Dow Jones Futures: Netflix Volatile Late; Tesla Eyes 3 Buy points with due earnings

Dow Jones futures edged lower after hours, along with S&P 500 futures and Nasdaq futures. Netflix led key earnings reports Tuesday night, with Tesla looming Wednesday.

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The stock rally continues to trade sideways, with the major indices closing little changed again on Tuesday.

Netflix (NFLX) was volatile on mixed results, while Intuitive surgical (ISRG) jumped towards a buy point. Interactive brokers (IBKR) and United Airlines (UAL) also reported. Meanwhile, regional banks were hit hard Western Alliance Bancorp (WAL) and Metropolitan Bank Holdings (MCB) increased with better revenues than feared.

Chip equipment giant ASML (ASML) reports early Wednesday, with peers Lamb Research (LRCX) due late Wednesday.

Finally, Tesla (TSLA) reports on Wednesday evening. Analysts expect a big Tesla earnings decline due to sharp price cuts. However, Tesla shares are close to several possible buy points.

The video embedded in this article reviews market action and analysis Mobileye (MBLY), Las Vegas Sands (LVS) and Lockheed Martin (LMT).

Dow Jones Futures today

Dow Jones futures fell a fraction relative to fair value. S&P 500 futures edged lower. Nasdaq 100 futures fell 0.1 percent. Netflix stock is a notable S&P 500 and Nasdaq 100 component, along with ISRG and UAL.

Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.

Key income

NFLX stock was down in late trading after initially dipping and then briefly turning positive. Netflix subscriber growth faltered, decelerating significantly compared to Q4. Revenue just hit and revenue just missed. The streaming TV giant also said it will soon crack down on password sharing in the US and will increase buybacks over the course of the year. Shares had closed up 0.3% at 333.70, finding support at the 50-day line. Netflix stock has a base of 349.90 cup with handle after the streaming giant more than doubled from May 2022 to early February 2023.

Before Tuesday’s closing, Netflix said it would shut down its DVD-by-mail business on September 29.

ISRG stock jumped in after-hours activity, signaling a possible breakout. Intuitive surgical earnings and turnover beat modestly, while procedure growth increased sharply. Shares rose 0.15% to 269.28 on Tuesday. Intuitive Surgical stock has a buy point at 285.19 cups after clearing an early entry at 259.12 from a too-low handle.

UAL shares rose slightly after United Airlines earnings topped views. Shares rose 1.6% to 43.04 on Tuesday, rebounding this week from the 200-day line but still trying to recover from an early March selloff.

IBKR stock fell solidly in extended trading after Interactive Brokers earnings fell short while earnings were in line. Interactive Brokers rose 1.1% to 84.74 on Tuesday, showing an early entry from the 50-day line. But the IBKR share is now signaling a move back below that key level.

WAL shares rose overnight after the Phoenix-based bank beat the readings and said deposits have increased since late March. Western Alliance shares fell 0.9% on Tuesday to 32.51. Shares are well above the 11-year low of 7.46 in March, but down more than 50% from early March levels.

MBC shares also rose after hours as the New York City-based bank also topped, with core deposits up slightly from March 31 compared with the end of 2022. Metropolitan Bank shares fell 1.2% to 30.80.

Super regional US Bancorp (USB) and Morgan Stanley (MS) is due early Wednesday.

ASML earnings come out very early Wednesday morning. ASML shares rose 0.7% to 643.33 on Tuesday, but hit resistance at the 50-day line. The Dutch chip equipment giant has a buy point at 683.28 cup handle, according to MarketSmith analysis.

On Monday, ASML shares fell 4.1% on a report that Taiwan Semiconductor (TSM) will cut investment plans when it reports Q1 results early Thursday.

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Stock market rally

The stock rally opened higher, erased gains, then traded narrowly mixed for most of the session.

The Dow Jones Industrial Average lost a fraction in Tuesday’s trading. The S&P 500 index rose 0.1 percent. The Nasdaq composite edged lower. The small-cap Russell 2000 fell 0.4 percent.

