X Futures for the Dow Jones industrial average, S&P 500 index and Nasdaq composite signaled modest gains early Tuesday as the major market averages look set to hold and extend Monday's big gains.
Dow components McDonald's (MCD) and Caterpillar (CAT) report earnings before the open, along with Lockheed Martin (LMT) and Pulte Group (PHM). All are in buy range as of Monday's close except for Caterpillar, which took a big step Monday toward its own entry point.
Meanwhile, look for Express Scripts (ESRX) to sell off at Tuesday's open on bad news. Express Scripts announced that it was likely to lose its top customer, Anthem (ANTM), sending shares of the pharmacy benefit manager down 15% late Monday. (CVS Health (CVS), which is a major PBM in addition to its drugstore operations, was up 3% late, perhaps on hopes that it will win the Anthem business.)
On Monday, the Nasdaq composite soared 1.2%, hitting an all-time high. The Dow Jones industrial average and the S&P 500 index rose 1.1%, both retaking their 50-day moving averages. Markets rallied worldwide following Sunday's first round of France's presidential election. Emmanuel Macron, a pro-reform, pro-EU centrist and nationalist Marine Le Pen will move on to a runoff in May. Polls show Macron easily beating the anti-immigrant, populist Le Pen.
Dow futures are up nearly 0.3% above fair value, while S&P 500 and Nasdaq 100 futures are 0.2% higher.
IBD'S TAKE: Thanks to strong gains in the major market averages and several new breakouts by leading stocks, the market is now back in a confirmed uptrend. For quick and thorough analysis of the market, read The Big Picture every day.
But while stocks closed near session highs, the vast majority of Monday's gains were at the open. What will push the market higher from here? How about the four leading stocks at or near buy range that are reporting earnings Tuesday morning?
McDonald's
The burger giant is currently in buy range from a 130.10 entry, rising for the past six sessions to 134.23 as of Monday. Analysts expect a 6% sales decline, to $5.53 billion, with earnings per share up 8%, to $1.33. U.S. same-store sales will be watched closely.
Beyond Q1 results and guidance, analysts will look for McDonald's clues about when it will roll out its mobile order-and-pay system, as well as any further talk of deliveries. Investors also will want to know how McDonald's big McCafe promotions are working, which could impact Starbucks (SBUX). Starbucks has broken out of its own consolidation ahead of earnings on Thursday.
Caterpillar
Analysts expect the maker of heavy construction and mining equipment to report a 7.5% EPS decline, to 62 cents, with sales off 2%, to $9.27 billion. On Monday, Caterpillar reported that equipment sales by retailers rose 1% in the three months to March vs. a year earlier, the first such gain since November 2012.
Caterpillar shares rose 2.6%, to 96.81, on Monday, retaking their 50-day line and approaching a 99.56 flat-base buy point.
Lockheed Martin
The defense contractor should report an 8% revenue rise to $1.24 billion with EPS also up 8%, to $2.79. Lockheed Martin rose 1.1%, to 276.21, on Monday, still in range from a 270 buy point retaken last week.
Defense stocks have rallied on hopes for higher U.S. military spending and increased geopolitical tensions with Syria and North Korea. Raytheon (RTN), Northrop Grumman (NOC), General Dynamics (GD) as well as Boeing (BA) report later this week. All of those stocks are in or near buy points as well.
Pulte Group
The homebuilder is expected to report a 21% EPS rise to 29 cents on a 22% revenue rise. Shares are technically in buy range, but only because of three high-volume declines in a row, sparked by concerns over guidance from fellow builder D.R. Horton (DHI).
Asian Markets
Japan's Nikkei rose 1.1% in Tuesday intraday trade while China's Shanghai composite climbed 0.3% and Hong Kong's Hang Seng 1.1%.
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