Dow Jones futures fell after hours, along with S&P 500 and Nasdaq futures. Netflix headlined major earnings reports on Tuesday night, with Tesla looming on Wednesday.
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The stock market rally continues to trade sideways, with major indices closing little changed once again on Tuesday.
netflix (NFLX) was volatile on mixed results, while Intuitive surgery (ISRG) jumped to a buy point. Interactive brokers (IBKR) and United Airlines (UAL) also reported. Meanwhile, regional banks hit hard Western Alliance Bancorp (WAL) and Metropolitan Holding Bank (MCB) jumped on better than expected earnings.
Chip Equipment Giant ASML (ASML) reports early Wednesday, with peers Search Lam (LRCX) expected late Wednesday.
Finally, You’re here (TSLA) reports Wednesday evening. Analysts expect a sharp drop in Tesla’s earnings amid steep price declines. However, Tesla stock is close to several possible buy points.
The video embedded in this article reviews the market action and analyzes mobileye (MBLY), Las Vegas Sands (LVS) and Lockheed Martin (LMT).
Dow Jones Futures Today
Dow Jones futures fell a fraction of fair value. S&P 500 futures fell slightly. Nasdaq 100 futures fell 0.1%. Netflix stock is a notable component of the S&P 500 and Nasdaq 100, along with ISRG and UAL.
Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Key wins
NFLX stock fell slightly late in the session after initially plunging and then briefly turning positive. Netflix subscriber growth was insufficient, slowing significantly from the fourth quarter. Profits just beat and revenue just missed. The streaming TV giant also said it will soon crack down on password sharing in the US and increase takeovers over the course of the year. The shares had closed up 0.3% at 333.70, finding support at the 50-day line. Netflix stock has a handle base of 349.90 cups after the streaming giant more than doubled from May 2022 to early February 2023.
Ahead of Tuesday’s shutdown, Netflix announced it would shut down its DVD-by-mail business on September 29.
ISRG stock jumped in after-hours action, signaling a possible breakout. Intuitive Surgical’s earnings and revenue edged lower, while procedure growth surged. The shares edged up 0.15% to 269.28 on Tuesday. The Intuitive Surgical stock has a buy point of 285.19 cup-based after clearing an early entry of 259.12 from a too low handle.
UAL stock edged higher 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 a selloff in early March.
IBKR stock fell sharply in extended trading after Interactive Brokers’ earnings fell short as revenue came in line. Interactive Brokers rose 1.1% to 84.74 on Tuesday, marking early entry from the 50-day line. But IBKR stock is now signaling a move back below that key level.
WAL stock surged overnight after the Phoenix-based bank topped views and said deposits had risen since late March. Western Alliance shares fell 0.9% on Tuesday to 32.51. Stocks are well off their 11-year low of 7.46 in March, but down more than 50% from their levels in early March.
MBC stock also surged after hours, with the New York-based bank also leading, with core deposits up slightly as of March 31 compared to the end of 2022. Bank slipped 1.2% to 30.80.
Superregional American bank (USB) and Morgan Stanley (MS) are expected early Wednesday.
ASML’s results will be released very early Wednesday morning. ASML stock edged up 0.7% to 643.33 on Tuesday but hit resistance at the 50-day line. The Dutch chip equipment giant has a buy point of 683.28 handle cups, according to MarketSmith analysis.
ASML shares fell 4.1% on Monday on a report that Taiwan semiconductor (TSM) will scale back its capital spending plans when it releases first quarter results early Thursday.
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 opened higher, erased gains, then traded in a narrowly mixed fashion for most of the session.
The Dow Jones Industrial Average lost a fraction in Tuesday’s stock trading. The S&P 500 index rose 0.1%. The Nasdaq composite fell slightly. The small-cap Russell 2000 fell 0.4%.
U.S. crude oil prices edged up 3 cents to $80.86 a barrel.
The 10-year Treasury yield fell 2 basis points to 3.57%.
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Among growth ETFs, the Innovator IBD 50 (FFTY) ETF jumped 2% to its best levels since early December. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.2%. ETF VanEck Vectors Semiconductor (SMH) rose 0.45%, with ASML and LRCX shares both held by SMH.
Mirroring stocks with more speculative stories, the ARK Innovation ETF (ARKK) fell 0.2%, continuing to trade just below its 50- and 200-day moving averages. ETF ARK Genomics (ARKG) fell 0.9%. TSLA stock remains the No. 1 position among Ark Invest ETFs.
The SPDR S&P Metals & Mining ETF (XME) climbed 0.6%. US Global Jets (JETS) gained 0.9%, with UAL stock as a significant member. The SPDR S&P Homebuilders ETF (XHB) gained 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) edged down 0.3%. The SPDR S&P Regional Banking (KRE) ETF, which includes WAL shares, fell 2.2% on Tuesday.
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Tesla Earnings
Tesla’s profits are expected to fall 20% from a year earlier as steep price cuts weighed on gross margins. Revenue is expected to rise 26% to $23.73 billion, but down sequentially from the fourth quarter.
Already in April, Tesla further reduced prices in the United States, Europe and other key markets. Chinese EV rivals are rolling out a slew of new models this week, many of which challenge Tesla’s aging lineup. Analysts will therefore want to get an idea of how low margins are and whether shipments will continue to rise. Investors will also want updates on the Tesla Cybertruck, a refreshed Model 3, and hints at a next-gen platform. Tesla bulls also have high hopes for the company’s energy storage business.
Tesla Stock
Tesla stock fell 1.5% to 184.31 on Tuesday, continuing to face resistance at the 50-day moving average. The stock has a buy point of 207.89 from a cup-with-handle base that formed just below the 200-day moving average. Investors might prefer to use a decisive break from the 200-day line, currently around 213, as a TSLA entry. A third possible buying point for Tesla shares would be a strong move above the 50-day line after earnings, offering early entry.
Market rally analysis
The stock market rally had another quiet day, with the major indices not moving much after giving up some early gains.
There is nothing wrong with the market digesting gains and trading tightly near the top of recent consolidations and 2023 highs, especially heading into earnings season. This lets the best stocks take a break while others settle down.
While market breadth improved significantly on the NYSE, it was less impressive on the Nasdaq. There is a tug of war between new highs and new lows.
The Invesco S&P 50,500 Equal Weight (RSP) ETF has improved in recent weeks but has not decisively crossed its 50-day line.
The Russell 2000, home to many bank stocks, is below its 200 and 50 day lines.
Homebuilders and some other housing-related stocks are up. DR Horton (DHI) releases its results on Thursday, launching a number of reports in the group.
Chip stocks tried to pull out on Tuesday morning after the SMH ETF found support at the 50-day line. But the ETF faltered despite strong Nvidia (NVDA) wins, with several sets of tokens reversing lower. Earnings from ASML, Lam Research and Taiwan Semiconductor could have a big impact on the chip sector and the overall market recovery.
Travel, Commodities, Footwear, Software, Defense/Aerospace, Medical, Gaming and other groups also have multiple inventories in or near buy zones. A little more market strength and breadth could create plenty of buying opportunities.
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What to do now
Buying opportunities have been relatively limited over the past few days, although investors could have chosen to munch on some of them. Now is not the time to significantly increase market exposure from current levels, whatever that may be. Sideways market action, while constructive, does not provide real momentum to individual stocks. This is probably why many promising stock moves near the open have often faded.
Additionally, the earnings season is expected to swing stocks, sectors and indices in the coming sessions.
But there are plenty of stocks showing interesting action in a variety of sectors. Investors want to be prepared to increase their exposure more significantly. So get your watchlists ready.
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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