US crude oil prices rose 3 cents to $80.86 a barrel.

The 10-year government yield fell 2 basis points to 3.57%.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) jumped 2%, hitting its best levels since early December. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 0.2%. VanEck Vectors Semiconductor ETF (SMH) rose 0.45%, with ASML and LRCX shares both SMH holdings.

Reflecting stocks with more speculative stories, the ARK Innovation ETF ( ARKK ) fell 0.2%, continuing to trade just below its 50-day and 200-day moving averages. ARK Genomics ETF (ARKG) fell 0.9%. TSLA stock remains #1 across Ark Invest’s ETFs.

The SPDR S&P Metals & Mining ETF ( XME ) climbed 0.6%. US Global Jets ( JETS ) rose 0.9%, with UAL stock a big member. The SPDR S&P Homebuilders ETF (XHB) rose 1.7%. The Energy Select SPDR ETF (XLE) was up 0.4% and the Health Care Select Sector SPDR Fund (XLV) was down 0.7%.

The Financial Select SPDR ETF (XLF) was down 0.3 percent. The SPDR S&P Regional Banking ETF ( KRE ), which includes the WAL stock, fell 2.2% on Tuesday.

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Tesla revenues

Tesla revenue is expected to fall 20% from a year earlier, as deep price cuts took a toll on gross margins. Revenue should increase 26% to $23.73 billion, but down sequentially compared to Q4.

Already in April, Tesla has cut prices further in the US, Europe and other key markets. Chinese electric car rivals are rolling out a number of new models this week, many challenging Tesla’s aging lineup. So analysts will want to get a sense of how low margins can go, and whether deliveries will continue to increase. Investors will also want updates on the Tesla Cybertruck, a refreshed Model 3 and any hints about a next-generation platform. Tesla bulls also have high hopes for the company’s energy storage business.

Tesla shares

Tesla shares fell 1.5% to 184.31 on Tuesday, continuing to face resistance at the 50-day moving average. Shares have a buy point at 207.89 from a cup-with-handle base that formed just below the 200-day moving average. Investors may prefer to use a decisive break of the 200-day line, currently around 213, as a TSLA stock entry. A third possible buy point for Tesla stock would be a strong move above the 50-day post-earnings line, providing an early entry.

Market rally analysis

The stock rally had another quiet day, with the major indexes not moving much after giving up some early gains.

There is nothing wrong with the market digesting gains and trading close to the top of recent consolidations and 2023 highs, especially heading into earnings season. It is to let top stocks take a breather while others establish themselves.

While market breadth has improved significantly on the NYSE, it has been less impressive on the Nasdaq. It’s a tug of war between new heights vs. new lows.

The Invesco S&P 50,500 Equal Weight ETF (RSP) has improved in recent weeks, but has not definitively cleared its 50-day line.

The Russell 2000, home to many bank stocks, is below its 200-day and 50-day lines.

Homebuilders and some other housing-related stocks are drifting higher. DR Horton (DHI) reports earnings on Thursday, kicking off a series of reports in the group.

Chip stocks tried to move out on Tuesday morning after the SMH ETF found support at the 50-day line. But the ETF faded despite being solid Nvidia (NVDA) increases, with more chip games reversing lower. ASML, Lam Research and Taiwan Semiconductor earnings could have a big impact on the chip sector and market growth in general.

Travel, commodities, footwear, software, defense/aviation, medical products, gaming and other groups also have more stocks in or near buy zones. A little more market strength and breadth could see many buying opportunities.

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What to do now

Buying opportunities have been relatively limited in recent days, although investors could have chosen to pounce on some of them. This is not the time to significantly increase market exposure from current levels, whatever they may be. The market’s sideways action, while constructive, does not provide a real boost to individual stocks. That’s probably why many promising stock moves near the open have often faded.

Earnings season is also likely to swing stocks, sectors and indices over the next several sessions.

But there are many stocks showing interesting action from a variety of sectors. Investors want to be ready to increase their exposure more meaningfully. So have the watch lists ready.

Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.

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