Dow Jones futures and S&P 500 futures rose slightly Wednesday morning, while Nasdaq futures turned lower, following Tuesday’s broad stock market rally. Treasury yields and crude oil prices continued to climb while Bitcoin moved back above $30,000.
Netflix (NFLX) headlined key earnings reports late Tuesday, along with Intuitive Surgical (ISRG) and Chipotle Mexican Grill (CMG). Netflix earnings missed while its subscriber guidance was light. NFLX stock fell slightly in premarket trading. Intuitive Surgical and Chipotle earnings topped, with both stocks rising overnight.
Dutch chip-equipment giant ASML (ASML) released mixed Q2 results early Wednesday morning but raised guidance. ASML stock climbed after holding above its 50-day line on Tuesday.
The stock market rally rebounded Tuesday with broad-based gains, though it came on lighter volume. The major indexes all extended rebounds from Monday’s intraday lows. The 10-year Treasury yield, which fell Tuesday morning to fresh five-month lows, rebounded higher. Crude oil prices rose slightly after plunging Monday.
Leading stocks fared well Tuesday.
DocuSign (DOCU) broke out while Facebook (FB) rebounded bullishly from its 50-day and 10-week lines. Marvell Technology (MRVL), Shopify (SHOP), Sea Ltd. (SE) and PayPal (PYPL) were among stocks reclaiming official buy points.
The video embedded in this article analyzes DocuSign, Marvell and FB stock, as well as reviewing the overall market rally.
ASML, PayPal and DocuSign stock are on IBD Leaderboard. Shopify, DocuSign, PayPal and Marvell stock are on SwingTrader. ASML stock and PYPL stock are on IBD Long-Term Leaders. ASML and SHOP stock are on the IBD 50.
The price of Bitcoin traded above $31,000 early Wednesday. On Tuesday, Bitcoin fell below $30,000, at the low of a two-month range from just above $29,000 to roughly $41,000. The cryptocurrency has been trending lower, within that range, since late June. Bitcoin peaked at $64,829.14 in April.
Bitcoin and other cryptocurrencies have come under pressure amid crackdowns or threats of greater oversight from China, the U.S. and many other countries. Bitcoin’s weakness also may reflect a “risk off” mentality as highly valued growth stocks retreated for much of July.
A break below $29,000 could signal a new leg down for Bitcoin.
Dow Jones Futures Today
S&P 500 futures climbed 0.2%. Nasdaq 100 futures fell 0.2%, reversing slim gains.
Crude oil futures rose 1.5%. The 10-year Treasury yield advanced 3 basis points to 1.24%, also off morning highs.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 192.39 million. Covid-19 deaths topped 4.13 million.
Coronavirus cases in the U.S. have hit 35.08 million, with deaths above 625,000.
The seven-day average of new U.S. cases has more than tripled since late June to above 38,000. Daily deaths have started to rise, but almost entirely among the unvaccinated.
Stock Market Rally
The stock market rally enjoyed solid price gains Tuesday, though volume was below average.
The Dow Jones Industrial Average climbed 1.6% in Tuesday’s stock market trading. The S&P 500 index rose 1.5%. The Nasdaq composite advanced 1.6%. The small-cap Russell 200 rallied 3.1%.
The 10-year Treasury yield rose 3 basis points to 1.21% after sinking to 1.13% intraday. Crude oil prices rose 1.5% to $67.42 a barrel after tumbling 7.5% on Monday.
Hospital stocks surged on blowout results from HCA Healthcare (HCA). But gains were broad-based across various sectors.
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The iShares Expanded Tech-Software Sector ETF (IGV) gained 1.9%, moving back above a buy point like a lot of top software names. DOCU stock is a notable IGV holding, but not Shopify.
The VanEck Vectors Semiconductor ETF (SMH) climbed 1.2%. ASML stock and Marvell are on SMH.
SPDR S&P Metals & Mining ETF (XME) climbed 3.1% and Global X U.S. Infrastructure Development ETF (PAVE) 2.8%. U.S. Global Jets ETF (JETS) rebounded 5.05% after tumbling to its lowest level in nearly eight months on Monday. SPDR S&P Homebuilders ETF (XHB) added 2.8%. The Energy Select SPDR ETF (XLE) bounced back 1.3% and the Financial Select SPDR ETF (XLF) rose 2.5%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) bounced 3% and ARK Genomics ETF (ARKG) 2.8%. ARKK moved back above its 200-day line after finding support at its 50-day line in recent sessions. ARKG reclaimed its 50-day line.
