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Blue Chips, Netflix Power Up; China Adds Tariffs

Premarket trading received several shots in the arm Tuesday, first from Netflix (NFLX), then from a cohort of blue chip names reporting solid quarterly results.

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Futures for the Dow Jones industrial average rose 0.9%, while the S&P 500 traded 0.7% above fair value. Nasdaq 100 futures jumped 1% higher.

Netflix was the powerhouse in early premarket trading, up more than 7% — easily the largest gain among Nasdaq 100 and S&P 500 stocks. Merck (MRK) bolstered the Dow in early trade, following an analyst upgrade.But it quickly surrendered its lead as investors waded into an early batch of blue chip earnings news from Goldman Sachs (GS), Johnson & Johnson (JNJ) and UnitedHealth Group (UNH).

The 50-day moving average remains the key hurdle for the market’s week-old uptrend. The uptrend is in good standing, carrying no distribution days. But 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.

Merck, J&J, UnitedHealth, Goldman Hoist Dow

On the Dow, UnitedHealth rolled up an early 2.1% gain on stronger-than-expected first-quarter results. The stock retook its 50-day line of support with a 2.6% gain on Monday. The stock is attempting to start up the right side of a four-month consolidation.

Merck buzzed ahead 1.5%, 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, it is poised to test resistance at its 50-day moving average.

Johnson & Johnson popped 1.3% following 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 and climbed 0.7% after clobbering Q1 earnings expectations and raising its quarterly dividend nearly 7%.  The stock is struggling to beat resistance at its 50-day moving average.

IBD Leaderboard stocks were busy in early action, drafting Netflix’ early gains. 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 are extended after a rebound from support at their 10-week moving average.

Leader peer Lululemon Athletica (LULU) gained 1.4% in premarket trading. The company announced late Monday it had appointed Patrick Guido as its chief financial officer, effective April 30. The stock, up 18% in the past three weeks, is extended.

China GDP Expands, Announces New Tariffs

China-based stocks were mixed, after the country reported GDP expanded 6.8% during the first quarter. Retails sales surged 35.4%, 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 2.5% in premarket trading. Shares of the Netflix-like platform advanced over the past six sessions, rising 9.7% above their March 29 IPO price.

Coming Up: Housing Starts, Factory Utilization

March housing starts from the Commerce Department, and industrial production numbers from the Federal Reserve are set for release at 8:30 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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