Premarket Trading: Blue Chips, Netflix Power Up; China Adds Tariffs
Tuesday’s premarket trading received several shots in the arm. First was Netflix (NFLX), which surged after reporting strong first-quarter results late Monday. Then a cohort of blue chip names kicked in and posted early advances, following above-expectation quarterly results.
The result: futures for the Dow Jones industrial average vaulted 1%. The S&P 500 traded 0.8% above fair value. Nasdaq 100 futures pressed 1.1% higher.
Netflix was the premarket trading powerhouse, up more than 7% and easily the largest gainer among Nasdaq 100 and S&P 500 stocks. Merck (MRK) bolstered the Dow in early trade, following an analyst upgrade. But the drugmaker quickly surrendered its lead as investors waded into an early batch of blue-chip earnings reports from Goldman Sachs (GS), Johnson & Johnson (JNJ) and UnitedHealth Group (UNH).
The positive premarket trading poised the week-old uptrend to hurdle resistance. The uptrend is in good standing, carrying no distribution days. But the 50-day moving average remains the key test for all three major indexes. The Dow failed to hold above its 50-day line on Monday, and the Nasdaq and S&P 500 have yet to break back above the critical level of support.
Premarket action suggested the Dow and the S&P 500 would open above their 50-day lines. Keep in mind that futures-driven premarket trading does not always translate to action during the regular session.
Merck, J&J, UnitedHealth, Goldman Hoist Dow Premarket Trading
On the Dow, UnitedHealth rolled up an early 2.5% gain on first-quarter results that were stronger than expected. The stock retook its 50-day line of support with a 2.6% gain on Monday, attempting to start up the right side of a four-month consolidation.
Also on the Dow, Merck buzzed ahead 2.1%, after Morgan Stanley upgraded the stock to overweight, from equal weight. The drugmaker surged 2.6% in heavy trade Monday, after the company’s lung-cancer treatment outperformed competitors in clinical trials. Merck is up 11% from an early April low and, like the overall Dow index, stands poised to test resistance at its 50-day moving average.
Further down the list of early Dow advancers, Johnson & Johnson trimmed its early gain to 0.3%. The medical products leader reported first-quarter results in which earnings and revenue topped analysts’ targets, and full-year guidance met or beat expectations.
Goldman Sachs reversed an early loss, stepping up 0.9% after clobbering first-quarter earnings expectations and raising its quarterly dividend nearly 7%. The stock has spent three days fighting resistance at its 50-day moving average.
Netflix Paces Nasdaq 100, S&P 500, Leaderboard Stocks
IBD Leaderboard stocks churned out some strong early moves, drafting Netflix’s early advance. The streaming entertainment leader reported first-quarter sales and earnings only narrowly above consensus targets. But a blowout beat in subscriber growth surprised investors and launched shares higher in premarket trading. Netflix shares remain extended after a rebound from support at their 10-week moving average.
Planet Fitness (PLNT) popped 1.6% ahead of the open. The gym network ended Monday a bit more than 2% below a 40.14 buy point in a second-stage flat base.
Leader peer Lululemon Athletica (LULU) pared its early surge back to 0.3% in premarket trading. The company late Monday named Patrick Guido its chief financial officer, effective April 30. The stock has jumped 18% over the past three weeks.
China GDP Expands, Announces New Tariffs
China-based stocks were mixed, as after markets in Hong Kong and Shanghai ended lower Tuesday, despite data showing the country’s GDP expanded 6.8% during the first quarter. Retail sales surged 35.4%, while investment in education soared 26.9%. China’s Commerce Ministry also announced its would impose 179% tariffs on sorghum imported from the U.S. The ministry said an investigation found the grain was unfairly subsidized by the U.S. government.
March IPO IQiyi (IQ) jumped 2.3% in premarket trading. Shares of the Netflix-like platform advanced over the past six sessions, rising 9.7% above their March 29 IPO price.
Housing Starts, Factory Utilization
Housing starts jumped in March to an annualized rate of 1.32 million, the Commerce Department reported. That was a healthy uptick from February’s disappointing 1.295 rate of home starts, startling economists who had projected a rate of 1.264 million new projects.
Building permits, which gauge upcoming activity, posted an even larger increase — to an annualized rate of 1.354 million. February’s permits clocked a 1.321 million pace. Economists had expected March permits issued at a 1.315 million rate.
Industrial production numbers from the Federal Reserve are set for release at 9:15 a.m. ET.
A busy slate for Tuesday’s after-hours session includes quarterly reports from railroad CSX (CSX), Intuitive Surgical (ISRG) and United Airlines (UAL). Lam Research (LRCX) also reports after the close, kicking off the first-quarter reporting season for the chip sector.
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