Stock Futures Gain Strength: Chip Stocks Set To Rally – Investor’s Business Daily


Stocks received a mixed launch Wednesday, as Qualcomm (QCOM) led a rally in chip stocks, while IBM (IBM) and UnitedHealth Group (UNH) dragged the Dow Jones industrials lower.


The Nasdaq ‘s early gain narrowed to 0.3%. The S&P 500 saw its advance dwindle to less than 0.1%, while the Dow Jones industrials declined widened to 0.2%.

Chipmaker Intel (INTC) topped the Dow. IBM fell to the bottom of the index on earnings results, and UnitedHealth Group dived on a raft of analyst downgrades.

Qualcomm easily led the Nasdaq 100. Qualcomm, Textron (TXT) and United Continental Holdings (UAL) rose highest among S&P 500 stocks.

Chip stocks were energized, as Qualcomm continued to soar on ratcheted-up ratings and price targets from Wall Street following Tuesday’s settlement with Apple (AAPL). Intel bolted higher after reporting results late Tuesday. The iShares PHLX Semiconductor ETF (SOXX) vaulted 2.7% in early action.

Netflix (NFLX), an IBD Leaderboard stock, reversed its early gains and moved lower after a disappointing outlook on subscriber growth. Also on the Leaderboard, Autohome (ATHM) scored an early breakout. Chipotle Mexican Grill (CMG), also a Leaderboard name, slipped on an analyst downgrade.

IPOs Jumia Technologies (JMIA) and Tuffin Software (TUFN) were spiking in premarket trade. Marijuana stocks were in motion, with Canopy Growth (CGC) and Aurora Cannabis (ACB) each opening up more than 2% after making strong moves on Tuesday.

Earnings News: Netflix, United, CSX Near Buy Points

Morgan Stanley (MS) gained 0.9% after first-quarter earnings fell less than expected and revenue rose 5%, topping analysts’ targets. Morgan Stanley shares are up 31% since late December, climbing from a 13-month consolidation.

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Netflix shed its early gain and slipped 0.9%.  The streaming entertainment leader reported late Tuesday first quarter revenue and earnings above analysts estimates. The company’s guidance for second-quarter subscriber growth stopped short of views.  Subscribers increased to 9.6 million in Q1, above consensus forecasts for 9.4 million. The stock is below a 371.59 buy point in a cup-with-handle base.

United Airlines (UAL) surged nearly 5%. The airline reported earnings were up 135% in the first-quarter, well above analyst views and its biggest gain in four years. Revenue rose 6%, below expectations. Wednesday’s gain moved the stock ti within 2% of a double-bottom base buy point at 91.03, according to a MarketSmith chart analysis.

Railroad CSX hauled 5% higher at the open. A stronger-than-forecast 31% earnings gain and a 5% revenue increase in line with expectations pushed the railroad to four quarters of steady-eddy gains. The stock is in a buy range above a cup base buy point at 76.34. The chase zone extends to 80.15.

Aurora Rises, Autohome Eyes Breakout

China-based Autohome popped 3.4%, enough to suggest it would top its buy point in opening trade. The online auto shopping and selling service ended Tuesday’s session 3.1% below a 11.70 buy point in a cup-with-handle base. Keep an eye on the stock’s trading volume. You would like to see trade at least 40% above normal to confirm a break out. Not all premarket moves carry over into regular trade.

Aurora Cannabis popped 2.9% ahead of Wednesday’s open. The company announced an acquisition Tuesday. Shares ended the session below a 10.42 buy point in a cup-with-handle base.

China’s Economic Growth Surprises

China’s markets ended mixed, despite a slew of positive economic news. China’s economy grew 6.4% in the first quarter, down from 6.8% growth a year ago but better than the 6.3% increase forecast by economists. Industrial production expanded 8.5% year-over-year in March, well above views for a 5.9% increase and the strongest performance since July 2014.  March retail sales popped 8.7%, also topping expectations.

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The Shanghai Composite advanced 0.3%, adding to Tuesday’s bullish rally. Hong Kong’s Hang Seng index slipped a fraction. In Japan, Tokyo’s Nikkei 225 ran 0.3% higher. Stocks rallied in India, with the Bombay Stock Exchange’s Sensex Index up 1%.

Among Asia-focused ETFs, the Direxion Daily CSI 300 China A Share Bull 2X Shares (CHAU) gained 1.6% in premarket trading. The Direxion Daily MSCI India Bull 3x (INDL) was unchanged.

Markets in the U.K. and Europe remained mixed in afternoon trade. Frankfurt’s DAX and the CAC-40 in Paris rose 0.4% apiece. London’s FTSE 100 lagged 0.1%.

IPO Watch: Jumia Spikes; Zoom, Pinterest On Deck

The spate of high-expectation initial public offerings is set to continue, with Pinterest and Zoom preparing to launch IPOs on Thursday. Germany’s Jumia Technologies spiked 13% ahead of Wednesday’s open. The online retailer to African countries ended Tuesday 147% above its IPO price from Friday.

Israel-based Tuffin Software knocked off a 10% premarket gain as it headed toward its fifth day of trade. Shares of the security software developer ended Tuesday 52% above their IPO price from Thursday.

Other recent IPOs, including Lyft (LYFT) and Tencent Music Entertainment (TME) moved up or down less than 0.5% in Wednesday’s premarket action. Tradeweb Markets (TW) slipped 1.7%.

Oil Prices Up On Inventories News

Oil prices made a run higher in early trade, ahead of weekly data due out from the Energy Information Administration at 10:30 a.m. ET. West Texas Intermediate added 0.4% to trade at $64.31 a barrel. Europe’s Brent crude benchmark rose 0.2% to $71.85. The American Petroleum Institute reported late Tuesday that weekly U.S. inventories declined by more than 3 million barrels, vs. expectations for an increase of almost 2 million barrels.

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Benchmarks Approach New Highs

The Nasdaq has surged 3.5% in April, leaving it 1.7% from its record high from August. The Dow Jones industrials have climbed 2% in April. The index edged to within 1.9% of its October high on Tuesday. The S&P 500 has gained 2.6% since the start of the month, moving on Tuesday to within 1.1% of its September record.

All four major market indexes are working on their fourth-consecutive monthly gain. As the indexes approach their prior highs, the stock market’s current uptrend has racked up a total of nine distribution days against the S&P 500 and the Nasdaq. Find out what distribution days are and how they could affect the current uptrend by reading the Big Picture.

View the General Market Indicators chart page here.

Follow Alan R. Elliott on Twitter @IBD_Aelliott.


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