Dow Jones futures rose Thursday morning, along with S&P 500 futures and especially Nasdaq futures, with Tesla earnings in focus. The stock market rally was split Wednesday, with the Dow Jones breaking above key levels while the Nasdaq composite hit notable resistance as FANG stocks Netflix and Facebook plunged.
Netflix crashed 35% Wednesday, weighing on the Nasdaq. The surprising Netflix subscriber decline and weak outlook rocked the streaming sector, from Disney to Roku. Meanwhile, a negative Cleveland Research note about slowing growth for Facebook parent Meta Platforms slammed FB stock for a 7.8% loss, with online plays generally struggling.
Tesla headlined earnings after the close. Alcoa, CSX, Steel Dynamics and United Airlines also reported.
American Airlines, Union Pacific and Nucor released results early Thursday.
Tesla stock popped overnight as it works on a cup-with-handle base. CSX stock is setting up again after a wild past few weeks. UAL stock jumped on a bullish outlook, with American also ascending, adding to a travel sector rebound.
Will CEO Elon Musk say anything about his Twitter bid? TWTR stock rose 1.2% to 46.72 on Wednesday, shrugging off Facebook ad concerns. Musk has amassed a 9.1% Twitter stake and has proposed paying $54.20 a share for the rest. But he hasn't made a formal bid and he apparently is seeking partners to help finance a deal. Twitter doesn't seem keen on a Musk takeover, at least at that price.
Tesla stock is on IBD Leaderboard and the IBD 50.
Dow Jones Futures Today
Dow Jones futures rose 0.75% vs. fair value. S&P 500 futures advanced 0.9%. Nasdaq 100 futures climbed 1.35%. Tesla and UAL stock are giving a lift to Nasdaq futures.
The 10-year Treasury yield rose 2 basis points to 2.86%.
Crude oil futures rose slightly.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally showed strong action among blue chips and weakness among techs.
The Dow Jones Industrial Average rose 0.7% in Wednesday's stock market trading. The S&P 500 index lost less than 0.1%, with NFLX stock easily the worst performer. The Nasdaq composite sank 1.2%. The small-cap Russell 2000 climbed 0.4%.
U.S. crude oil prices edged up 0.1% to $102.19 a barrel.
The 10-year Treasury yield fell 7 basis points to 2.84%, after running up to 2.98% in Tuesday night trading. The benchmark yield is still up for the week.
Among the best ETFs, the Innovator IBD 50 ETF edged up 0.2%, while the Innovator IBD Breakout Opportunities ETF jumped 1%. The iShares Expanded Tech-Software Sector ETF fell 1.5%. The VanEck Vectors Semiconductor ETF dipped 0.2%.
Reflecting more-speculative story stocks, ARK Innovation ETF tumbled 5.9% and ARK Genomics ETF retreated 2.1%. Tesla stock is the No. 1 holding across ARK Invest's ETFs.
SPDR S&P Metals & Mining ETF slipped 0.1%, with Alcoa stock a major component. The Global X U.S. Infrastructure Development ETF climbed 0.8%. U.S. Global Jets ETF ascended 0.3%. SPDR S&P Homebuilders ETF picked up 1.1%. The Energy Select SPDR ETF advanced 0.4% and the Financial Select SPDR ETF 0.7%. The Health Care Select Sector SPDR Fund gained 1.3%.
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Tesla Earnings
Tesla earnings surged 246% to $3.22 a share with revenue up 81% to $18.76 billion. Both were well above views, with growth accelerating for a second straight quarter. Regulatory credits revenue jumped to a new record $679 million, up 31% vs. a year earlier and more than double Q4's $314 million.
The Tesla earnings release didn't offer new guidance on 2022 deliveries or any more hints about the Cybertruck timeline. Elon Musk, at the Tesla Austin "Cyber Rodeo" earlier this month, reiterated that the hope is for production to start sometime next year.
