Dow Jones futures rose overnight along with S&P 500 futures and Nasdaq futures Netflix (NFLX) Subscriber growth in focus and Tesla profits looming.
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An attempt at the stock market rally added to Tuesday’s gains but ended well behind the highs in a volatile session. reports from Apple (AAPL) iPhone production didn’t help. Apple stock briefly turned down, but was able to close slightly higher.
While the market rally is still underway, it hasn’t confirmed anything yet. Investors should pay close attention and remain cautious.
Netflix’s subscriber growth in Q3 was much stronger than expected, with the streaming TV giant also bullish on subscribers in Q4. The result was also exceeded. Netflix stock surged, signaling a breakout. Disney (DIS) and roku (ROKU) also rose overnight.
Intuitive Surgery (ISRG) beat Q3 EPS and revenue forecasts. ISRG stock jumped overnight. Intuitive stocks are near bottoms. But the results for the robotic surgical systems maker could bode well for other medical equipment makers.
United Airlines (UAL) delivered strong Q3 results and Q4 guidance after an upbeat outlook of Delta Airlines (DAL) last week. UAL shares jumped in extended trading, with Delta contributing to regular gains.
chip giant ASML (ASML) reported early Wednesday morning followed by Lam Research (LRCX) Wednesday evening. They will offer reading on the chip sector, including possible comments on US controls on chip technology for China. Both ASML stock and LRCX are just above their lowest levels since 2020.
Tesla (TSLA) is available on Wednesday evening. The EV giant should deliver strong earnings growth, but investors will want certainty about the future.
Meanwhile, there has been new evidence that Elon Musk’s Twitter (TWTR) takeover could be imminent. TWTR stock is not far off the buyout price of $54.20 per share.
Dow Jones futures today
Dow Jones futures were up 0.6% from fair value, with DIS stock offering a small boost. S&P 500 futures were up 0.8%. Nasdaq 100 futures were up 1.2%. NFLX shares and United Airlines are constituents of the S&P 500 and Nasdaq 100.
Crude oil futures rose 1%.
The US could boost Strategic Petroleum Reserves sales over the winter, reports late Tuesday said. The government would promise to buy back crude oil reserves at or below $67-$72 a barrel.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.
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stock market rally
The attempt at stock market rally started strong but fell off the highs almost immediately. A volatile session ensued, although major indices ended with solid to strong gains.
The Dow Jones Industrial Average rose 1.1% in trading on Tuesday. The S&P 500 index rose 1.15%. The Nasdaq Composite gained 0.9%. Small-cap Russell 2000 gained 1.2%.
The 10-year government bond yield fell 1 basis point to 4%, after falling to 3.97% just after the market opened, and then rose to 4.07%, just below a recent 14-year high.
US crude prices fell 3.1% to $82.82 a barrel after reports the Biden administration will release more crude from the SPR. Natural gas futures fell 4.2% after falling 7% on Monday.
ETFs
Among the best ETFs, Innovator IBD 50 ETF (FFTY) is up 1.15%, while Innovator IBD Breakout Opportunities ETF (BOUT) is up 1.3%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.7%. The VanEck Vectors Semiconductor ETF (SMH) closed just above breakeven. ASML and LRCX stocks are significant SMH stocks.
The SPDR S&P Metals & Mining ETF (XME) was up 1.3% and the Global X US Infrastructure Development ETF (PAVE) was up 2%. The US Global Jets ETF (JETS) rose 2.5%, with shares in United Airlines and DAL being key contributors.
SPDR S&P Homebuilders ETF (XHB) is up 2.3%. The Energy Select SPDR ETF (XLE) is up 0.9% and the Financial Select SPDR ETF (XLF) is up 1.6%. The Health Care Select Sector SPDR Fund (XLV) gained 0.6%.
Mirroring stocks with more speculative histories, ARK Innovation ETF (ARKK) was up 1.6% and ARK Genomics ETF (ARKG) was up 1.3%. Tesla stock is the top position among Ark Invest’s ETFs.
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Apple iPhone concerns
Apple is ending production of the iPhone 14 Plus just two weeks after the big-screen phone went on sale. That’s according to The Information, citing sources. This follows previous reports that tech giant Dow Jones reined in overall production of the iPhone 14. However, the 14 Plus wasn’t seen as a big seller as investors tended to focus on the more expensive iPhone 14 Pro versions.
The iPhone Plus report came as Apple introduced new iPads.
Apple’s earnings are due on October 27th.
