Dow Jones Futures Drop as Netflix Dives into Subscriber Guidance; Ugly market reversals teach painful lesson

Dow Jones futures fell slightly overnight, while S&P 500 futures and especially Nasdaq futures lost more ground. Guidance from Netflix subscribers caused NFLX shares to plummet overnight, with streaming rival Walt Disney (DIS) is also losing ground.




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For the second straight session, major indices tried to recover but returned lower before sharp losses, extending the stock market correction.

Bulls don’t like to be boxed in, but investors rushing to buy Wednesday and Thursday’s morning rebounds have suffered painful losses.

Netflix (NFLX) and CSX (CSX) announced a profit on Thursday-evening. Giant of oilfield services Schlumberger (SLB) is on tap Friday morning.

Dow Jones insurance giant Travelers (TRV) and ocean shipping company matson (MATX) moved in buy range, at least intraday, on strong earnings news. Both are now in the leading group and colleagues are also doing well. Their relative strength lines are hitting recent highs at the very least. In a better market, both TRV stock and MATX would give strong buy signals. But it’s hard to be convinced about any stock in a correction, especially now that the market is showing ugly reversals.

Tesla stock

Tesla shares rose 0.1% to 996.27 on Thursday, but bounced back from intraday highs of 1,041.66. The EV maker continues to hit resistance near its now declining 50-day moving average. Tesla (TSLA) holds up much better than most high PE stocks. And there is a positive side to the TSLA stock that is now pausing. After a dip from early January highs, Tesla stock tried to race higher again. It is unusual for a stock to shoot straight up from a vertical dive. But as time goes on, that’s less of a concern. Practically speaking, Tesla earnings are on tap next week. That can be a catalyst for big gains, but also for big losses.

Tesla stock is on the IBD Leaderboard and the IBD 50.

Peloton Meltdown

While many beaten growth stocks recovered on Thursday, Platoon Interactive (PTON) crashed 24% as it reported it has stopped manufacturing its affiliate bicycles and treadmills due to weak demand. PTON shares were already down 81% from a record high of 171.09 in January 2021 on Wednesday, so investors may have thought it was a steal. But just because a stock has crashed doesn’t mean it can’t fall further. Peloton stock has now fallen to its worst level since March 2020.

Main income

Netflix’s revenue easily beats views, while its subscriber growth narrowly surpassed analysts’ expectations, but lacked the company’s own guidelines. The streaming giant, which just announced monthly fee increases, also issued weak subscriber guidance for the first quarter.

NFLX shares plunged 20% in overnight action, marking a drop to the worst level since June 2020. Shares returned lower before a 1.5% drop on Thursday. Since it hit a record 700.99 on November 17, Netflix stock has fallen sharply.

Disney stocks plummeted as Netflix subscriber guidance doesn’t bode well for Disney+ and other Disney streaming properties. DIS stocks could hit their worst level since late 2020.

CSX earnings just got past the views. CSX shares fell modestly in extended trading. Shares for the railway company faded Thursday to close 1 cent to 35.24 after initially rallying on solid results from rival Union Pacific (UNP).

Schlumberger shares fell to close 0.2% to 37.04 on Thursday, but it is still in the buy zone. Fellow oilfield services giant Baker Hughes (BKR) reported mixed results early Thursday, but BKR stock rose, briefly opening a buying point.

Dow Jones Futures Today

Dow Jones futures fell 0.3% from fair value, with DIS stocks weighing on blue chips. S&P 500 futures fell 0.4%. Nasdaq 100 futures fell 0.8% as NFLX shares led the decline.

The 10-year yield fell by 4 basis points to 1.79%.

Keep in mind that an overnight action in Dow futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.


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Stock Market Correction

The stock market correction continued to hit new lows as the main index fell for a second straight session.

The Dow Jones Industrial Average fell 0.9% in Thursday’s stock market trading. The S&P 500 index lost 1.1%. The Nasdaq composite fell 1.3% after gaining a whopping 2.1% over the course of the day. The small-cap Russell 2000 fell 1.8%.

The yield on ten-year government bonds remained about the same at 1.83%. Crude oil futures in February fell 0.1% to $86.90 a barrel when the contract expired. Crude oil futures in March fell 0.3% to $85.55.

One of the best ETFs was the Innovator IBD 50 ETF (FFTY) down 2.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost 1.6%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 0.7%. The VanEck Vectors Semiconductor ETF (SMH) fell 3.1%.

SPDR S&P Metals & Mining ETF (XME) slipped 3.6% and Global X US Infrastructure Development ETF (PAVE) 1.6%. The US Global Jets ETF (JETS) fell 0.5%. SPDR S&P Homebuilders ETF (XHB) slipped 2.1%. The Energy Select SPDR ETF (XLE) lost 0.9%, while the Financial Select SPDR ETF (XLF) lost 0.6%. The Health Care Select Sector SPDR Fund (XLV) pulled back 0.65%.

As a result of more speculative story stocks, ARK Innovation ETF (ARKK) rose 0.2% and ARK Genomics ETF (ARKG) fell less than 0.1%. Tesla stocks remain at the top of ARK Invest’s ETFs.


Five best Chinese stocks to watch right now


Market analysis

In like a lion, out like a lamb. Market corrections and bear markets are sensitive to strong opens and weak closes. On Wednesday, the market plunged into the first hour of trading with major indices closing sharply.

On Thursday, the key averages recovered further but began to fade towards the end of the morning, while the pullback intensified in the afternoon.

The Nasdaq composite is starting to lose track of the 200-day line. The tech-heavy index moved below its early October low to its worst level since June. Those October lows essentially match the Nasdaq highs in February 2021.

The big-cap Nasdaq 100 fell below the 200-day mark along with the Dow Jones Industrial Average. The S&P 500 index is approaching that long-term level, reaching a three-month low on Thursday. The Russell 2000 heads due south and hits a new low in 52 weeks.

A few stocks look interesting, such as Matson or TRV stocks. But it’s hard to trust a stock in a market correction.


Time the Market with IBD .’s ETF Market Strategy


What to do now

At this point, a market rally — one that actually lasts an entire session — shouldn’t come as a surprise, as several indicators suggest the indices are oversold, as the Netflix stock crash pushes futures lower.

But if stocks have a solid session, that doesn’t mean a strong market rally is underway.

If you try to catch the first day of a stock market rally, you will eventually succeed. The problem is that you will also catch a lot of dead-cat bounces, with a lot of small losses or a few big ones. Anyone who bought on Wednesday or Thursday’s intraday highs is likely to be sitting on modest to solid losses.

Far better to wait a few days to see if major institutions back another rally attempt. A follow-up day is needed to confirm a new uptrend. Not all confirmed market rallies work, but your chances are much better if you wait for an FTD.

Still, with an attempted market rally underway, you definitely want to build your watchlists. You don’t run to jump the weapon, but you want to be ready to pull the trigger on the right stocks.

Read The Big Picture every day to stay informed about market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.

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