Dow Jones futures edged higher overnight, while S&P 500 and Nasdaq futures edged lower. Tesla (TSLA) and Netflix (NFLX) Wednesday night earnings headlines.
X
The stock market rally ended at Wednesday’s all-time high, but major indices ended in positive territory after hitting 52-week highs in the market. Market ranges were strong again, but many leading stocks erased or reversed gains. The Nasdaq continues to grow.
apple (AAPL) hit a record high on Wednesday after a Bloomberg report said it had built an in-house generated AI chatbot for employees known as Ajax. AAPL shares fell back, but still closed slightly higher.Noon News Beats the Dow Jones Giants microsoft (MSFTMore) and Google’s parent alphabet (Google), the chatbot leader broke out of intraday lows.
Despite failing to deliver an operating profit, TSLA shares fell solidly in after-hours trading as Tesla’s EPS and sales outpaced views. Shares tumbled on the earnings call after Elon Musk said that fears of lower profit margins from Tesla becoming fully self-driving “looks ridiculous.”
Netflix’s subscriber growth slightly outpaced its views, but the earnings reveal sent NFLX’s share price plummeting overnight.
Las Vegas Sands (LVS), know about finance (DFS), IBM (IBM) and united airlines (UAL) also reported Wednesday night. United Airlines and Las Vegas Sands outperformed, while Discover and IBM stock missed out on gains. UAL shares surged, signaling a rise to the upper end of the buy range. IBM stock fell slightly. DFS shares plunged, signaling a drop well below the buy point. LVS shares fell towards the 50th.
thursday morning, american airlines (AAL), taiwan semiconductor (TSM), DR Houghton (DHI), Freeport McMorran (FCX), Traveler (TRVs), Johnson & Johnson (JNJ) and Abbott Laboratories (ABT) report.
Tesla stock is up IBD Leaderboard, with UAL stocks on the leaderboard watchlist. Microsoft stock is listed in his IBD Long-Term Leaders.
dow jones futures today
Dow Jones futures edged above fair value. S&P 500 futures fell 0.2%. Nasdaq 100 futures fell 0.5%. Tesla and Netflix are notable constituents of the S&P 500 and Nasdaq 100.
Note that overnight trading such as Dow Futures does not necessarily translate into actual trading in the next regular stock market.
IBD experts analyze hot stocks during the stock market rally on IBD Live.
stock market rise
The stock market rally ended at a high, but rose slightly.
The Dow Jones Industrial Average rose 0.3% in stock market trading on Wednesday. The S&P 500 index rose 0.2%. The Nasdaq Composite closed just above breakeven. Small-cap Russell 2000 rose 0.45%.
Apple shares climbed 0.7% to 195.10 after hitting a high of 198.23 just after noon on the chatbot’s report. MSFT shares fell 1.2%. Shares surged 4% on Tuesday as Microsoft announced pricing for its enterprise AI tools, reversing a short-term stock market sell-off. Google shares fell 1.4%, flattening back toward the 50-day line.
Market ranges were firm as financial markets continued to rally and telecommunications markets recovered for the second day in a row.
Invesco S&P 500 Equal Weight ETF (RSP) rose 0.5%, approaching its 2023 high.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 0.1%, while the Nasdaq 100 fell slightly.
The Nasdaq is 8.2% above the 50-day moving average and the Nasdaq 100 is 8.7% above. These have reached their limits, increasing the likelihood of a market pullback. The surge in many of the most highly speculative growth stocks over the past few days indicates more bubbles.
US oil prices fell 0.5% to $75.35 a barrel.
The 10-year Treasury yield fell 5 basis points to 3.73%, testing the 50-day line.
ETFs
Among Growth ETFs, Innovator IBD 50 ETF (FFTY) fell 1.3%. iShares Augmented Technology Software Sector ETF (IGV) MSFT shares became the main component of IGV, up 0.1%. VanEck Vectors Semiconductor ETF (SMH) fell 1.05%.
Reflecting more speculative stocks, the ARK Innovation ETF (Arkuk) rose 1.6%, while the ARK Genomics ETF (Argu) 1.1%. TSLA stock is the #1 holding across Ark Invest ETFs.
