Stocks rolled out a mixed open Wednesday, as earnings news divided early trade and investors looked toward this afternoon’s Federal Reserve data.
Netflix (NFLX) was the morning’s headliner, scorching out broad early gains as analysts upgraded price targets following strong third-quarter results. United Continental (UAL) launched a rally among airlines as a strong profit forecast overcame mixed third-quarter performance.
Winnebago (WGO), Lam Research (LRCX) and ASML Holding (ASML) also bolted higher following their quarterly reports. Cannabis stocks were hangdog, with Tilray (TLRY) and Cronos Group (CRON) trading lower as Canadians celebrated the country’s first day of legalized recreational marijuana use.
The Nasdaq Composite gained 0.2%, with Netflix, Lam Research and American Airlines (AAL) making the strongest moves. S&P 500 futures edged 0.1% lower, as IBM (IBM) dropped to the bottom of the list after reporting another revenue miss.
The Dow Jones industrial average slipped 0.5%, with IBM down hard and Home Depot (HD) pulling lower after an analyst downgrade.
Oil Prices Dip, Housing Data Lags; Fed Minutes Pending
Oil prices slipped, with West Texas Intermediate down 1.1% Wednesday. Prices have hovered just above $71 a barrel after dropping 4% last week. Futures rose Tuesday, after the American Petroleum Institute reported a surprise drawdown in weekly oil inventories. Official supply data are due out at 10:30 a.m. ET, from the Energy Information Administration.
Housing starts slumped in September, slowing to an annualized pace of 1.201 million new projects. The pace of starts in August was 1.282 million, and economists had projected 1.216 million groundbreakings in September.
Building permits, a precursor to starts, rose to an annualized rate of 1.241 million vs. 1.229 million in August. Economists had projected a larger increase, to 1.272 million.
The Federal Reserve releases minutes from the Federal Open Market Committee’s September meeting at 2 p.m. ET.
Netflix, United Spike; IBM Drags
Netflix shares surged more than 7% ahead of the open, as analyst at Wedbush, Stifel Nicolaus, JPMorgan and Raymond James raised their price targets on the stock. The streaming entertainment leader’s late Tuesday earnings report showed subscriber growth far above expectations. If it holds through the starting bell, the move would send shares well up the right side of the stock’s current four-month base pattern. But would leave it well below the current buy point at 423.30.
United Continental spiked 6%, despite missing analysts’ third-quarter profit targets. Management’s earnings outlook was above expectations, however, and the company said it stands to recoup around 90% of a $2.5 billion spike in fuel costs.
United shares had dropped 5% below an 83.14 buy point from a month-long cup base it cleared in August. Other airlines picked up the updraft: American Airlines climbed 4%. Delta Air Group (DAL) gained 3%.
Dow Stocks: IBM Results Mixed, Home Depot Downgraded
Dow stock IBM dived almost 6%. Its third-quarter results were mixed, with earnings above forecasts, but revenue stopped short of targets for a third straight quarter. Cloud revenue rose 20% to $19 billion, and management said the company continues to turn cash flow back into the business as it transitions to focus on cloud computing and data analytics. IBM shares are down 21% from a February 2017 high.
Also on the Dow, Home Depot dropped 3.3% after Credit Suisse dropped its rating on the stock to neutral, from outperform. Home Depot shares are pulled back in a test of support at their 40-week moving average. Home Depot dropped almost 8% below a 204.35 buy point after clearing a flat base in September.
Winnebago, Chip Equipment Makers Rally
Chip equipment makers showed early strength as analysts hustled to raise price targets on Lam Research following strong fiscal first-quarter results late Tuesday. Lam shares vaulted more than 3% as Stifel Nicolaus and JPMorgan raised their targets to 229 and 230, respectively. Netherlands-based peer ASML Holding powered up 2.2% in early trade, also on better-than-forecast results.
Winnebago rocketed almost 12% higher, as fiscal fourth-quarter earnings narrowly topped analyst views, but revenue blew past estimates. Shares are down 47% from a December high. RV peer Thor Industries (THO) gained 0.8% in early trade.
Japan Surges; Auto Sales Trip European Trade
Tuesday’s gains on U.S. markets did not carry over into China, where benchmark indexes in Shanghai and Hong Kong posted only modest gains on Wednesday. In Japan, Tokyo’s Nikkei 225 jumped 1.3%, bounding higher for a second day as that index attempts to retake support at its 200-day line.
In Europe, stocks remained mixed. Frankfurt’s DAX narrowed earlier losses to 0.3% in afternoon action. The CAC-40 in Paris traded 0.2% lower. The FTSE 100 in London defended a 0.2% gain.
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