Dow Jones futures were little changed after hours, as were S&P 500 futures and Nasdaq futures. Nvidia chipmaker Taiwanese semiconductor (TSM) reports this early on Thursday, with major consequences for the chip sector.
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The stock market rally started slightly higher but quickly turned lower again, with the Nasdaq leading the retreat.
Chip stocks were big losers on Wednesday. Blame the semiconductor equipment giant’s disappointing results and guidance ASML (ASML), as well as caution regarding Taiwan Semi’s results.
AI chip makers Nvidia (NVDA), Broadcom (AVGO) and Arm positions (ARM) suffered significant to sharp losses. Among chip equipment makers, ASML shares fell lower Applied materials (AMAT), Lam Research (LRCX), KLA Corp. (KLAC) broke key levels.
AI server maker Super microcomputer (SMCI) fell lower after triggering buy signals near the open.
In the meantime, Tesla (TSLA) at the 2024 low
Investors need to recognize that the nature of the stock market has changed.
Nvidia stock is on the IBD Leaderboard. KLAC stock is on the IBD Long-Term Leaders list. Nvidia, ASML, and Broadcom stock are on the IBD 50. Nvidia, ASML, Broadcom, and SMCI stock are on the IBD Big Cap 20.
Dow Jones futures today
Dow Jones futures were flat versus fair value. S&P 500 futures and Nasdaq 100 futures moved higher.
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 continues to come under increasing pressure, with Wednesday’s small initial gains quickly turning back into losses.
The Dow Jones Industrial Average fell 0.1% in stock trading on Wednesday, at its worst level since late January. The S&P 500 index lost 0.6% and the Nasdaq index lost 1.15%, both at their worst levels in two months. The small-cap Russell 2000 fell 1% to a new two-month low.
They are all well below their 50-day limit.
The most recent breakouts or buy signals have struggled or failed outright in recent days.
Several indicators point to the market being oversold, but it has been that way all week. The CBOE Volatility Index is trading near 2024 highs, although there is no evidence of excessive bearishness.
But while the market may be ready for some kind of revival, it doesn’t have to happen right away and it doesn’t have to take long.
US crude oil prices fell 3.1% to $82.69 per barrel.
The yield on ten-year government bonds fell by 7 basis points to 4.58%. But just in April, the price is still up 38 basis points.
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ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) fell 0.6%. The VanEck Vectors Semiconductor ETF (SMH) fell 3.1%. Nvidia and TSM shares are the largest holdings in SMH, while Broadcom, ASML, Applied Materials, Lam Research and KLA are also major components.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) fell 1.4% and the ARK Genomics ETF (ARKG) lost 2.3%. Tesla shares are a major stock in Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) bounced back and fell 0.15%. The US Global Jets ETF (JETS) rose 3.9% United Airlines (UAL) soared in earnings. SPDR S&P Homebuilders ETF (XHB) lost 0.8%. The Energy Select SPDR ETF (XLE) fell 0.3% and the Health Care Select Sector SPDR Fund (XLV) fell 0.2%.
The Industrial Select Sector SPDR Fund (XLI) fell 0.5% and the Financial Select SPDR ETF (XLF) climbed 0.25%.
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Taiwan’s semiconductor revenues
Taiwan Semiconductor’s profits are expected to remain flat, although the foundry giant last week reported first-quarter revenue above expectations, fueled by high-end AI chips.
TSMC makes chips for Nvidia, Apple (AAPL), Broadcom and many others.
Taiwan Semiconductor shares fell 0.55% to 139.03, hitting resistance at the 21-day line after recovering from the 10-week line on Tuesday. TSM stock is on track to have a new base with a buy point of 158.40 after Friday’s close. But investors could use the April 10 high of 148.43 as an early entry.
AI chip stocks are struggling
Taiwan Semi’s results and guidance will be critical for AI chip leaders Nvidia, Broadcom and Arm.
Nvidia shares fell 3.9% to 840.35, falling below the 10-week mark for the first time since early November. The shares did adhere to the 50-day limit. NVDA stock has a 974 buy point from a flat base.
Broadcom fell 3.3% to 1,284.61, breaking below the 50-day mark. AVGO stock has undergone another consolidation, with 1,403.98 as a buy point.
ARM shares fell 12% to 107.50, undermining the consolidation low and now sitting well below the 50-day line.
Super Micro isn’t a chipmaker, but its AI servers are a home for AI processors from Nvidia and others. SMCI stock was right in buy territory after Tuesday’s 10.6% spike. On Wednesday, shares hit 1,020.33 intraday, moving above the trendline, but turned around to close 1.7% lower at 960.14%, holding the 21-day and 50-day lines.
Taiwan Semiconductor’s investment targets will be important to chip equipment giants.
ASML fell 7.1% to 907.61, below the 50-day line and the bottom of the flat base. The Dutch chip equipment manufacturer missed sales and guidance early on Wednesday.
AMAT stock, Lam Research and KLA all fell about 5%, falling below their 50-day line. Lam Research and KLA will report next week.
Tesla shares
Tesla shares fell 1.1% to 155.45, extending its weekly loss to 9.1%. Shares have fallen to 2024 lows and are just above the late April 2023 low.
Tesla’s earnings are looming on April 23, and the conference call is of great importance. Analysts and investors want clarity about Tesla’s strategy.
On Wednesday, Tesla asked shareholders to approve the reincorporation of the company in Texas and a $55.8 billion pay package that was rejected by a Delaware court.
Analysis of the market rally
The stock market is not doing well. The major indices have broken decisively below their 50-day moving averages.
It is possible that the market will recover, even if only for a short period of time, triggering a few buying signals. But the major indexes and major stocks would still require significant work.
Wait for real evidence of strength, not just one good day and certainly not just one strong opening.
Investors should have reduced their exposure in the context of the weak market. Even ignoring the major indexes, investors should limit their exposure by simply cutting out the losers and taking profits.
Tesla, Google, Metaplatforms (META) and Microsoft (MSFT) is reporting gains along with hundreds of others, creating the potential for big stock, sector and market moves.
Of course, upcoming earnings can be a positive catalyst, so you want to be ready.
Stay involved in the market and work on those watchlists. Focus on stocks that are holding significant levels and showing relative strength. Remember, just because a stock looks resilient today doesn’t mean it will hold up in the future.
Read The Big Picture every day to stay informed about market direction and the most important stocks and sectors.
Follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
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