on your watch list, spending extra time on prime candidates for new entries.
Read Big picture every day to stay in sync with market trends and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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