Dow Jones futures rose overnight, along with S&P 500 futures and Nasdaq futures, with Netflix ( NFLX ) subscriber growth in focus and Tesla earnings approaching.
The attempted stock market rally added to the rise on Tuesday, but ended well off highs in a volatile session. Report on apple (AAPL) iPhone production didn’t help. Apple shares briefly turned lower, but managed to close slightly higher.
While the market rally is still underway, it hasn’t confirmed anything yet. Investors should pay close attention and be cautious.
Netflix subscriber growth was much stronger than expected in Q3, with the streaming TV giant also positive on Q4 customers. Earnings also peaked. Netflix shares rose, signaling a breakout. Disney (DIS) and Year (ROKU) also rose overnight.
Intuitive surgical (ISRG) beat 3rd quarter EPS and revenue forecasts. ISRG stock jumped into action overnight. Intuitive shares are near lows. But results for the maker of robotic surgery systems could bode well for other medical device companies.
United Airlines (UAL) delivered strong Q3 earnings and Q4 guidance, following a bullish outlook from Delta Air Lines (DAL) last week. UAL shares rose in extended trading, with Delta adding to gains in regular sessions.
Chip gear fight ASML (ASML) reports early Wednesday morning, followed by Lamb Research (LRCX) Wednesday night. They will offer a reading on the chip sector, including possible comments on US controls on chip technology to China. Both ASML stock and LRCX are just above their lowest levels since 2020.
Tesla (TSLA) is on tap Wednesday evening. The EV giant should deliver strong earnings growth, but investors want security about the future.
Meanwhile, there was new evidence that Elon Musk’s Twitter (TWTR) takeover may be imminent. TWTR stock is not far from its purchase price of $54.20 per share.
Dow Jones Futures today
Dow Jones futures rose 0.3% relative to fair value, with DIS shares giving a small gain. S&P 500 futures rose 0.6 percent. Nasdaq 100 futures rose 1.1 percent. NFLX stock and United Airlines are S&P 500 and Nasdaq 100 components.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The attempt at a stock market rally started strong, but fell off its highs almost immediately. A volatile session followed, although the major indexes finished with solid to strong gains.
The Dow Jones Industrial Average rose 1.1% in Tuesday’s trading. The S&P 500 index rose 1.15 percent. The Nasdaq composite rose 0.9 percent. The small-cap Russell 2000 rose 1.2%.
The 10-year Treasury yield fell 1 basis point to 4%, after falling to 3.97% just after the market opened, and then rising to 4.07%, just below a recent 14-year high.
U.S. crude oil prices fell 3.1% to $82.82 a barrel amid reports that the Biden administration will release more crude from the Strategic Petroleum Reserve. Natural gas futures fell 4.2% after falling 7% on Monday.
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 1.15%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 1.3%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.7%. The VanEck Vectors Semiconductor ETF (SMH) closed just above break-even. ASML and LRCX shares are significant SMH holdings.
The SPDR S&P Metals & Mining ETF (XME) rose 1.3% and the Global X US Infrastructure Development ETF (PAVE) gained 2%. The US Global Jets ETF (JETS) rose 2.5%, with United Airlines and DAL shares key components.
The SPDR S&P Homebuilders ETF (XHB) gained 2.3%. The Energy Select SPDR ETF (XLE) was up 0.9% and the Financial Select SPDR ETF (XLF) was up 1.6%. The Health Care Select Sector SPDR Fund ( XLV ) rose 0.6%.
Reflecting stocks with more speculative stories, the ARK Innovation ETF ( ARKK ) rose 1.6% and the ARK Genomics ETF ( ARKG ) rose 1.3%. Tesla stock is the top holding across Ark Invest’s ETFs.
Top five Chinese stocks to watch now
Apple iPhone concerns
Apple is cutting iPhone 14 Plus production just two weeks after the large-screen phone went on sale. This is stated by The Information, which cites sources. It follows earlier reports that the Dow Jones tech giant reined in overall iPhone 14 production. However, the 14 Plus was not seen as a big seller, with investors’ focus more on the more expensive iPhone 14 Pro versions.
The iPhone Plus report came as Apple unveiled new iPads.
Apple earnings are due on October 27.
Apple shares ended up 0.9% at 143.75 on Tuesday. However, shares rose as much as 3.1% intraday, topping their 21-day line.
