Dow futures: market rally still missing; Tesla drives profit engines

Overnight Dow Jones futures are down a bit, along with S&P 500 futures and Nasdaq futures, with a focus on Tesla’s earnings. A stock market rally added to the momentum on Wednesday, led by technology companies and small businesses.




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But while indicators are showing strength, bottom fishing continues to drive progress on a large scale. There is still a relative lack of buying opportunities at the moment.

Tesla (TSLA) topped key earnings overnight, with EPS topping but margins thin. Tesla stock rose slightly in active trading overnight.

steel dynamics (STLD) and Alcoa (AA) Inc. started profits from metals and mining, with steelmaking company Nokor (NUE) and the copper giant Freeport McMorran (FCX) Early Thursday. United Airlines (UAL) touched with the results after closing with American Airlines (AAL) due before opening Thursday. CSX (CSX) railroad earnings led, with Union Pacific (UNP) is out early Thursday.

Alcoa’s earnings and revenue topped the number of views, as the aluminum giant announced a $500 million buyback. AA stock jumped overnight.

Steel Dynamics’ earnings and sales topped the list. STLD stock rose modestly after initially appearing overnight.

United Airlines’ earnings dipped in viewership, although revenue was balanced. UAL stock fell sharply in extended actions, while AAL stock fell modestly.

CSX stock rose strongly, indicating a move above the falling 50-day line, on the back of strong second-quarter results.

From CSX to Tesla stocks, none of these stocks are close to buying points. But it does provide some indication of the strength of the sector in a difficult economic environment.

Meanwhile, health insurers struggled Wednesday after Fit health (ELV), formerly Anthem, has warned of the high medical costs. United Health (OH), another health insurance company, is on the IBD Leaderboard and IBD 50.

Dow jones futures contracts today

Dow futures fell 0.2% against stocks. fair value. S&P 500 futures sank 0.3%. Nasdaq 100 futures lost 0.4%. The Tesla stock is a major component of the Nasdaq while the UAL stock is also found in the Nasdaq 100 Index.

Remember that overnight action in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.


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stock market rise

The stock market rally continued its gains, although it was leaning heavily toward technology and small businesses.

The Dow Jones Industrial Average rose 0.15% in the stock trading session on Wednesday. The S&P 500 rose 0.6%. The Nasdaq Composite Index and small-cap Russell 2000 rose 1.6%.

US crude oil prices for August fell 1.9% to $102.26 a barrel. The price of September crude oil, the new contract for the month nearest to maturity, fell 0.9% to $99.88 a barrel.

US natural gas prices jumped 10.2% on renewed fears that Russian gas supplies will not return to normal, spurring further demand for US liquefied natural gas. Cheniere Energy (liquefied natural gas) and Flex LNG (FLNG) Both made bullish moves.

The 10-year Treasury yield rose 2 basis points to 3.04%.


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ETFs

Among the top ETFs, the Innovator IBD 50 ETF (FFTY) was up 0.2%, with a number of medical stocks weighing on the FFTY. The Innovator IBD Breakout Opportunities ETF (BOUT) was down 0.3%. The ETF (IGV) in the iShares Expanded Tech-Software Sector (IGV) jumped 3.35%. The VanEck Vectors Semiconductor Index (SMH) was up 2.35%.

Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) jumped 5.1% and the ARK Genomics ETF (ARKG) jumped 3.1%. TSLA stock is a major ownership across Ark Invest’s ETFs.

The SPDR S&P Metals & Mining ETF (XME) is up 0.25%, with NUE, Steel Dynamics, Alcoa and Freeport-McMoRan stocks all being notable components. The US Infrastructure Development Fund (PAVE) Global X Index is up 1%. The US Global Jets ETF (JETS) was up 0.5%, with UAL and American Airlines holding big. SPDR S&P Homebuilders ETF (XHB) is offering 0.55%. The Energy Select SPDR ETF (XLE) is up 1% and the Financial Select SPDR ETF (XLF) is up 0.4%. The health care sector SPDR (XLV) fund sank 1%.


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Tesla earnings

Tesla’s earnings beat adjusted views in the second quarter that was marred by a prolonged Shanghai factory shutdown and a slower buildup due to the Covid shutdown. Gains rose 57% vs. A year ago to $2.27 per share. Revenue increased 42% to $16.93 billion.

