Day Ahead: 3 Things to Watch for July 23

By Liz Moyer

Investing.com -- Tensions between the United States and China kept added a more sober tone to Wednesday's trading session, with the Dow rising modestly.

On Tuesday, the U.S. ordered the Chinese consulate in Houston closed, citing national security concerns and prompting retaliation as China said it was considering shuttering the U.S. consulate in Wuhan.

GOP leaders in the Senate on Wednesday were considering extending pandemic unemployment assistance to December at a reduced $400 a week. Politicians have argued against the payments, which are in addition to unemployment for many, as a disincentive to return to work.

A spate of earnings due after the close on Wednesday and before the open on Thursday include Microsoft Corporation (NASDAQ:MSFT), Tesla Inc (NASDAQ:TSLA)and Twitter Inc (NYSE:TWTR). Thursday features the weekly new unemployment claim numbers.

Here are some things that could affect the market tomorrow:

1. Will Tesla continue to rally?

Tesla shares closed up 1.5% on Wednesday, and rose 6% in after-hours trading, but will they continue their remarkable rise? 

The company reported its fourth consecutive quarterly profit on Wednesday after the closing bell. Analysts tracked by Investing.com had expected a loss of 19 cents a share on revenue of $5 billion.

Shares of the electric car maker have been on an incredible rally, climbing 280% this year.  Short-sellers, who would profit from a decline in the stock, have been circling overhead convinced Tesla is ready for a correction. But now that it has notched its cumulative four quarter profit, it is eligible to join the S&P 500index, an event that tends to boost stocks.

2. Airline earnings highlight travel woes

Southwest Airlines Company (NYSE:LUV) shares fell slightly on Wednesday ahead of earnings in the morning. Analysts have been revising their forecasts amid the overall grim outlook for the airline sector.

Covid-related shutdowns have limited travel, and airlines don't expect that to normalize for several more months. Earlier this week, United Airlines Holdings Inc (NASDAQ:UAL) reported a $1.62 billion loss attributed to the slowdown in air travel because of the coronavirus.

The U.S. Global Jets ETF (NYSE:JETS) is down 48.7% this year.

Analysts tracked by Investing.com expect Southwest to report a loss of $2.61 a share on revenue of $920 million.

3. Jobs numbers come out as Senate considers extending unemployment assistance.

Initial unemployment claims for last week and continuing claims will be reported at 8:30AM ET (1230 GMT). The trend has been weekly improvement since the worst of the pandemic produced job losses in March, but tens of millions of Americans are still out of work, with unemployment at a post-World War II high.

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On Wednesday, Bloomberg reported that the administration and certain GOP Senators were considering an extension to the extra pandemic unemployment benefits they instituted in March to help support the economy amid widespread joblessness.

The timing is crucial because the $600 weekly payments, which often come on top of regular unemployment checks, are due to expire next week. Congress is working to push out another stimulus plan, but it was not clear whether it would be able to push a package through by the end of the month.