Dow Jones Futures: Alibaba Earnings Offer Insight Into China Trade War Impact

Dow Jones futures edged higher late Tuesday, along with S&P 500 futures and Nasdaq futures. The Dow Jones and other major averages rose Tuesday, a modest bounce from Monday’s higher-volume sell-off on an escalating China trade war. Apple stock and Boeing stock both rose, but like the Dow Jones remain below their 200-day line. Meanwhile, Alibaba stock and Tencent stock report earnings before Wednesday’s open. Alibaba (BABA) and archrival Tencent Holdings (TCEHY) will offer some insight into how the China trade war is impacting the Chinese economy.


Dow Jones Futures Today

Dow Jones futures rose 0.2% vs. fair value. Apple (AAPL) and Boeing (BA) are both Dow Jones components. S&P 500 futures climbed 0.2% and Nasdaq 100 futures advanced 0.3%. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Current Stock Market

The stock market rebounded Tuesday as President Donald Trump made a variety of bullish statements regarding a China trade deal. That helped the Dow Jones and other major averages recoup about one-third of Monday’s sharp sell-off as China retaliated after Trump hiked tariffs last week. But the Dow Jones Industrial Average remains well below its 200-day average, while the Nasdaq composite and S&P 500 index are below their 50-day lines.

Apple stock rose 1.6% and Boeing stock advanced 1.7%. But those gains follow losses of 5.8% and 4.9%, respectively, both in much heavier volume. Apple stock fell more than 7% below a 197.97 buy point on Monday, making that entry invalid.

Among the best ETFs, Innovator IBD 50 (FFTY) rose 2.1% and the iShares Expanded Tech-Software Sector ETF (IGV) jumped 2.2%. The VanEck Vectors Semiconductor ETF (SMH) rallied 2.6%. All three ETFs are still down for the week.

Stock Market Correction

Monday’s sharp drop, along with last week’s big losses, triggered a move into a stock market correction. While the current stock market correction doesn’t appear to be ready to repeat the severe late-2018 selling, it does mean that investors should resist buying stocks for now.

China trade-war headlines, for good or ill, are likely to drive the stock market up and down, at least in the near term.

Stock Market Rally Attempt

One day doesn’t make a stock market rally. Tuesday is day one of a rally attempt within the stock market correction. Look for continued gains and big, higher-volume sessions on one or more of the major averages. That would be follow-through day to confirm the rally attempt.

Alibaba Earnings

Wall Street expects Alibaba earnings to rise 5% to 96 cents a share. The Chinese e-commerce titan’s revenue should jumps 35% to $13.3 billion.

Alibaba stock tried to break out from a deep cup-with-handle base with buy points of 188.18 or 189.89 in April to early May. But after hitting a nine-month high of 195.72 on April, Alibaba stock tumbled as the China trade war suddenly escalated. Shares fell for six straight sessions, hitting a low of 168.78 intraday Monday.

Alibaba stock rose 2.8% on Tuesday to 174.84, but the buy points are now invalid.

Tencent Earnings

Analysts see Tencent earnings of 32 cents a share, up 3%. The messaging and gaming giant’s revenue is seen up roughly 10% to $12.8 billion.

Tencent stock is working on a deep, 15-month cup-with-handle buy point of 51.34. Shares have pulled back in recent days. Tencent stock, which is Hong Kong listed and trades over the counter in the U.S., rose 0.8% to 47.07 on Tuesday. That’s still below its 50-day line.

Tencent, Alibaba Earnings And The China Trade War

Tencent and Alibaba earnings growth has cooled amid slower growth in China’s economy, in part due to the China trade war, including the tariffs and resulting investment uncertainty. Tencent earnings woes also reflect a long suspension of government approvals of new mobile games.

Strong earnings and guidance would be a good sign that China’s economy is doing OK, which would be bullish for the global economy. Weak results or outlooks would suggest that the China trade war, especially as it intensifies, could upend a fragile recovery.

Of course, signs of a strong Chinese economy could give Beijing policymakers room to hold tough in the China trade war. A weaker economy could spur a desire to offer some concessions in China trade talks.

Chinese mobile gaming specialist NetEase (NTES) and shipping giant ZTO Express (ZTO) report late Wednesday.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.


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