Q2 will take a significant hit due to an extended Tesla Shanghai shutdown due to Covid lockdowns in the city. Tesla is just restarting production with some staff in a "closed loop," meaning they live on site. A return to full production will take weeks, and will depend on how suppliers and logistics can operate.
Tesla is working on 4680 batteries, but didn't signal any breakthrough for mass production. That mass production is necessary for cost savings, and may be key to making the Cybertruck, Semi and Roadster viable.
Musk said he "aspires" to make a special robotaxi by 2024 with no steering wheel or pedals. He also continues to tout a future Tesla Bot, dubbed "Optimus," though experts say general purpose humanoid robots are likely decades away.
Tesla Stock
Tesla stock jumped nearly 8% in premarket trade. Shares closed down 5% Wednesday to 977.20, continuing to trade around the 1,000 level. TSLA stock has a 1,152.97 cup-with-handle buy point, according to MarketSmith analysis, but the base has been messy.
A longer handle would let the moving averages catch up. Tesla stock closed 4.8% above its 50-day line on Wednesday. On April 5, shares were 19.9% above that key level.
Alcoa Earnings
Alcoa earnings topped views, but revenue missed.
AA stock fell 7%, signaling a drop below the 50-day line. Alcoa stock edged up 0.4% to 86.93 on Wednesday after finding support at its 50-day. Shares have tested the 50-day/10-week line a couple of times since a December breakout, so a new bounce would have been a riskier place to buy. AA stock is working on a consolidation.
The relative strength line for Alcoa stock is near highs.
STLD Earnings
Steel Dynamics earnings topped forecasts. Nucor earnings topped while sales well short.
STLD stock edged higher. NUE stock rose nearly 2%. Both are trading just below highs
CSX Earnings
CSX earnings were better than expected, as price hikes boosted unit revenue, offsetting a 2% dip in volumes.
CSX stock rose 2% in extended action. Shares edged up 1 cent to 35.30 on Wednesday. CSX stock is working on a 38.73 buy point from a flat base with some wild up-and-down action over the past several weeks.
Union Pacific earnings were in line, while revenue topped.
UNP stock climbed nearly 2% early Thursday.
United Airlines Earnings
United Airlines reported a slightly wider-than-expected loss while revenue came in light. But United expects to return to profitability in Q2.
UAL stock jumped 8% early Thursday. That's after rising 1.2% on Wednesday. Shares have rebounded along with airline and travel stocks broadly over the past several sessions. Last Wednesday, Delta Air Lines topped Q1 views and said customers aren't fazed by big fare increases so far.
American Airlines early Thursday reported a smaller-than-expected loss as revenue topped. It expects Q2 revenue to be up 6%-8% vs. Q2 2019, before the Covid crisis.
AAL stock leapt 11% after edging up 0.6% on Wednesday.
Market Rally Analysis
The stock market rally was clearly divided on Wednesday. The Dow Jones moved above its 200-day line, approaching its late March peak. The S&P 500 hit resistance at its 200-day. The Nasdaq composite hit resistance at its 200-day line and reversed lower.
The Russell 2000, for its part, moved above its 50-day line after closing just below that key level on Tuesday.
REITs, travel and an expanding number of medical stocks led the way on Wednesday. Industrials and infrastructure-related firms had a strong session.
Commodity-related names and defense firms held up well. A number of leading energy stocks are consolidating, several with proper bases already, after previous runs.
But growth stocks, after bouncing Tuesday, struggled once again, especially ARK-style speculative growth. Some chip names bounced on ASML results, but most are well out of position.
The Netflix crash and mounting worries about Facebook growth are bad news for many big internet firms, and doesn't bode especially well for discretionary spending broadly.
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What To Do Now
The stock market rally is not too easy to handle, except in areas of the market that are working. It's nice to see leadership broadening out to include REITs, travel and more medicals. Still, much of the market is in bad shape.
Exposure should remain modest, and focused on strong sectors. Investors should consider taking at least partial profits quickly on winners to avoid round-tripping moves.
With earnings season heating up and another big Fed meeting looming in early May, caution and profit-taking may be even more important in the next few weeks.
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