Dow Jones futures rose slightly early Wednesday, along with S&P 500 futures and Nasdaq futures. The stock market rally pulled back modestly Tuesday after President Donald Trump threatened new China trade-war tariffs, saying the two sides are a long way from a deal. The European Union said it'll investigate Amazon.com (AMZN) over anticompetitive behavior regarding third-party sellers. That comes after a House antitrust hearing Tuesday in which U.S. lawmakers accused Amazon, Facebook (FB), Apple (AAPL), and Google parent Alphabet (GOOGL) of abusing market power. United Airlines (UAL) and CSX (CSX) reported earnings after the close.
XAmazon stock fell slightly before the open while Apple stock and Facebook stock were little changed. United Airlines stock inched higher on strong results and guidance. CSX plunged on weak earnings after testing a buy zone Tuesday.
Dow Jones Futures Today
Dow Jones futures rose a fraction vs. fair value, along with S&P 500 futures. Nasdaq 100 futures were up about 0.1%. 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 stock market rally was moving sideways Tuesday morning when President Trump said that Washington and Beijing were still far apart on a China trade deal. He noted that he could raise China tariffs, escalating the China trade war once again.
The Dow Jones Industrial Average lost just 0.1%, helped by modest post-earnings gains for JPMorgan Chase and Goldman Sachs (GS). The S&P 500 index fell 0.3% and Nasdaq composite lost 0.4%. U.S.-listed Chinese stocks such as Baozun (BZUN) and China-exposed names like Apple reversed modestly lower.
Many growth stocks outpaced the major indexes' declines.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) edged down just 0.1%. But the iShares Expanded Tech-Software Sector ETF (IGV) fell 1.1%. The VanEck Vectors Semiconductor ETF (SMH) slid 1%.
The market rally since early June could be due for a pullback, just as earnings season hits full steam. A China trade truce and expected Fed rate cuts drove the recent stock market rally. While a July Fed rate cut appears a lock, the China trade news can turn negative in an instant. Trump's decision to escalate the China trade war triggered May's stock market correction. A new breakdown in trade talks could have a similar reaction.
Apple, Internet Giants Under Fire
The most recent stock market correction bottomed on June 3 amid reports that the Justice Department was mulling a Facebook antitrust probe. The DOJ also reportedly gained key oversight over Apple. The FTC, meanwhile, will take the lead in monitoring Amazon and Google. That sent Facebook stock, Google stock and Amazon stock tumbling, with Apple stock also retreating.
Since then, no Big Tech antitrust probe has taken place. Facebook stock and Amazon stock have marched higher and cleared buy points. Apple stock is moving toward a breakout and Google stock is starting to rebound. But all that could change quickly. And if Apple and the internet giants come under pressure, it's hard to see a strong stock market rally.
The European Union will formally investigate whether Amazon abuses its role as both a marketplace for independent sellers and as a retailer itself. The Amazon probe, long expected, follows similar EU probes of Facebook, Apple and Google, with the latter fined three times by Europe.
Tuesday's House hearing didn't uncover any big news. But it shows how little support Big Tech has on Capitol Hill on either side of the aisle, after long enjoying bipartisan support. President Trump sees internet giants as being biased against him. Democrats, including several presidential candidates, are mulling breaking up Big Tech companies. The public has a very low opinion of Facebook in particular.
Earlier, lawmakers at a separate hearing grilled Facebook over its Libra cryptocurrency plans.
Meanwhile, Group Of Seven finance ministers will discuss digital currencies and taxing Big Tech companies at their meeting Wednesday.
United Airlines Earnings
United Airlines earnings jumped 30% to $4.21 per share as revenue climbed nearly 6% to $11.4 billion. Analysts forecast United Airlines earnings per share of $4.08 and revenue of $11.36 billion. The carrier also gave bullish guidance, as well as announcing a $3 billion buyback.
United Airlines stock rose 0.4% overnight. Shares climbed 2.85% to 93.92 Tuesday, just within the 5% chase zone from an 89.51 cup-with-handle buy point.
CSX Earnings
CSX earnings rose 7% to $1.08 a share. Revenue actually fell 1% to $3.06 billion. Analysts expected CSX earnings per share of $1.10 with revenue up 2% to $3.16 billion.
The rail giant also cut full-year revenue guidance.
CSX stock tumbled 7.15% before the open. Shares rose 1.9% to 79.97 on Tuesday, hitting 80.23 intraday, briefly clearing a 79.82 buy point from a cup-with-handle base.
CSX shows why investors should largely avoid buying a stock just before earnings, one of five steps to navigate earnings season.
Canadian Pacific Railway (CP) reported strong earnings before Tuesday's open. Canadian Pacific hit a new high, fueling CSX stock. Union Pacific (UNP) and Kansas City Southern (KSU) also moved toward buy points ahead of earnings reports later this week. But Union Pacific stock fell 1.9% late on the CSX earnings miss.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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