Both were well below Q1 levels. However, analysts had expected earnings per share from Tesla of $1.81 on sales of $16.539 billion.

Total auto margin decreased to 27.9% from 32.9% in the first quarter and 28.4% a year earlier.

Regulatory credit, which is essentially net profit, fell to $344 million vs. $679 million in the first quarter and $354 million in the second quarter of 2021.

Tesla’s R&D spending fell to $667 million vs. $865 million in the first quarter, but up from $576 million a year earlier. As a percentage of revenue, research and development continued to decline to just 3.9% in the second quarter.

Tesla sold 75% of its bitcoin, a move that allowed the electric car maker to turn positive cash flow in the quarter. CEO Elon Musk said, on the earnings call, that Tesla still owns some Dogecoin. Musk has always touted his Dogecoin holdings, but he has never said that Tesla owns any of that cryptocurrency.

Tesla production should rise from the sequential decline in the second quarter, especially when production outages end to improve capacity in Shanghai and Berlin. Industry-wide production of cars and electric vehicles should also rebound as chip shortages and other supply chain problems ease.

Tesla said it still expects 50% annual growth over a multi-year period, but the earnings statement did not say what its 2022 delivery could be.

Musk said the Cybertruck will come out in mid-2023, but deadlines for that and many others have slipped several times.

The 4680 battery, which is still in trial production, does not appear to be in mass production this year. Musk noted ongoing technical challenges, including the dry cathode problem.

Tesla Stock

Tesla stock is up more than 1% overnight after initially jumping 4% after the close and turning negative for a brief period.

TSLA stock rose 0.8% to 742.50 in the regular Wednesday session, slightly above the 50-day and 21-day moving averages. Stocks have posted higher declines since late May. But Tesla’s stock is far from the record set in November of 1,243.49.


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Do not raise the suitability of health insurance companies

Health insurance companies struggled. Elibility Health beat second-quarter opinions, but cautioned that medical costs will remain high in the second half of 2022, especially for commercial customers. ELV stock, which was lagging some of its peers, fell 7.6%, falling below the 50-day line and closing above the 200-day mark.

UN stock fell 2.6%, but closed above a buying point cleared last Friday on UnitedHealth earnings. Cigna (CI) sank 2.9%, reducing its entry, despite rebounding near the 50-day line.

two cents (CNC) and humana (HUM) is down modestly, but comfortably in a buying range.

Medical stocks generally fought back on Wednesday.

Market Rise Analysis

The stock market rally continued to build momentum. After breaking the 50-day moving averages on Tuesday, the Nasdaq, the Russell 2000 and the S&P 500 moved decisively above the highs of late June on Wednesday morning, while the Dow Jones also surpassed its June highs.

But indices slipped off session highs, whether that was due to European concerns, other news, or no news at all. The Nasdaq and the Little Hats kept a lot of their big morning moves. The S&P 500 pared its modest gains near the June highs. The Dow Jones Industrial Average is down, but it is still holding above the 50-day line.

Meanwhile, the market’s rally faces several other hurdles, with the Nasdaq not far from its peak in early June.

Names that have been beat have been topped in recent days, so there aren’t a lot of great setups and stocks flashing buy signals in the past couple of days. The decline in drug stocks on Wednesday did not help.

Market ETFs or sector ETFs, such as software and biotech, in many cases sound better than individual names. They also provide ways to identify the names of the hardest hit growth without making a specific bet.


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What are you doing now

Obviously, the stock market rally is showing strength. Investors should look to benefit by increasing exposure.

One concern is that the market is headed for a profit spree and the Federal Reserve meeting next week. Investors have to choose between quick exposure now before big market-moving news, or letting buying opportunities pass.

The lack of buying opportunities right now, perhaps a blessing in disguise, is another reason to carefully increase exposure.

Be prepared to pull back hard if the market turns lower again.

Keep working on watch lists. Focus on actionable plays or close-up stocks to buy points.

Read the big picture every day to stay in sync with market trend, stocks and leading sectors.

Please follow Ed Carson on Twitter at Tweet embed For stock market updates and more.

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