Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, with Netflix subscribers in focus and Tesla results approaching. The major indices recovered on Tuesday over some key levels after meeting resistance on Monday.
The gain was broad-based, but there were few new buying opportunities.
Netflix (NFLX) jumped overnight on better-than-expected earnings and subscriber subsidies. Trucking giant JB Hunt Transport Services (JBHT) and egg producer Cal-Maine (CALM) also topped EPS views Tuesday night.
Chip equipment giant ASML (ASML) reports early Wednesday.
Tesla (TSLA) headlines revenue Wednesday night. Tesla revenues should show an increase compared to the second quarter of 2021, but decrease significantly compared to the first quarter, reflecting Covid-related impacts on production in Shanghai. Shares of Tesla climbed 2.1% on Tuesday to 736.59, above the 50-day line and just below some short-term resistance. But the TSLA stock is well below its peak at the end of 2021 at 1,243.49.
The video embedded in this article analyzed the market rally action and discussed Li Auto (LI), Flex LNG (FLNG) and Synopsys (SNPS).
Dow Jones Futures today
Dow Jones futures rose 0.3% relative to fair value. S&P 500 futures rose 0.3 percent. Nasdaq 100 futures rose 0.5%, and NFLX shares boosted.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Elon Musk loses round to Twitter
Meanwhile, a judge in the Delaware Chancery Court granted an expedited trial Twitter (TWTR) lawsuit against Tesla boss Elon Musk for his efforts to end Twitter takeover. The trial is set to begin in October. Musk had sought a delay into 2023, which would have put pressure on Twitter to make up. Although the ruling was not on the realities of the case, it is a positive indication for Twitter. Musk could end up having to pay a large fine – over a $ 1 billion breach fee – or possibly even have to terminate the $ 44 billion deal, $ 54.20 per share. This could force Musk to sell more TSLA shares.
Twitter shares rose 2.8% to 39.49, moving above the 50-day line for the first time in two months.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally rose solidly at the opening and picked up speed, and ended with large rises near session heights.
The Dow Jones Industrial Average rose 2.4% in Tuesday’s trading, even with the Dow giants IBM (IBM) and Johnson & Johnson (JNJ) falls on earnings. The S&P 500 index rose 2.8 percent. The Nasdaq index rose 3.1 percent. Small-cap Russell 2000 jumped 3.5%.
The US crude oil price rose 1.6% to $ 104.22 a barrel. Futures on natural gas fell 2.9% after reports that Russia will restart its Nord Stream natural gas pipeline to Europe as planned. However, Russia’s Vladimir Putin signaled possible new delays late Tuesday.
The 10-year government interest rate rose 6 basis points to 3.02%. The 2-year government interest rate fell by 8 basis points to 3.24%, with the yield curve still inverted from the 2- and 10-year notes.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.6%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 1.4%. iShares Expanded Tech-Software Sector ETF (IGV) rose 2.9%. VanEck Vectors Semiconductor ETF (SMH) rose 4.6%, with the ASML stock a remarkable stake.
SPDR S&P Metals & Mining ETF (XME) rose 2.7% and Global X US Infrastructure Development ETF (PAVE) 3.7%. The US Global Jets ETF (JETS) rose 4.1%. SPDR S&P Homebuilders ETF (XHB) rose 3.4%. Energy Select SPDR ETF (XLE) rose 3.1% and Financial Select SPDR ETF (XLF) 3%. Health Care Select Sector SPDR Fund (XLV) rose 1.7%.
ARK Innovation ETF (ARKK) reflects more speculative history stocks, jumped 4.2% and ARK Genomics ETF (ARKG) 5.2%. The TSLA share is a large holding across Ark Invest’s ETFs.
Five best Chinese stocks to see now
Netflix revenue peaked in the second quarter, while revenue was somewhat missed. Netflix subscribers fell by 970,000 compared to the company’s forecasts for a loss of 2 million. The online TV streaming giant sees a gain of 1 million subscribers in the current quarter, even though it provided low on Q3 revenues. The last season of “Stranger Things” rolled out at the end of Q2 and the beginning of Q3, which probably helps the number of subscribers.
Netflix shares rose 8% in overnight trading. The NFLX stock rose 5.6% to 201.63 on Tuesday, picking up in recent days, but has still limited reach since the first quarter results report.
The Netflix subscriber data is good news for streaming players such as Year (ROKU) and Disney (HAZE).
JB Hunt’s earnings and revenue growth were better than expected, as shipping stocks are struggling amid weaker freight rates and demand while diesel prices reached record highs. The JBHT share fell 1% in expanded trading. The stock rose 3.8% to 174.46 on Tuesday, after taking back its 50-day line last week.
Another trucking company Knight-Swift (KNX) and railway giant CSX (CSX) has an appointment on Wednesday night.
Cal-Maine revenues slightly beat fiscal targets for the fourth quarter, while revenues rose by 69%, the fourth consecutive quarter of accelerating growth, amid strong egg pricing.
CALM shares rose 1% late. Shares fell 1.7% to 52.33 on Tuesday, but jumped from the 21-day line. The CALM stock has a buying point of 60.05 cups, according to MarketSmith analysis, but would ideally form a handle.
The ASML revenue comes very early Wednesday morning, and starts the results for semiconductor manufacturers. As chip demand declines on slower PC and smartphone sales, investors see that demand for chip equipment is also weakening. ASML shares rose 5.25% to 498.36 on Tuesday, continuing a two-week rise from the 52-week low, but still below the 50-day limit.
Few chip-related games are over the 50-day lines. But the software makers for chip design Synopsys and Cadence design systems (CDNS) are above their 50-day and 200-day lines, close to flashing buy signals.
Tesla vs. BID: Which EV giant is the best buy?
Market Rally Analysis
After reversing lower from key resistance on Monday, the market rally retreated sharply on Tuesday in higher volume vs. Monday. The Nasdaq bounced back above its 50-day line and Monday’s intraday high to peak in late June and early July. The same was done by small-cap Russell 2000.
The Dow Jones and S&P 500 rose above their 50-day lines and are approaching peaks at the end of June.
Can the market rally now decisively remove these levels of resistance? Doing so would indicate that the market is in at least one negotiable rally. Remember that the peaks in early June are the next big obstacle.
The market width was strong on Tuesday, but not many new shares broke out or showed strong action. It was a day for bottom fishing, with hard-hit stocks on the rise, but still well below old heights.
Still, it was nice to see chip (SMH) and software (IGV) ETFs move back over their 50-day lines. As with the major indices, chips and software stocks have reached the top of their 50-day lines shortly this year, only to fall back quickly.
Medical leaders who turned lower on Monday returned Tuesday. AstraZeneca (AZN) moved into a buying zone, albeit in light volume.
Beauty stocks such as elf beauty (ALV), Ulta beauty (ULTA) and Olaplex (OLPX) shows strength, even if their charts are not perfect.
Time market with IBD’s ETF market strategy
What to do now
It’s a difficult time. The major indices are beginning to break through resistance. If it continues, investors may feel more confident in gradually increasing their exposure. However, the earnings season is warming up, with the Federal Reserve meeting next week.
These news events can drive the market higher or send the indices sharply lower – or whips back and forth. Individual shares can at least fall in earnings.
So if you are adding exposure, be prepared to go back quickly.
Definitely work with your watchlists, spend extra time on top candidates for new listings.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
CAN YOU ALSO LIKE:
Why this IBD tool simplifies the search for top stocks
Do you want to make a quick profit and avoid big losses? Try SwingTrader
Best growth stocks to buy and look at
IBD Digital: Unlock IBD’s Premium Stock Lists, Tools and Analyzes today