Dow Jones futures fell after hours, along with S&P 500 futures and especially Nasdaq futures, while Metaplatforms (META) focused on guidance. Service now (Now and Chipotle Mexican Grill (CMG) also reported, with key economic data available.
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The stock market’s attempted rally started higher on Wednesday, marking a possible third solid advance in a row. But the major indexes erased gains to close narrowly mixed.
Nvidia (NVDA), the market’s top stock, suffered an ugly downside reversal, hitting resistance from the 50-day mark. A number of leading stocks have pared or reversed their early gains.
AI game Vertiv (VRT) rose to a record high on Wednesday morning, but gave up many of its gains. Tesla (TSLA) retained most of its after-earnings gains, but is a beaten stock.
In addition to Meta, ServiceNow and Chipotle, IBM (IBM) and Impinj (PI) reported. Meta shares sold off, while ServiceNow and IBM retreated. Chipotle stood up modestly as Impinj jumped.
early Thursday, Caterpillar (CAT), Tradeweb Markets (TW) and Royal Caribbean (RCL) are among the notable reports.
Investors will also receive the first figures on GDP growth in the first quarter on Thursday, together with the weekly unemployment figures. The GDP report will include the main PCE price index, essentially previewing the March PCE price data due Friday.
Nvidia stock and Meta Platforms are on the IBD Leaderboard. Vertiv stock is on the IBD 50. Vertiv, ServiceNow, and Meta stock are on the IBD Big Cap 20.
Dow Jones futures today
Dow Jones futures fell 0.2% from fair value, with IBM being a blue chip component. S&P 500 futures fell 0.6%. Nasdaq 100 futures lost 1.1%, with Meta shares making a real impact. ServiceNow is NYSE-listed, but several other software releases were favored, including Microsoft (MSFT).
Remember, overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading during the next regular stock market session.
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Stock market rally
The stock market rally started with solid gains but quickly erased them.
The Dow Jones Industrial Average fell 0.1% in stock trading on Wednesday. The S&P 500 index edged higher and the Nasdaq index rose 0.1%. The small-cap Russell 2000 fell 0.4%.
Shares of Tesla fell from their intraday high of 167.97, but still rose 12.1% to 162.13 on the EV maker’s comments about “affordable” vehicles and more. Shares hit a 15-month low on Monday. Vertiv stock rose more than 19% intraday to a record 94.39, but closed just 6.8% higher at 84.57.
Perhaps the most negative signal on Wednesday was the most important stock on the market. Nvidia fell 3.3% to return lower than near the 50-day mark. That it wasn’t a technical move suggests Nvidia stock won’t return to new highs anytime soon, which isn’t good news for AI stocks and the broader market.
After a big sell-off, the market finally rebounded and the week started. But one or two good days is nothing special. What matters is whether the market will stage a follow-up day to confirm the new uptrend. That could still happen from Thursday. The rally attempt will still be in effect as long as the major indices do not undermine the recent lows.
US crude oil prices fell 0.7% to $82.81 per barrel.
The yield on ten-year government bonds rose by 5.5 basis points to 4.65%.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 0.1%, with ServiceNow shares taking a major position. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.1%. Nvidia stock is the dominant SMH player, while Lam Research is also in the ETF.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) rose 0.1% and the ARK Genomics ETF (ARKG) fell 1.3%. Tesla shares are a major stock in Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) fell 0.3%. The US Global Jets ETF (JETS) fell 1.9%. The SPDR S&P Homebuilders ETF (XHB) retreated 1%. The Energy Select SPDR ETF (XLE) rose 0.1% and the Health Care Select Sector SPDR Fund (XLV) fell 0.3%.
The Industrial Select Sector SPDR Fund (XLI) fell 0.8%. The Financial Select SPDR ETF (XLF) lost a fraction.
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Meta-revenue
Meta revenue exceeded views as revenue rose 27% to $36.46 billion, the fifth consecutive quarter of faster growth.
However, the parent company of Facebook and Instagram expects second-quarter revenue of $36.5 billion – $39 billion. At the midpoint of $37.75 billion, that is below the consensus for $38.254 billion.
Meta also increased its 2024 capital expenditure target to $30 billion to $40 billion from $30 billion to $37 billion, “as we continue to accelerate our infrastructure investments in support of our artificial intelligence roadmap.”
That’s good news for suppliers like Arista Networks (A NET).
Meta shares fell 15% in overnight trading. During Wednesday’s regular session, shares fell from an intraday high of 510 to close down 0.5% at 493.50, again below the 50-day mark.
ServiceNow Revenue
ServiceNow’s profits lagged comfortably, slightly outpacing revenue gains of 24% to $2.6 billion. But the first major software maker to report for the current cycle forecast slightly lower subscription revenue in the second quarter and full year.
ServiceNow stock fell sharply amid extended action. Shares rose 0.7% to 746.29 on Wednesday, hitting resistance near the 10-week mark. NOW stock has a buy point of 815.32 from a flat base.
Chipotle earnings
Chipotle’s earnings are easy to beat. Sales grew by almost 14% to $2.7 billion, a slight increase.
CMG stock rose modestly overnight and hovered around a buy point. Shares rose 0.3% to 2,923.32 on Wednesday, their third straight gain. Chipotle stock has a buy point at 3,023.98 after a tight three-week stretch that could turn into a flat base after this week.
Other incomes
IBM’s profits were better, but revenue lagged. The Dow tech giant also said it would buy cloud software Hashi Corp (HCP) in a $6.4 billion deal. Shares were sold after closing.
Impinj’s profits lagged sharply. Shares rose to around 133 in extended trading, signaling a possible breakout. PI shares fell 2.2% to 120.91 on Wednesday. PI stock has a buy point of 132.
Analysis of the market rally
Active investors like to be active. So when the market has one or two good days after a dip, many want to get back in quickly. Wednesday’s action was a reality check.
Until a follow-through day comes along that confirms a new uptrend, investors should be largely stuck in cash. It’s okay to try some swing trades or pilot positions early in a rally attempt if you’re ready to be at least as aggressive in your exit.
Keep in mind that if a market rally is going to last several months or even just a few weeks, if you wait for an FTD you still have a chance to catch most of the run. If a market rally comes to nothing after a few days or a few weeks, early intervention will not be a good thing.
That being said, an FTD could come any day. So you want to keep updating your watchlists and stay engaged with the market.
Read The Big Picture every day to stay informed about market direction and the most important stocks and sectors.
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