Dow Jones futures edged higher overnight, along with S&P 500 futures and Nasdaq futures, with Tesla gains in focus. The stock market rally was divided on Wednesday, with the Dow Jones breaking above key levels while the Nasdaq Composite faced notable resistance as FANG stocks Netflix and Facebook plummeted.
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Netflix (NFLX) plunged 35% on Wednesday, weighing on the Nasdaq. Netflix’s surprise drop in subscribers and weak outlook rocked the streaming sector Disney (DIS) to roku (ROKU). Meanwhile, a negative Cleveland Research note on slowing growth for Facebook parents meta platforms (FB) slammed FB stock down 7.8% as online gaming in general struggled.
Tesla (TSLA) headlined the earnings after the market close. Alcoa (AA), CSX (CSX), steel dynamics (STLD) and United Airlines (UAL) also reported.
Nukor (NUE), Union Pacific (UNP) and American Airlines (AAL) report early Thursday.
Tesla stock has skyrocketed overnight as it operates on a cup-and-handle basis. CSX stock is rebuilding after a wild few weeks. UAL stock jumped on a bullish outlook, helping the travel sector recover.
Will CEO Elon Musk say anything about his Twitter (TWTR) bid? TWTR shares rose 1.2% to 46.72 on Wednesday, shaking off concerns about Facebook ads. Musk has amassed a 9.1% Twitter stake and proposed paying $54.20 per share for the remainder. But he hasn’t made a formal offer and is apparently looking for partners to help fund a deal. Twitter doesn’t seem interested in a Musk acquisition, at least at this price point.
Tesla shares are on the IBD Leaderboard and the IBD 50.
Dow Jones futures today
Dow Jones futures are up 0.25% from fair value. S&P 500 futures were up 0.35%. Nasdaq 100 futures were up 0.55%. Tesla and UAL stocks give Nasdaq futures a boost.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
stock market rally
The stock market rally showed strong action in blue chips and weakness in techs.
The Dow Jones Industrial Average rose 0.7% in trading on Wednesday. The S&P 500 Index lost less than 0.1%, with NFLX stock the worst performer by far. The Nasdaq Composite was down 1.2%. Small-cap Russell 2000 rose 0.4%.
US crude prices edged up 0.1% to $102.19 a barrel.
The 10-year government bond yield fell 7 basis points to 2.84% after rising to 2.98% in Tuesday night trade. The benchmark return is still up for the week.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) was up 0.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) was up 1%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 1.5%. The VanEck Vectors Semiconductor ETF (SMH) is down 0.2%.
Mirroring more speculative story stocks, ARK Innovation ETF (ARKK) tumbled 5.9% and ARK Genomics ETF (ARKG) 2.1%. Tesla stock is ARK Invest’s #1 ETF.
The SPDR S&P Metals & Mining ETF (XME) is down 0.1% with Alcoa stock a key component. The Global X US Infrastructure Development ETF (PAVE) was up 0.8%. The US Global Jets ETF (JETS) rose 0.3%. The SPDR S&P Homebuilders ETF (XHB) is up 1.1%. The Energy Select SPDR ETF (XLE) is up 0.4% and the Financial Select SPDR ETF (XLF) is up 0.7%. The Health Care Select Sector SPDR Fund (XLV) gained 1.3%.
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Tesla Earnings
Tesla’s earnings rose 246% to $3.22 per share, while sales rose 81% to $18.76 billion. Both were well above expectations, with growth accelerating for the second straight quarter. Regulatory lending revenue rose to a new record of $679 million, up 31% year over year and more than doubling the fourth quarter’s $314 million.
The Tesla earnings release offered no new guidance for 2022 deliveries or further guidance on the Cybertruck timeline. Elon Musk reiterated at the Tesla Austin “Cyber Rodeo” earlier this month that there are hopes of starting production sometime next year.
The second quarter will be significantly impacted due to an extended Tesla Shanghai shutdown due to Covid lockdowns in the city. Tesla is in the process of resuming production with some employees on a “closed-loop” basis, meaning they live on-site. A return to full production will take weeks and will depend on how suppliers and logistics can work.
Tesla is working on 4680 batteries but did not signal a breakthrough for mass production. This mass production is necessary for cost savings and can be key to making the Cybertruck, Semi and Roadster viable.
Musk continues to tout a future Tesla bot called “Optimus,” though experts say general-purpose humanoid robots are likely decades away.
Tesla stock
Tesla shares rose 5% in overnight trading. Shares closed up 5% on Wednesday at 977.20 and continued to trade around the 1,000 mark. TSLA stock has a buy point of 1,152.97 cups with handles according to MarketSmith analysis, but the base has been messy.
A longer grip would allow the moving averages to catch up. Tesla shares closed 4.8% above its 50-day moving average on Wednesday. On April 5, the stock was 19.9% above that key level.
Alcoa Revenue
Alcoa earnings beat views, but revenue lagged.
AA-Shares fell nearly 4%, signaling a drop below the 50-day moving average. Alcoa stock rose 0.4% to 86.93 on Wednesday after finding support at its 50-day price. Stocks have tested the 50-day/10-week moving average a couple of times since a breakout in December, so a bounce back would have been a riskier place to buy. AA stock is working on a consolidation.
Alcoa’s relative strength line is near highs.
STLD receipts
Steel Dynamics earnings beat forecasts.
STLD stock fell overnight. Shares closed down 0.5% at 91.49, slipping off their highs.
NUE stock fell 1.5% on Wednesday.
CSX Earnings
CSX results were better than expected as unit count growth offset a 2% volume decline.
CSX stock rose 2% in extended action. Shares rose 1 cent on Wednesday to 35.30. CSX stock is working at a buy point of 38.73 from a flat base with some wild up and down action over the past few weeks.
UNP shares rose 0.6% on Wednesday.
United Airlines Revenue
United Airlines reported a slightly stronger-than-expected loss while revenue was lower. However, United expect to return to profitability in the second quarter.
UAL stock is up nearly 8% overnight. That’s up 1.2% after closing. Shares have largely recovered in recent sessions along with airline and travel stocks. Last Wednesday, Delta Airlines (DAL) topped Q1 views and said customers are not worried about big rate hikes so far.
AAL stock also emerged late after rising 0.6% on Wednesday.
Analysis of the market rally
The stock market rally was clearly divided on Wednesday. The Dow Jones moved above its 200-day moving average and neared its late March high. The S&P 500 met resistance at its 200-day price. The Nasdaq Composite met resistance at its 200-day moving average and reversed to the downside.
For its part, the Russell 2000 moved above its 50-day moving average after closing just below that key level on Tuesday.
REITs, travel and a growing number of medical stocks led the way on Wednesday. Industrials and infrastructure-related companies enjoyed a strong session.
Commodity-related names and defense companies held up well. A number of leading energy stocks are consolidating, some already with decent bases after previous runs.
But growth stocks struggled again after Tuesday’s rally, particularly ARK-style speculative growth. A few chip names popped up ASML (ASML) results, but most are way out of position.
Netflix’s crash and mounting worries about Facebook’s growth are bad news for many big internet companies and bode well for discretionary spending in general.
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What now
The stock market rally isn’t all that easy to handle except in areas of the market that are working. It’s nice to see the lead expanding into REITs, travel and more medicine. Still, much of the market is in bad shape.
Exposure should remain modest and focus on strong sectors. Investors should consider taking at least some profits quickly to avoid round-trip moves.
With the earnings season heating up and another major Fed meeting in early May, caution and profit-taking could become even more important in the coming weeks.
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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