Apple shares rose 0.9% to 143.75 on Tuesday. However, shares rose as much as 3.1% on the day, beating its 21-day moving average.
Netflix Subscribers
Netflix’s revenue beat estimates as subscribers grew by 2.41 million versus analyst opinions of about 1 million. And the tech giant sees subscriber growth of 4.5 million in Q4. The streaming giant will launch an ad-supported tier for $6.99 per month on November 3rd. Netflix is also stepping up efforts to crack down on password sharing in hopes of increasing its subscriber base.
But the days of easy subscriber growth are long gone. It’s an uphill, expensive battle just to keep existing customers, with Disney+, Apple+, HBO Max, Paramount+ and many more battling for viewers’ eyes and wallets.
NFLX stock soared 14% to about 274 in extended trading. Shares fell 1.7% on Tuesday to 240.86 after rising 6.7% on Monday. Netflix stock has a buy point of 252.09 from a bottoming base, according to MarketSmith analysis. It should easily surpass this level but could test its long 200-day moving average.
Disney stock rose 3% overnight. DIS stock rose 1.2% on Tuesday, below the bearish 50-day and 200-day moving averages.
Roku stock rose 4% in extended action. Shares have tumbled since hitting a record high of 490.76 in July 2021 but rose 1.3% on Tuesday.
Tesla Earnings
Tesla earnings are due late Wednesday. Analysts expect Tesla’s earnings to rise 76% year over year, with sales rising sharply.
However, demand concerns are mounting amid rising production and declining backlogs. So investors will be eager for comment on Tesla deliveries in the fourth quarter and into next year.
Tesla shares rose 0.4% to 200.19 on Tuesday after rallying as high as 229.75 in the morning. Tesla stock hit a 15-month low on Friday.
CEO Elon Musk might have an additional reason to be bullish on Wednesday night’s earnings call. Assuming the Twitter deal may close by Oct. 28, Musk may need to sell more Tesla stock in the coming days to pay for the $44 billion acquisition. Some estimates suggest that Musk may need to sell an additional $8 billion in TWTR stock.
Twitter suspended employees’ stock accounts on Tuesday in “anticipation” of a deal, Bloomberg reported. Twitter shares rose a little over 2% to 51.78.
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Analysis of the market rally
At Tuesday’s open, the S&P 500 and Nasdaq Composite gaped above their 21-day moving averages and joined the Dow Jones and Russell 2000. All major indices also moved above Friday’s highs after being within days of Monday despite big gains.
Major indices pared or erased gains as government bond yields neared recent highs, recovered somewhat and then retreated on Apple iPhone news. The Nasdaq is well below its 21-day moving average, while the S&P 500 closed slightly above that level but in the lower half of the range.
At some point, the major indices signaled a possible following day to confirm the new uptrend. The Dow and S&P 500 ended solidly higher with volume above Monday’s levels. But the wins weren’t strong enough to qualify as a follow-through. A good finish to the session highs didn’t exactly signal strength.
An FTD can happen at any time. A confirmed market recovery would be a positive signal, but not a guarantee. Even if it works, it could be another bear market rally, meeting resistance at the 50-day or 200-day moving average.
Booz Allen Hamilton (BAH) broke above a flat-based buy point and closed near session highs. BAH stock’s line of relative strength is at a new high, but the consulting firm’s growth has been modest.
Aehr test systems (AEHR) cleared a 17.80 entry in big volume. The RS line for AEHR stock is at a peak in 2022. But stock is well above the 50-day moving average and is prone to large swings.
DoubleVerify (DV) came right up to a buy point and arguably outperformed some slightly lower entries before collapsing gains.
In the meantime, shock wave medicine (SWAV) and wolf speed (WOLF) found resistance around its 50-day moving average.
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What now
This is an interesting time. The market rally attempt has made some headway, but action has been volatile, with both resistance and support at the 21-day moving average. Buying stocks is difficult because if you buy on strength, gains can quickly disappear as the market deviates from intraday highs.
So if you’re making any moves, get in slow and be ready to get out fast.
There’s nothing wrong with staying all or almost all cash and waiting for more market clarity.
But while you wait, stay busy with the market. And work on those watch lists. Stocks can move in and out of positions quickly in the current climate, so make sure your watchlists are up to date. Focus on a select group of viable or near-viable stocks while also keeping an eye on a broader list of stocks showing strong relative strength.
Read The Big Picture every day to keep up to date with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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