Dow Jones futures rose slightly after hours, along with S&P 500 futures and Nasdaq futures. Giant of chip equipment ASML (ASML) reports ahead of Wednesday’s opening.
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The ailing stock market rally had a relatively quiet Tuesday. The major indices closed narrowly mixed.
Fed chief Jerome Powell said Tuesday afternoon that recent data shows no further progress has been made so far this year toward returning to our 2% inflation target. He indicated that interest rates will remain at current levels until inflation gets closer to 2%. As recently as early April, Powell had maintained that there was continued progress on inflation. The Fed chief said in a speech to the Wilson Center’s Washington Forum on Tuesday that wage pressures are gradually easing.
The major indices largely ignored Powell’s comments but remain well below their 50-day moving averages. However, some leading stocks saw encouraging action.
Nvidia (NVDA) is up slightly, but is still below some key levels. Fellow AI leader Super microcomputer (SMCI) rose and gave a buy signal.
Sea limited (SE) made a bullish move towards a buy point Data hound (DDOG) and DesignKings (DKNG) are doing well.
Applied materials (AMAT), Lam Research (LRCX) and KLA Corp. (KLAC) are in the process of setting up almost new registrations, but the results from peer ASML will be critical.
In the meantime, Tesla (TSLA) shares fell below 2024 lows amid continued unrest over the EV giant’s strategy in the wake of major job cuts and other announcements.
Nvidia stock is on the IBD Leaderboard. KLA stock is on the IBD Long-Term Leaders list. Nvidia, Datadog, Interactive Brokers are on the IBD 50. ASML stocks, 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.
Dow Jones futures today
Dow Jones futures rose 0.1% versus fair value. S&P 500 futures and Nasdaq 100 futures rose 0.1%.
Remember, overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading during the next regular stock market session.
Join IBD experts as they analyze leading stocks and the market on IBD Live
Mixed win on Tuesday evening
United Airlines (UAL) earnings beat expectations as underlying demand offset this Boeing (BA) headwind. Interactive real estate agents (IBKR) topped the views across a range of metrics JB Hunt Transport Services (JBHT) missed. United Airlines shares rose sharply. Interactive Brokers changed little while JB Hunt plummeted.
ASML profit on tap
ASML’s first quarter profits are expected to decline significantly. Analysts predict a recovery in the second half of 2024.
ASML shares rose 2.3% to 976.91 on Tuesday, rising above the 50-day mark. The stock is trading on a flat base with a buy point of 1,056.34. Investors could use a move above the 1,000 level, which coincides with a downtrend line, as an early entry.
Applied Materials, Lam Research and KLA also find support in the 50-day or 10-week lines. Lam Research shares and KLA have a flat base like ASML, while AMAT shares have a de facto flat base.
Nvidia chipmaker Taiwanese semiconductor (TSM) reports this early on Thursday. TSMC’s earnings will be critical to the chip sector, with capital expenditure guidance especially important for chip equipment makers such as ASML and Applied Materials.
Stock market rally
The stock market rally was within a modest range on Wednesday. Fed chief Powell’s comments on inflation and interest rates briefly hit stocks, but major indexes closed mixed.
The Dow Jones Industrial Average rose 0.2% in stock trading on Tuesday. The S&P 500 index fell 0.2%, with SMCI shares the best performers. The Nasdaq index fell 0.1%. All remain below their 50-day moving averages, with the S&P 500 and Nasdaq plunging below that key level on Monday.
The small-cap Russell 2000 fell 0.4% to hit a new two-month low
US crude oil prices fell 5 cents to $85.36 a barrel.
The yield on ten-year government bonds rose by 3 basis points to 4.66% and reached almost 4.7% intraday.
Markets last week priced in a June rate cut following a sharp CPI inflation report. In the wake of Powell’s comments on Tuesday, the odds of a rate hike on July 31 fell to 44%, down from 48.9% on Monday and 75% a week earlier.
The current stock market rally began in late 2023, after 10-year Treasury yields peaked and the Federal Reserve announced a turn toward rate cuts.
But after falling about 120 basis points from late October to late December, 10-year government bond yields have recovered 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 SMH’s dominant stock, but Taiwan Semiconductor, Applied Materials, ASML, and LRCX stock are also notable components.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) fell 1.6% and the ARK Genomics ETF (ARKG) fell 3.2%. Tesla shares are a top holding within Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) rose 0.2%. The SPDR S&P Homebuilders ETF (XHB) retreated 1.3%. The Energy Select SPDR ETF (XLE) lost 0.9% and the Health Care Select Sector SPDR Fund (XLV) closed fractionally higher.
The Industrial Select Sector SPDR Fund (XLI) fell 0.2. The Financial Select SPDR ETF (XLF) fell 0.6%.
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Nvidia stock
Nvidia stock rose 1.6% to 874.15, hitting resistance at the 21-day line after undercutting that level on Monday. According to MarketSurge, the AI ​​chip leader has a flat-base buy point of 974. The April 11 high of 907.39 would provide an early entry for NVDA stock.
Super Micro Stock
Super Micro shares rose 10.8% to 976.30, reclaiming the 50-day and 21-day lines and hitting a downtrend line. Loop Capital raised its SMCI stock price target from 1,000 to 1,500.
Investors could buy the AI ​​server maker here for an early entry, or wait for a move above Tuesday’s high. Super Micro shares are on track to have a base with a buy point of 1,229 after this week.
Super Micro earnings are due on April 30, but often publish preliminary results a week or two before the full financials.
Tesla shares
Shares of Tesla fell 2.7% to 157.11 on Tuesday, undermining the 2024 low to the worst level since late April 2023.
That extended Monday’s 5.6% decline, when 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 fired, a bad sign for these efforts.
Tesla has eliminated US inventory discounts for the first time since 2022, excluding demo cars. Model Y inventory even grew with discounts of up to 10%.
Together with the job cuts, this move could strengthen margins, but at the expense of sales after the terrible deliveries in the first quarter.
All that adds to the uncertainty about Tesla’s direction. The EV giant will report first-quarter results on April 23, with the conference call looming particularly large.
What to do now
The stock market rally is under severe pressure as major indices are below their 50-day limits and leading stocks are struggling. That didn’t really change on Tuesday, although some top stocks had great days.
Now is not the time to add exposure, especially as earnings season gets underway.
Treasury yields are an increasing headwind for equities, while Powell and the Fed are clearly no longer a headwind.
Investors who haven’t brightened up in recent days may choose to use the market’s gains as an opportunity to scale back.
Still, many stocks aren’t far from action, while others just need a few good days to bounce back.
So work on your watchlists. With many charts showing damage, investors should prioritize stocks that are holding key levels or showing relative strength.
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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