Dow Jones futures were little changed overnight, as were S&P 500 and Nasdaq futures, with Netflix subscribers in focus and Tesla earnings looming. Major indexes bounced above some key levels on Tuesday after hitting resistance on Monday.
Gains were widespread, but there were few new buying opportunities.
netflix (NFLX) jumped overnight on better-than-expected earnings and subscriber additions. trucking giant JB Hunt Transportation Services (JBHT) and egg producer Cal Maine (CALM) also topped EPS views on Tuesday night.
Smart Equipment Giant ASML (ASML) reports early Wednesday.
You’re here (TSLA) headlines Wednesday night. Tesla earnings are expected to show an increase from Q2 2021 but decline significantly from Q1, reflecting Covid-related impacts on Shanghai production. Tesla stock rose 2.1% on Tuesday to 736.59, above its 50-day line and just below some near-term resistance. But TSLA stock is well below its late-2021 peak of 1,243.49.
The video embedded in this article analyzed the market rally action and discussed Li-Auto (LI), Flexible LNG (FLNG) and Synopsis (SNPS).
Dow Jones Futures Today
Dow Jones futures were at par with fair value. S&P 500 futures rose slightly. Nasdaq 100 futures gained 0.3%, with NFLX shares giving a boost.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Elon Musk loses his sleeve against Twitter
Meanwhile, a Delaware Chancery Court judge granted an expedited trial to the Twitter (TWTR) against Tesla CEO Elon Musk for his efforts to end the Twitter takeover. The trial will begin in October. Musk had asked for a postponement until 2023, which would have put pressure on Twitter for him to settle. While the ruling wasn’t on the merits of the case, it’s a positive indication for Twitter. Musk could end up having to pay a major fine — over $1 billion in severance pay — or maybe even have to close the $44 billion, $54.20 per share deal. This could force Musk to sell more TSLA shares.
Twitter stock rose 2.8% to 39.49, topping its 50-day line for the first time in two months.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally rose solidly at the open and gathered momentum, closing with big gains near session highs.
The Dow Jones Industrial Average rose 2.4% in Tuesday’s stock trading, even with the Dow giants IBM (IBM) and Johnson & Johnson (JNJ) falling on profits. The S&P 500 index jumped 2.8%. The Nasdaq composite jumped 3.1%. Small cap Russell 2000 jumped 3.5%.
U.S. crude oil prices rose 1.6% to $104.22 a barrel. Natural gas futures fell 2.9% as Russia restarts its Nord Stream gas pipeline to Europe as planned. Russian Vladimir Putin, however, signaled possible further delays on Tuesday evening.
The 10-year Treasury yield rose 6 basis points to 3.02%. The 2-year Treasury yield jumped 8 basis points to 3.24%, with the yield curve still inverted against 2-year and 10-year bonds.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) gained 1.6%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1.4%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 2.9%. ETF VanEck Vectors Semiconductor (SMH) rose 4.6%, with ASML stock taking a notable position.
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%. SPDR S&P Homebuilders ETF (XHB) rose 3.4%. The Energy Select SPDR ETF (XLE) gained 3.1% and the Financial Select SPDR ETF (XLF) 3%. The SPDR health care sector fund (XLV) rose 1.7%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) jumped 4.2% and ARK Genomics ETF (ARKG) 5.2%. TSLA stock is a major holding in Ark Invest ETFs.
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Netflix revenue topped second quarter views while revenue lagged slightly. Netflix subscribers fell by 970,000 from the company’s forecast for a loss of 2 million. The Internet TV streaming giant sees a gain of 1 million subscribers in the current quarter, even as it guided third-quarter earnings down. The final season of “Stranger Things” ran late in the second quarter and early in the third quarter, which likely helped the subscriber numbers.
Netflix stock jumped 8% in overnight trading. NFLX stock rose 5.6% to 201.63 on Tuesday, rallying over the past few days but still within range since the first quarter earnings report.
Netflix subscriber data is good news for streaming players like Year (ROKU) and disney (SAY).
JB Hunt’s earnings and revenue growth were better than expected as shipping inventories struggled amid weaker freight and demand rates, while diesel prices hit record highs. JBHT stock fell 1% in extended trade. The shares rose 3.8% to 174.46 on Tuesday, after retracing its 50-day line last week.
Fellow trucking company Swift-Knight (KNX) and railway giant CSX (CSX) are expected Wednesday evening.
Cal-Maine’s profits easily beat fourth-quarter fiscal targets while revenue jumped 69%, the fourth straight quarter of accelerating growth, amid high egg prices.
CALM stock rose 1% lagging. Shares fell 1.7% to 52.33 on Tuesday but rebounded from the 21-day line. CALM stock has a buy point of 60.05 cups, according to MarketSmith’s analysis, but would ideally form a handle.
ASML’s results are due early Wednesday morning, kicking off results for semiconductor makers. As chip demand declines due to slowing PC and smartphone sales, investors are also seeing demand for chip-based equipment weaken. ASML stock rose 5.25% to 498.36 on Tuesday, continuing a two-week rebound from 52-week lows but still below the 50-day line.
Few token-bound games exceed their 50-day lines. But chip design software makers Synopsys and Cadence Design Systems (CDNS) are above their 50 and 200 day lines, near flashing buy signals.
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Market rally analysis
After reversing lower from key resistance on Monday, the market rally rebounded strongly on Tuesday into higher volume from Monday. The Nasdaq bounced above its 50-day line and Monday’s intraday high to surpass its late June and early July highs. The same was true for the small cap Russell 2000.
The Dow Jones and S&P 500 have broken through their 50-day lines and are approaching their late-June highs.
Can the market rally now decisively eliminate these resistance levels? This would suggest that the market is at least in a tradable rally. Keep in mind that the highs in early June are the next big hurdle.
Market breadth was strong on Tuesday, but there was not much new action that broke out or showed strong action. It was a bottom fishing day, with hard hit stocks rallying but still well below former highs.
Still, it was nice to see the chip (SMH) and software (IGV) ETFs back above their 50-day lines. As with major indexes, chip and software stocks briefly topped their 50-day lines this year only to fall back quickly.
Medical leaders who reversed the decline on Monday rebounded on Tuesday. Astra Zeneca (AZN) moved into a buying zone, albeit in light volume.
Beauty values such as elf beauty (ELF), Ultimate beauty (ULTA) and Olaplex (OLPX) show strength, even if their graphics aren’t perfect.
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What to do now
It is a delicate period. The major indices are beginning to break through resistance. If this continues, investors might feel more confident about gradually increasing exposure. However, earnings season is heating up, with the Federal Reserve meeting next week.
These news events could propel the market higher or cause the indices to fall sharply – or seesaw back and forth. Individual stocks could dip on earnings either way.
So if you add exposure, be prepared to back down quickly.
Definitely work on your watchlists, spending more time on top candidates for new entries.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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