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Dow Jones Futures: Netflix Dives On Subscriber Miss; IBM Falls As UnitedHealth, eBay Eye Buy Points

Dow Jones futures fell early Thursday, along with S&P 500 futures and Nasdaq futures, signaling more pressure for the stock market rally. Netflix earnings headlined overnight reports, with IBM (IBM), eBay (EBAY) and UnitedHealth (UNH) also releasing quarterly results. Netflix stock plunged on weak subscriber growth, weighing slightly on streaming rivals Amazon.com (AMZN) and Walt Disney (DIS). EBay stock jumped back above a buy point, UnitedHealth stock neared a breakout while IBM stock reversed lower.
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Netflix (NFLX) has a so-so 78 IBD Composite Rating out of a best-possible 99. UnitedHealth stock has a decent 87 Composite Rating. IBM stock is just 60. But eBay stock boasts a 95 Composite Rating. Amazon stock has a stellar 97 CR and Disney stock an 80.

Dow Jones Futures Today

Dow Jones futures edged lower vs. fair value, with IBM stock providing a minor drag but UnitedHealth rising modestly. S&P 500 futures sank 0.2%. Nasdaq 100 futures retreated 0.45%, hit by Netflix stock and other big techs falling in sympathy, such as Amazon. 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 Rally


The current stock market rally pulled back for a second straight session, with somewhat larger losses that picked up at the close. The Dow Jones Industrial Average fell 0.4%. The S&P 500 index retreated 0.65%. The Nasdaq composite sank 0.5%.
With few fresh headlines to drive the stock market rally, investors awaited earnings from Netflix stock tonight and many others in the coming days and weeks. After a strong run-up since June 3, the stock market rally could be due for a pullback.
The latest The Big Picture notes that investor sentiment has grown bullish, a possible bearish sign.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slid 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 0.2% after sinking 1.2% Tuesday. The VanEck Vectors Semiconductor ETF (SMH) rose 0.4%, nearly a buy point. Chips rallied on chip equipment giant ASML (ASML), which reclaimed a buy point on better-than-expected earnings.

Netflix Earnings

Netflix earnings fell 29% to 60 cents a share as revenue grew 33% to $4.92 billion. Analysts expected Netflix earnings of 56 cents on sales of $4.93 billion.
Netflix subscribers rose by just 2.7 million in Q2 vs. company forecasts for a gain of 5 million. U.S. subscribers actually fell by 130,000. The company said customer growth missed across regions, but more so in places with subscription price hikes. Meanwhile, streaming competition is growing from Disney streaming service Disney+, as well as from other current offerings like Amazon Prime Video and Disney's Hulu and future offerings from Apple, Comcast, AT&T and more. Disney will pull a lot of content from Netflix, including Marvel and Star Wars films.
For Q3, Netflix sees EPS of $1.04, revenue at $5.25 billion and subscriber growth of 7 million, lifted by the new seasons of "Stranger Things" and "Orange Is The New Black." Analysts hadforecast Q3 Netflix earnings of 97 cents a share and revenue of $5.216 billion.
Netflix earnings are adjusted. In the real world, the internet TV giant burned through $594 million in cash. Netflix expects to lose $3.5 billion in 2019.
Netflix stock plunged 11% to 323 early Thursday, setting up a crash below its 50-day and 200-day lines. Shares fell 1% to 362.44 on Wednesday.
Netflix stock had been trying to get above a 386.09 buy point. But the relative strength line for Netflix stock has gone sideways or slightly lagged for several months. The RS line, shown in blue below, tracks performance against the S&P 500.
Meanwhile, Amazon stock fell 0.4% to 1,983.83 before the open, still slightly above a 1,964.50 buy point. Shares edged down 0.9% on Wednesday. Disney stock dipped 0.25% to 142.21, below a 142.47 buy point after sliding 1.2% on Wednesday.

IBM Earnings

IBM earnings came in at $3.17 a share as revenue fell 4.2% to $19.16 billion. Analysts expected IBM earnings of $3.07 on revenue of $19.16 billion.
Cloud revenue was $19.5 billion over the past 12 months, a 5% gain.
IBM reaffirmed full-year earnings guidance.
IBM stock fell 0.8% to 141.91 early Thursday late after briefly moving above a 145.49 buy point late Wednesday. Shares dipped 0.3% to 143.06 on Wednesday. IBM stock is working on a cup-with-handle base. Most of that base formed below the 200-day line, which is not a good sign. But the handle is long enough to be its own base, and that has largely formed over the 200-day.

EBay Earnings

EBay earnings rose 28% to 68 cents per share on Q2 revenue of $2.7 billion. Analysts expected eBay earnings per share of 62 cents on revenue of $2.68 billion.
For 2019, eBay raised its earnings target slightly and trimmed its sales guidance.
EBay stock jumped 5% to 41.02, signaling a move back above a buy point. Shares lost 2.2% on Wednesday to 39.03, falling below a 39.24 cup-with-handle buy point cleared weeks ago. EBay stock suffered a nasty reversal after hitting a 14-month high intraday of 41.11.

UnitedHealth Earnings

UnitedHealth earnings rose 15% to $3.60 a share. Revenue climbed 8% to $60.59 billion. Analysts expected UnitedHealth earnings per share of $3.46 on revenue of $60.67 billion. The Dow Jones managed care giant raised 2019 guidance for adjusted EPS to $14.70-$14.90, roughly in line with analyst views given the 14-cent EPS beat in Q2.
UnitedHealth stock rose 0.7% to 268.50 early Thursday, just below a 272.59 buy point.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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