Netflix revenue beat estimates as subscribers grew by 2.41 million, compared with analyst views of about 1 million. And the technology giant sees subscribers up by 4.5 million in Q4. On November 3, the streaming giant is launching an ad-supported tier for $6.99 a month. Netflix is also stepping up efforts to crack down on password sharing in hopes of increasing its subscriber numbers.
But the days of easy subscriber growth are long gone. It’s a tough, expensive battle just to keep existing customers, with Disney+, Apple+, HBO Max, Paramount+ and many more vying for viewers’ eyes and wallets.
NFLX stock rose 14% to around 274 in extended trading. Shares fell 1.7% to 240.86 on Tuesday after jumping 6.7% on Monday. Netflix stock has a buy point at 252.09 from a bottom base, according to MarketSmith analysis. It should easily clear that level, but could test the long-sliding 200-day line.
Disney shares rose modestly overnight. DIS stock rose 1.2% on Tuesday, below declining 50-day and 200-day lines.
Roku stock rose solidly in prolonged action. Shares have crashed since hitting a record high of 490.76 in July 2021, but rose 1.3% on Tuesday.
Tesla earnings are due late on Wednesday. Analysts expect Tesla revenue to rise 76% compared to a year earlier, with a sharp increase in revenue.
But concerns about demand are increasing amid soaring production and a shrinking backlog. So investors will be eager for comments on Tesla deliveries in Q4 and next year.
Tesla shares rose 0.4% to 200.19 on Tuesday after rising as high as 229.75 in the morning. Tesla shares hit a 15-month low on Friday.
CEO Elon Musk may have an extra reason to be bullish on Wednesday night’s earnings call. Assuming the Twitter deal closes, perhaps by Oct. 28, Musk may have to sell additional Tesla shares in the coming days to pay for the $44 billion purchase.
Twitter locked employees’ stock accounts on Tuesday “pending” a deal, Bloomberg reported. Twitter shares rose just over 2% to 51.78.
Tesla vs. BYD: Which EV giant is the best buy?
Market rally analysis
At Tuesday’s open, the S&P 500 and Nasdaq composite crossed their 21-day moving averages, joining the Dow Jones and Russell 2000. All the major indexes also moved above Friday’s highs, after all, Monday had intraday despite big gains.
The major indexes cut or erased gains as Treasury yields neared recent highs, bounced back somewhat, then retreated on Apple iPhone news. The Nasdaq is well below its 21-day line while the S&P 500 closed slightly above this level, but in the lower half of the range.
At one point, the major indices signaled a possible follow-up day to confirm the new uptrend. The Dow and S&P 500 closed solidly higher, with volume above Monday’s level. But the gains were not quite strong enough to qualify as a follow-up. Closing well off session highs didn’t exactly give signal strength.
An FTD can happen at any time. A confirmed market rally would be a positive signal, but not a guarantee. Even if it works, it could be another bear market rally that hits resistance at the 50-day or 200-day lines.
Booz Allen Hamilton (BAH) broke out past a flat-base buy point, and nearly closed higher. The relative strength line for BAH stock is at a new high, but the consultancy’s growth is quite modest.
Aehr test systems (AEHR) cleared a 17.80 entry on heavy volume. The RS line for AEHR stock is at a peak in 2022. But shares are well above the 50-day mark and subject to large swings.
DoubleVerify (DV) came right up to a buy point and arguably topped some slightly lower entries before paring gains.
Meanwhile, Shockwave Medical (SWAV) and Wolfspeed (WOLF) hit resistance around its 50-day lines.
Time the market with IBD’s ETF market strategy
What to do now
This is an interesting time. The market rally attempt has made some progress, but the action has been volatile, with both resistance and support at the 21-day line. Buying stocks is difficult because if you buy on strength, your gains can quickly disappear if the market reverses from intraday highs.
So if you make any moves, go in slowly and be ready to get out quickly.
There is nothing wrong with staying all or almost all in cash and waiting for more market clarity.
But while you wait, stay engaged in the market. And work on those watch lists. Stocks can move in or out of position quickly in the current climate, so make sure your watchlists are up to date. Focus on a select group of tradable or near-tradable stocks, while also keeping an eye on a broader list of stocks showing strong relative strength.
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.
YOU MAY ALSO LIKE:
Get the next big winning stock with MarketSmith
Do you want to make quick profits and avoid big losses? Try SwingTrader
Best growth stocks to buy and watch
IBD Digital: Unlock IBD’s Premium stock lists, tools and analysis today
Fed Pivot Coming in December; Here is proof