SPDR S&P Metals & Mining ETF (XME) and the Global X US Infrastructure Development ETF (pave) both fell 0.3%. US Global Jets ETF (Jets), held by UAL and American Airlines Corp, rose 0.8%. SPDR S&P Homebuilders ETF (XHB) ended with a decimal point. Energy Select SPDR ETF (XLE) rose 0.6%, while the Healthcare Select Sector SPDR Fund (XLV) increased by 0.5%.
Industrial Select Sector SPDR Fund (XLI) edges are lowered.
Financial Select SPDR ETF (XLF) rose 0.4%. SPDR S&P Regional Banking ETF (KRE) increased by 3.1%
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Tesla earnings
Tesla’s earnings were 91 cents a share, up 20% from a year ago and comfortably above the 80 cents views. Non-operating income of 0.9 cents and mainly favorable foreign exchange movements contributed. Operating income he was $2.4 billion and missed $2.7 billion views.
Revenue rose slightly to $24.93 billion, up 47%. In the second quarter of 2022, Tesla Shanghai was shut down for several weeks due to the coronavirus lockdown, slowing the recovery of production at the Berlin and Austin factories.
Free cash flow was just over $1 billion, well short of the consensus consensus of $1.88 billion.
Second quarter deliveries hit a record high, but inventories increased as production again outpaced sales.
Gross margin fell to 18.2% from 19.3% in the first quarter and 25% in the same period last year as Tesla continued to offer price cuts and other incentives to boost vehicle sales.
At Tesla’s earnings call, investors were hoping for signs that gross margins would hit bottom soon.
But Chief Executive Elon Musk said on a conference call that “short-term volatility in gross profit” doesn’t matter if “autonomy” significantly boosts Tesla’s profitability. That suggests Musk isn’t worried about further margin erosion. Despite Musk’s predictions for this year, most self-driving experts say Tesla is far from fully self-driving.
Tesla said it was in talks to license FSD to a major automaker.
“Cybertruck is on track to begin initial production at Gigafactory Texas later this year,” Tesla said in its earnings call. On Saturday, Tesla released a photo of an Austin-built Cybertruck, but its second-quarter earnings call suggested it wasn’t built on a production line.
Potential buyers don’t yet know what the Cybertruck’s pricing, battery life and other key specs will be. Tesla’s earnings call made no mention of it.
Information about upcoming Model 3 upgrades was also scarce, and perhaps no real hints about future next-gen models.
Musk said Tesla will cut production over the summer due to factory renovations. Production has outpaced deliveries for several quarters, even though we are already well below capacity.
He expects 1.8 million deliveries in 2023, a first for an EV maker.
Musk also said the Optimus bot should perform some meaningful work at Tesla’s factory next year.
Tesla shares fell 4% in overnight trading.
Shares fell on Wednesday, closing 0.7% lower at 291.26. But the stock is up 3.5% so far this week. TSLA stock has surged 137% in 2023 and is tackling the buy point of 313.80 from a very deep cup base dating back about 10 months.
Netflix earnings
Netflix added 5.9 million subscribers in the second quarter, well above the 1.8 million expected, amid a crackdown on password sharing. The internet streaming giant currently has 238.39 million paying customers worldwide.
Netflix’s revenue surpassed views, but revenue was also revealed. The company also posted mixed results in the third quarter.
Analysts expect Netflix’s revenue to fall 12% year-over-year and sales to rise 4% to $8.27 billion.
NFLX stock fell 8% overnight. The stock rose 0.6% to 477.59 on Wednesday after jumping 5.5% on Tuesday. Hollywood productions are closed and writers and actors are on strike.
But Netflix, with its rich content library, is well-positioned to give customers a wealth of shows and movies to watch even as competitors face shrinking pipelines in the coming months. The company has upped its evidence of free cash flow, citing lower spending due to the strike.
Timing the Market with IBD’s ETF Market Strategy
what to do now
The last few days have been a good time to make existing positions work. Major indices continue to rise, with major stocks outperforming. Some are still sending buy signals, but the chances of a market pullback are increasing.
A prolonged frothy market leading into the earnings season in earnest raises risks, especially for growth stocks.
For positions that have been held for weeks or even months, a drop may not be a big deal, but new purchases can quickly come under pressure.
It’s easy to get cocky when a market rally is doing well for weeks and your portfolio is making big gains. Remember, he’s no smarter than he was a month ago. Keep your ego and emotions in check.
Keep working on your watchlist and keep an eye on your holdings’ major returns.
Read “The Big Picture” daily to stay on top of market direction and key stocks and sectors.
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