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Netflix earnings jumped 87% to $2.97 a share as revenue grew 19% to $7.34 billion. Analysts expected Netflix earnings of $3.18 a share on revenue of $7.32 billion.
Investors have tended to focus on Netflix subscribers. The streaming TV giant added 1.54 million customers vs. its own target of 1 million, though it lost 436,000 subscribers in the U.S. and Canad. Analysts expected Netflix subscriber growth of 1.15 million. However, the FANG giant expects a net gain of 3.5 million subscribers in the third quarter vs. Wall Street consensus of about 5.5 million.
Netflix confirmed it will offer video games to subscribers at no extra costs.
NFLX stock fell 1% before Wednesday’s open. Shares dipped 0.2% on Tuesday to 531.05.
Netflix stock has an official buy point of 593.39. Investors could view 563.66 as an early entry or as a buy point from a double-bottom base. Last week, NFLX stock approached that entry before reversing lower.
Intuitive Surgical Earnings
Intuitive Surgical earnings leapt 253% to $3.92 a share on a 71% sales spike to $1.46 billion, as elective surgeries returned after grinding to a near halt a year earlier. Analysts expected Intuitive Surgical earnings of $3.07 per share on $1.27 billion in sales.
ISRG stock climbed 2% in extended trade. Shares rose 2.45% to 955.05, just below recent all-time highs. That’s extended from an 893.89 buy point from a flat base, part of a base-on-base consolidation.
Chipotle earnings skyrocketed 1,765% to $7.46 share as sales grew 39% to $1.89 billion. Wall Street forecast Chipotle earnings of $6.53 a share with revenue at $1.883 billion.
Same-store sales swelled 31.2% vs. views for a 30.1% spike.
CMG stock popped 4% before the open, signaling a move back into buy range. On Tuesday, Chipotle stock rose 1.5% to 1,574.35, briefly reclaiming a 1,579.62 cup-base buy point, according to MarketSmith. Investors also could use 1,626.67 as an alternate entry.
The Dutch company earned the equivalent of $3.04 a share on sales of $4.84 billion. Wall Street had forecast ASML earnings of $3 a share on sales of $4.93 billion. ASML reports financial results in euros. In local currency, ASML earnings rose 41% year over year while sales climbed 21%.
But the maker of expensive ultraviolet lithography machines raised full-year sales guidance. It also announced a new buyback of up to 9 billion euros.
ASML stock rose 3% before Wednesday’s open. Shares edged up 5 cents on Tuesday to 684.05, rebounding from its 50-day line for a second straight day. Shares cleared a 711.09 buy point last week from a three-weeks-tight pattern, but soon reversed lower. Investors could use a post-earnings bounce from the 50-day line as an ASML stock buy signal.
Market Rally Analysis
The stock market rally had a much-needed bounce. The Nasdaq composite, which fell to the top of its prior consolidation, nearly touching its 10-week line Monday, rebounded nicely. The S&P 500 extended its bounce from the 50-day line. The Dow Jones reclaimed its 50-day line while the Russell 2000 bounced from near its 200-day line.
The broad-based gains come after the Nasdaq advance/decline line had fallen to its lowest levels since January. Several key market sectors rebounded from multi-month lows.
Some psychological indicators, including the put/call ratio and the CBOE Volatility Index, fell after spiking to their highest levels in weeks.
So there were a lot of reasons why the stock market rally was “due” for a bounce, and it got one.
Is this the start of a renewed, healthy market rally? The light volume after Monday’s heavy-volume sell-off was not especially inspiring. The market needs to show some more strength, and not a return to the megacaps lifting the major indexes.
Leading stocks definitely showed positive action Tuesday, with DOCU stock and PayPal stock among those leading the way. Continued healthy action in top stocks is crucial, along with more market breadth.
For now though, the stock market rally remains under pressure.
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What To Do Now
Investors could have added to holdings slightly on new buying opportunities, such as SHOP stock, DocuSign or Facebook. But there’s no need to rush into a slew of new positions. Let the market rally prove itself, drawing you in.
Software and various Covid plays are back in favor, so you want to have some exposure to this hot area of the market rally. But take care not to become too concentrated in one sector or theme, especially if your overall exposure is high.
Focusing on early entries and pullbacks is still a smart strategy in this choppy market rally. If you buy from a traditional breakout, try to at least start your position as close to the buy point as possible.
But jumping on various buy signals means doing your homework ahead of time. Build up those watchlists and be ready to act.
Earnings season continues to ramp up. Know the earnings dates for your stocks, and decide whether you’ll hold, sell or take partial profits heading into results. Earnings season also is a reason to be careful with new buys in the near term.
Read The Big Picture every day to stay in sync with the 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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