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Netflix Drives Stock Market Futures, But This Chip Leader Looms Large For Rally


Stock market futures rose modestly late Monday after blowout subscriber growth and bullish guidance from Netflix (NFLX) after the close. Fellow FANG stocks Facebook (FB), Amazon (AMZN) and Google-parent Alphabet (GOOGL) showed fractional gains, while Netflix’s China partner, iQiyi (IQ), continued to add to its recent breakout. But Lam Research‘s (LRCX) earnings on Tuesday may be more important for the stock market rally.

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During Monday’s regular session, the Dow Jones industrial average led with a 0.9% gain but was unable to close above its 50-day moving average. The S&P 500 index advanced 0.8%, and the Nasdaq composite rose 0.7%.

Stock Market Futures

Stock market futures rose vs. fair value. Nasdaq 100 futures, boosted by Netflix, advanced 0.5%. S&P 500 futures climbed 0.3%. Dow Jones futures were up 0.2%.

Netflix

Leaderboard stock Netflix earned 64 cents a share in the first quarter, up 60% vs. a year earlier, meeting or just beating views depending on what consensus forecast is used. The internet TV giant added 7.41 million streaming subscribers, above its target for 6.35 million. Netflix jumped 5% in late trade, though off its best after-hours levels.

Netflix may not have huge coattails, though. Amazon (Amazon Prime Video), Alphabet (Google YouTube) and Facebook (Facebook Watch) all have competing video products, but those aren’t their primary revenue and profit drivers. All three FANG stocks nudged higher in late trading, but only just.

Baidu (BIDU)-unit iQiyi, which came public at 18 in late March, rose 1% after hours. The so-called “Netflix of China” actually licenses Netflix content for its streaming service. The stock cleared a very short IPO-base buy point at 18.30 last week and is now extended, rising 2.1% to 19.74 on Monday.

Keep in mind that overnight trading in individual stocks or Dow Jones futures often doesn’t translate into how the stock market will trade in the next regular session.

Lam Research

Lam Research reports earnings after Tuesday’s market close. Analysts expect a 56% earnings gain to $4.36 a share, with revenue soaring 32% to $2.85 billion. Lam has topped EPS targets in each of the past six quarters.

Lam shares fell 0.1% to 203.55 in the stock market today, holding above its 50-day line. The stock is working on a new consolidation, but does not yet have a proper buy point.

It’s a top-rated big-cap tech stock, but why is it so important?

Lam Research kicks off earnings for the semiconductor sector, which typically is a leader or contributor in tech rallies. Chips account for a big share of the Nasdaq composite and S&P 500 index. Chips also are in just about every tech product. So if chip stock stocks are faring well, there’s a good bet that chip demand is strong, and thus demand for a variety of tech gear is also strong.

And yet, chip stocks have been lagging the S&P 500 index since the market peaked just over a month ago. The Philadelphia Semiconductor Index, or Philly Sox, is finding resistance at its 50-day moving average, like the Dow Jones, S&P 500 index and Nasdaq.

Intel Near A Buy Point

Not all semiconductors are struggling. Chip giant Intel (INTC) has formed a flat base with a 53.88 buy point. Intel rose 1% to 52.40 on Monday.

Lam Research also has some notable exposure to the memory-chip market. Memory-chip makers, including giant Micron Technology (MU) and recent IPO Smart Global Holdings (SGH), were screaming higher until the recent market correction. Since then, they’ve erased gains from their prior run-ups.

Fellow big-cap chip gear maker ASML (ASML) and chip foundry Taiwan Semiconductor Manufacturing (TSM) report later this week.

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