Dow Jones Drops 200 Points On Hot Inflation Data; Tesla Stock Falls Before AI Day

Dow Jones Surges 550 Points, But This Key Signal Missing; Netflix, Tesla Earnings On Deck

Dow Jones futures were higher ahead of Tuesday’s open after the Dow Jones Industrial Average surged more than 550 points Monday. Netflix earnings are out late Tuesday, and Tesla earnings are due Wednesday.

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But, first, Dow Jones stocks Goldman Sachs (GS) and Johnson & Johnson (JNJ) will report early Tuesday.

Stock Market Today: Bank Of America, Charles Schwab Earnings

On Monday, the Dow Jones Industrial Average surged 1.9% and the S&P 500 advanced 2.65%. The tech-heavy Nasdaq composite climbed 3.4%. And the small-cap Russell 2000 rose 3.2%.

Among exchange traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) moved up 3.3% and SPDR S&P 500 (SPY) rallied 2.5%.

Bank of America (BAC) and Charles Schwab (SCHW) reported their quarterly results Monday morning. BAC shares jumped 6.1%, while Charles Schwab shares sold off 2.25%.

EV giant Tesla (TSLA) raced 7% higher, rebounding from Friday’s big skid. Among Dow Jones stocks, Apple (AAPL) traded up 2.9% and Microsoft (MSFT) climbed 3.9% in today’s stock market.

AutoZone (AZO), Cardinal Health (CAH), Molina Healthcare (MOH) and Vertex Pharmaceuticals (VRTX) — as well as Dow Jones stocks Chevron (CVX) and Merck (MRK) — are among the top stocks to watch. Keep in mind that the ongoing stock market correction is a time for investors to sit on the sidelines and build watchlists of top growth stocks.

Cardinal Health and Vertex are IBD Leaderboard stocks. Merck and Molina Healthcare were featured in this week’s Stocks Near A Buy Zone column, along with two other top stock ideas.

4 Top Growth Stocks To Watch In The Current Stock Market Correction

Dow Jones Futures Today: Treasury Yields, Oil Prices

Ahead of Tuesday’s opening bell, Dow Jones futures rose 1.6%, while S&P 500 futures gained 1.9%. Nasdaq 100 futures moved up 2.1% vs. fair value. Remember that overnight action in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

The 10-year Treasury yield ticked higher to 4.01%, closing above 4% for the second straight session. Meanwhile, U.S. oil prices extended losses from Friday’s tumble, edging lower Monday. West Texas Intermediate futures traded below $86 a barrel.

Q3 Earnings Season

Third-quarter earnings season heats up this week, with key reports coming from Lockheed Martin (LMT), Netflix (NFLX), Procter & Gamble (PG), Travelers (TRV), Alcoa (AA), IBM (IBM), Tesla, American Express (AXP) and Verizon Communications (VZ), along with a number of other high-profile companies.

Earnings reports cause many of the largest moves in stocks, and they require special care. Strong earnings can fuel top stocks to previously untouched levels — and above new buy points — while a less-than-impressive announcement can send shares tumbling.

The stock market’s reaction to an earnings release can often tell you more than the earnings themselves. If the results seem strong but the stock slides anyway, investors may be concerned about the sustainability of growth, rising costs or other potential negatives.

With the market in rally attempt mode, investors should be tracking companies that handily beat earnings results and have strong upside reactions. They could be among the stock market’s leaders if the market is able to rebound.

What To Do In Today’s Stock Market: Look For This Key Signal

Despite Monday’s big gains, the market trend remains in a correction amid sharp losses in recent sessions. Investors remain on the lookout for a follow-through day, which is the key signal that can upgrade the market trend into a confirmed uptrend. The Nasdaq and S&P 500 can trigger that trend-change day on Tuesday (Day 4 of the current rally attempt) at the earliest. With IBD’s trend being “market in correction,” investors are safer on the sidelines.

Now is the ideal time to build a strong watchlist of top-performing stocks. Many long-term leaders tend to break out at or near the follow-through day, the market bottoming signal. Missing that early opportunity can be a costly mistake.

Friday’s The Big Picture column commented: “Technically speaking, the rally attempt is intact but the reversal lowers odds for a bullish follow-through. The 21-day exponential moving averages remain tough resistance so that’s where investors should watch when buyers return.”

Five Dow Jones Stocks To Watch Now

Dow Jones Stocks To Watch: Chevron, Merck

Energy giant Chevron continues to consolidate above its 50-day line, building a base that shows a 182.50 buy point. An early entry at 166.93 is also in play. Chevron stock rose 0.7% Monday.

CVX stock boasts a strong 98 out of a perfect 99 IBD Composite Rating, per the IBD Stock Checkup. Investors can use the IBD Composite Rating to easily gauge the quality of a stock’s fundamental and technical metrics.

Dow Jones member and IBD 50 stock Merck is breaking out past a double bottom’s 93.12 buy point, according to IBD MarketSmith pattern recognition. Shares rallied 2.1% Monday, closing above the buy point. Keep in mind that the ongoing market correction is a reason to stay on the sidelines; however, stock is showing abnormal signs of strength. The relative strength line hit a new high last week. Third-quarter earnings results are due Oct. 27 before the opening bell.

Top Stocks To Watch: AutoZone, Cardinal, Molina, Vertex

Auto parts leader and recent IBD Stock Of The Day AutoZone is about 3% away from a cup base’s 2,362.34 buy point. Keep an eye out for a potential handle to offer a lower entry. AutoZone shares rose 1.5% Monday.

IBD Leaderboard stock and medical leader Cardinal Health is shaping a flat base that has a 72.38 buy point, according to IBD MarketSmith chart analysis. Earnings are due Nov. 4.

Molina Healthcare finished Monday just 2% under a flat base’s 361.35 buy point. The stock’s RS line hit a new high last week, confirming the health care stock as a leader to watch.

Biotech leader Vertex Pharmaceuticals continues to build a flat base with a 306.05 buy point and an early entry at 296.90. Its RS line made a new high in recent sessions, a sign of big stock market outperformance.

Netflix Earnings

Netflix earnings are due out Tuesday after the stock market closes. The streaming giant’s adjusted EPS is expected to fall 33% to $2.14 on revenue of $7.83 billion.

Netflix shares are building a double-bottom base with a 250.49 buy point. The stock is about 65% off its 52-week high.

Join IBD experts as they analyze leading stocks in the current stock market rally attempt on IBD Live

Tesla Stock

Tesla stock surged 7% Monday, nearly erasing Friday’s 7.55% dive. On Friday, shares closed at their lowest level since June 2021. Despite Monday’s rise, the stock is still about 47% off its 52-week high.

The EV giant’s third-quarter results are late Wednesday. Tesla is expected to earn an adjusted $1.01 per share on sales of $22.1 billion.

Dow Jones Leaders: Apple, Microsoft

Among Dow Jones stocks, Apple shares rallied 2.9% Monday, rebounding from Friday’s 3.2% sell-off. Still, shares are about 23% off their 52-week high and below their 50- and 200-day lines.

Microsoft advanced 3.9%, continuing its rebound from last week’s 52-week low price. The software giant is about 32% off its 52-week high.

Apple earnings are expected on Oct. 27, while Microsoft’s are due Oct. 25.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.

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