Dow Jones futures were little changed after hours, as were S&P 500 futures and Nasdaq futures. The CPI inflation report is available after cooling producer prices provided a market tailwind on Tuesday.
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Market makes bullish move; Sea Limited, Samsara, Monolithic Power give buy signals
The stock market rally had a strong session, with the Nasdaq and Nvidia (NVDA) in the lead.
Sea limited (SE) rose to a buy level on the back of earnings numbers. Meta platforms (META text), ServiceNow (NOW) and Monolithic energy systems (MPWR) gave buy signals.
Investors may be looking for more exposure as long as the stock market continues to perform well.
DOJ Considers Google Split
The Justice Department is considering a split from Google’s parent company Alphabet (GOOGL), Bloomberg reported Tuesday night, in the wake of last week’s antitrust victory against the internet giant. During the trial later this year, the Justice Department will almost certainly push to end exclusive search deals, such as making Google the default search engine on Apple’s iPhone. If Justice does seek a breakup, it will likely try to sever Google’s Android mobile operating system and Chrome web browser.
Google shares fell slightly after the close. Shares rose 1.15% to 164.16 on Tuesday. Apple (AAPL), which receives $20 billion a year from the Google search deal, lost a fraction. AAPL shares rose 1.7% to 221.27 on Tuesday.
Now Holdings (NU) Earnings Beat Expectations NU shares rose sharply in overnight action. The Brazilian digital bank rose 1.7% to 12.71 on Tuesday, a sixth straight gain after dipping to 9.67 on Aug. 5.
Nvidia stock and ServiceNow are on the Leaderboard. ServiceNow stock has been added to SwingTrader. Monolithic Power stock is on the IBD Long-Term Leaders watchlist. Samara stock and ServiceNow are on the IBD 50 list. ServiceNow stock was Tuesday’s IBD Stock Of The Day. Samsara stock was Friday’s pick.
The video accompanying this article discusses Tuesday’s market rally and analyzes shares of Sea Limited, Samsara, and Monolithic Power.
Dow Jones Futures Today
Dow Jones futures were about unchanged vs. fair value. S&P 500 futures fell 0.1%. Nasdaq 100 futures were flat.
Please note that trading Dow futures and other markets overnight does not necessarily result in actual trading during the next regular trading session.
CPI inflation
At 8:30 a.m. ET, the Labor Department will release the Consumer Price Index. Economists expect a modest 0.2% monthly gain for both headline CPI in July and core CPI. That would keep 12-month CPI inflation at 3%, while core inflation eases to 3.2%, the lowest level since April 2021.
The Fed’s favorite inflation gauge, the PCE price index, takes about 70% of its input from the CPI and 30% from the PPI.
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Rally on the stock market
The stock market rally saw broad, strong gains, led by the Nasdaq. Cooling PPI inflation provided a tailwind ahead of Wednesday’s consumer price index and other key economic data this week
The Dow Jones Industrial Average rose just over 1% in stock trading Tuesday, back above its 50-day line. The S&P 500 index rose 1.7%, reclaiming its 21-day line and approaching its 50-day mark. The Nasdaq Composite jumped 2.4%, also above its 21-day mark. The small-cap Russell 2000 rose 1.6%, nearly back to its 50-day line.
Volume was higher than Monday on both exchanges.
U.S. crude oil prices fell 2.1% to $78.35 a barrel, ending a streak of five straight gains.
The 10-year US Treasury yield fell six basis points to 3.85%.
Stock market returns to risk-oriented mentality
Financial markets have rebounded dramatically since the global sell-off on August 5, when recession fears combined with yen-carry unwinding and worries about Nvidia AI chips. The CBOE Volatility Index, or VIX, has fallen since the August 5 explosion to its highest level since the Covid crisis.
Risk-taking is picking up again in trading, with the Nasdaq and growth stocks trying to regain the lead.
Still, the S&P 500 and Nasdaq have the 50-day line as potential resistance. Wednesday’s CPI report, along with retail sales and a slate of reports on Thursday, will provide fresh tests of the emerging market rally.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.8%, with ServiceNow shares and Samsara as both members. The VanEck Vectors Semiconductor ETF (SMH) rose 4.1%. Nvidia shares are the dominant SMH holding, with Monolithic Power also a member.
The ARK Innovation ETF (ARKK) rose 4.1% and the ARK Genomics ETF (ARKG) rose 4%, among more speculative stocks.
SPDR S&P Metals & Mining ETF (XME) rose 1.1%. SPDR S&P Homebuilders ETF (XHB) rose 2.1%. The Energy Select SPDR ETF (XLE) fell 1% and the Health Care Select Sector SPDR Fund (XLV) rose 1.2%.
The Industrial Select Sector SPDR Fund (XLI) rose 1.05%. The Financial Select SPDR ETF (XLF) climbed 0.8%.
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Nvidia stock
Nvidia shares rose 6.5% to 116.14, ignoring a report that Chinese tech giant Huawei would roll out its own AI chip. Shares closed above their 21-day moving average for the first time since July 16. NVDA shares are still below their 50-day line, but the gap has narrowed.
The AI chip leader fell to 90.69 on August 5 as reports of a delay in next-generation AI chips added to global concerns that day.
Stocks in buy zones
Shares of Sea Limited rose 11.85% to 74.85, pushing above their 50-day line on heavy volume. The Singapore-based e-commerce and gaming giant’s earnings missed expectations, but its 23% revenue growth was the strongest. SE shares have a consolidation buy point at 76.60, but crossed a trend line entry on Tuesday.
Meta shares rose 2.4% to 528.54, breaking a trend line and the short-term high of 527.17 from August 1 after Meta gains. Meta shares are on track to have a shallow cup base in addition to a previous base after this week. The buy point would be 542.81.
Samsara shares rose 4.3% to 39.83, breaking a 39.21 cup-with-handle buy point. On August 5, IOT shares dipped below the 200-day and 50-day lines intraday, but closed above both. The AI and Internet of Things game is highly volatile.
ServiceNow shares rose 1.5% to 818.80, above the 806.52 handle entry and 815.32 alternate entry. After breaking out for gains on July 25, NOW shares fell back amid the tech-led market retreat. But the software giant bounced off the 50-day and found broad support around the 21-day line.
Monolithic Power shares rose 5.3% to 867.81, now well above its 50-day range and breaking a trend line. MPWR shares are on track to have a flat base after this week with a buy point of 891.67.
What to do now
The new market rally is promising, across major indexes and leading stocks. Investors should look to gain more exposure, especially those who moved to all or near all cash during the recent sell-off. But let the market and your positions pull you in gradually.
The S&P 500 and Nasdaq are facing significant resistance as Wednesday’s CPI inflation report and other key data loom. If stocks fall again, be ready to exit.
But it is definitely a time to be on the lookout for new purchases, so get your watchlists ready.
Read The Big Picture every day to stay up to date on market developments 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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