Dow Jones futures rose modestly Wednesday morning, along with S&P 500 futures and Nasdaq futures. Chip-equipment giant ASML (ASML) fell on weaker-than-expected sales and guidance, weighing on rivals as well.
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The ailing stock market rally had a relatively quiet Tuesday. The major indexes closed narrowly mixed.
Fed chief Jerome Powell said Tuesday that recent data shows “a lack of further progress so far this year on returning to our 2% inflation goal.” He signaled that rates will stay high until inflation gets closer to 2%. As recently as early April, Powell had maintained that there was continued progress on inflation.
The major indexes largely shrugged off Powell’s comments, but remain clearly below their 50-day moving averages. However, some leading stocks showed encouraging action.
Nvidia (NVDA) rose slightly, not far from buy areas but still below some key levels. However, AI leader Super Micro Computer (SMCI) surged, flashing a buy signal.
Meanwhile, Tesla (TSLA) stock broke below 2024 lows amid continued unease about the EV giant’s strategy in the wake of big job cuts and other announcements.
Nvidia stock is on IBD Leaderboard. KLA stock is on the IBD Long-Term Leaders list. Nvidia, Datadog, Interactive Brokers are on the IBD 50. ASML stock, Datadog, Super Micro and Nvidia are on the IBD Big Cap 20.
The video embedded in the article discussed Tuesday’s market action and analyzed Sea Limited, DraftKings and Datadog. Sea Limited (SE) made a bullish move toward a buy point, while Datadog (DDOG) and DraftKings (DKNG) are acting well.
Dow Jones Futures Today
Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures advanced 0.4% and Nasdaq 100 futures climbed 0.3%.
The 10-year Treasury yield dipped to 4.65%.
Crude oil futures fell slightly.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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ASML Earnings On Tap
ASML earnings for Q1 fell significantly, but topped views. However, the Dutch giant missed on sales and gave a weak outlook, with bookings for extreme ultraviolet lithography machines down.
Shares fell more than 3% in premarket trade to about 942, signaling a move back below the 50-day line. ASML stock rose 2.3% to 976.91 on Tuesday. Shares are working on a flat base with a 1,056.34 buy point.
Applied Materials (AMAT), Lam Research (LRCX) and KLA Corp. (KLAC) fell more than 1%. They’ve also been finding support at the 50-day or 10-week lines. Lam Research stock and KLA have flat bases like ASML, while AMAT stock has a de facto flat base.
Nvidia chipmaker Taiwan Semiconductor (TSM) reports early Thursday. TSMC’s earnings will be key for the chip sector, with capital spending guidance especially important for chip-gear makers like ASML and Applied Materials.
Lam Research and KLA will report next week.
Other Earnings Mixed
United Airlines (UAL) earnings beat views as underlying demand offset Boeing (BA) headwinds. Interactive Brokers (IBKR) topped views on a range of metrics while J.B. Hunt Transport Services (JBHT) missed. United Airlines stock rose solidly. Interactive Brokers was little changed while J.B. Hunt tumbled.
Stock Market Rally
The stock market rally traded in a modest range Wednesday. Fed chief Powell’s midafternoon comments about inflation and rates briefly hit stocks, but the major indexes closed mixed.
The Dow Jones Industrial Average climbed 0.2% in Tuesday’s stock market trading. The S&P 500 index fell 0.2%, with SMCI stock the top performer. The Nasdaq composite dipped 0.1%. All remain below their 50-day moving averages, with the S&P 500 and Nasdaq tumbling below that key level on Monday.
The small-cap Russell 2000 fell 0.4%, hitting a fresh two-month low
U.S. crude oil prices fell 5 cents to $85.36 a barrel.
The 10-year Treasury yield rose 3 basis points to 4.66%, nearly hitting 4.7% intraday.
Markets priced out a June rate cut last week, after a hot CPI inflation report. In the wake of Powell’s comments Tuesday, the odds of July 31 rate hike fell to 44%, down from 48.9% on Monday and 75% a week earlier.
The current stock market rally got underway in late 2023 after the 10-year Treasury yield peaked and as the Federal Reserve signaled a pivot toward rate cuts.
But after tumbling some 120 basis points from late October to late December, the 10-year Treasury yield has retraced more than two-thirds of that decline.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 0.3%. The VanEck Vectors Semiconductor ETF (SMH) gained 0.8%. Nvidia stock is the dominant SMH holding, but Taiwan Semiconductor, Applied Materials, ASML and LRCX stock are notable components too.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 1.6% and ARK Genomics ETF (ARKG) slumped 3.2%. Tesla stock is a top holding across Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) edged up 0.2%. The SPDR S&P Homebuilders ETF (XHB) stepped down 1.3%. The Energy Select SPDR ETF (XLE) gave up 0.9% and the Health Care Select Sector SPDR Fund (XLV) closed fractionally higher.
The Industrial Select Sector SPDR Fund (XLI) slipped 0.2. The Financial Select SPDR ETF (XLF) declined 0.6%.
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Nvidia Stock
Nvidia stock advanced 1.6% to 874.15, hitting resistance at the 21-day line after undercutting that level Monday. The AI chip leader has a 974 flat-base buy point, according to MarketSurge. The April 11 high of 907.39 would offer an early entry for NVDA stock.
Super Micro Stock
Super Micro stock soared 10.8% to 976.30, retaking the 50-day and 21-day lines and touching a downward-sloping trendline. Loop Capital hiked its SMCI stock price target to 1,500 from 1,000.
Investors could buy the AI server maker here for an early entry or wait for a move above Tuesday’s high. Super Micro stock is on track to have a base with a 1,229 buy point after this week.
Super Micro earnings are due on April 30, but often releases preliminary results a week or two before full financials.
Tesla Stock
Tesla stock fell 2.7% to 157.11 on Tuesday, undercutting 2024 lows to its worst levels since late April 2023.
That extended Monday’s 5.6% dive as the EV giant said it would cut more than 10% of its global workforce, or more than 14,000 jobs. Several top Tesla executives from key projects resigned or were laid off, a bad sign for those efforts.
Tesla has eliminated U.S. inventory discounts for the first time since 2022, excluding demo cars. Model Y inventory had been swelling even with discounts of up to 10%.
Along with job cuts, this move may bolster margins, but at the expense of sales after terrible Q1 deliveries.
All of that adds to uncertainty about Tesla’s direction. The EV giant reports Q1 earnings on April 23, with the conference call looming especially large.
What To Do Now
The stock market rally is under heavy pressure, with the major indexes below their 50-day lines and leading stocks struggling. Tuesday didn’t really change that, though some top stocks had OK days.
It’s not a time to be adding exposure, especially with earnings season ramping up.
Treasury yields are a growing headwind for stocks, while Powell and the Fed are clearly no longer a tailwind.
Investors who haven’t lightened up much in the past few days could choose to use market bounces as an opportunity to scale back.
Still, a lot of stocks aren’t far from being actionable, while others just needs a couple good days to set up again.
So work on your watchlists. With many charts showing damage, investors should prioritize stocks holding key levels or showing relative strength.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
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Jessica Roberts is a seasoned business writer who deciphers the intricacies of the corporate world. With a focus on finance and entrepreneurship, she provides readers with valuable insights into market trends, startup innovations, and economic developments.
