Dow Jones futures fell slightly on Wednesday morning, along with S&P 500 and Nasdaq futures.
The stock market rally closed mixed on Tuesday, but top stocks such as Nvidia hit highs as further breakouts slumped.
The Nasdaq initially stocked higher, as Nvidia (NVDA) and other AI stocks continued to work Tuesday morning, as did You’re here (TSLA). The composite gave up all of its gains by mid-afternoon before closing slightly higher.
The rest of the market was lackluster throughout the session, with the S&P 500 flat and the Dow Jones slightly lower.
Few stocks were tradeable on Tuesday, and some of them fell quickly, including Lifetime group (LTH) and ON Semiconductor (ON). Others seemed stretched out.
PC and printer giant HP Inc. (HPQ), Hewlett Packard Enterprise (HPE), Ambarella (AMBA) and Box (BOX) reported Tuesday night. Box stock rose slightly, while HPQ, HPE and especially AMBA stocks fell on earnings or forecast.
Salesforce.com (CRM) looms Wednesday night with cybersecurity games Okta (OKTA) and CrowdStrike (CRWD). Meanwhile, a white-hot artificial intelligence game C3.ai (AI) can offer thermal control for AI stocks, including AI stock.
The video embedded in this article highlights Tuesday’s market action and analyzes the shares of Life Time Group, ON Semiconductor and FLNC.
rival of Tesla Fluency Energy (FLNC) was the IBD share of the day on Tuesday.
Dow Jones Futures Today
Dow Jones futures fell 0.1% from fair value. S&P 500 futures fell 0.2% and Nasdaq 100 futures lost less than 0.1%.
The 10-year Treasury yield slipped 5 basis points to 3.65%.
Crude oil futures fell more than 2% early Wednesday after falling on Tuesday.
China’s official manufacturing purchasing managers’ index edged down 0.4 points in May to 48.8, still below the neutral 50 level and defying expectations of a slight rise to 49.4. It’s the latest sign that China’s economic rebound from the end of Covid regulations is running out of steam.
Hong Kong’s Hang Seng index fell 1.9%, continuing to decline since late January.
At 10 a.m. ET Wednesday, the Department of Labor will release the April JOLTS survey. Job vacancies, which have fallen sharply but remain high, are expected to fall to 9.35 million from 9.59 million in March. On Friday, Labour’s April jobs report is due.
Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally, after the long holiday weekend, treated the tentative debt ceiling agreement as a non-event. A positive open quickly turned mixed, with the Nasdaq well off the highs.
The Dow Jones Industrial Average edged down 0.15% in trading on Tuesday. The S&P 500 index was essentially flat. The Nasdaq composite rose 0.3%. The small-cap Russell 2000 fell 0.3%.
U.S. crude oil prices fell 4.4% to $69.46 a barrel.
The 10-year Treasury yield fell 12 basis points to 3.7%.
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 0.8%. CRM stock is one of the top IGV stocks, along with AI stock also in the ETF. ETF VanEck Vectors Semiconductor (SMH) climbed 0.5%. NVDA stock is a major holding of SMH, with Onsemi also a component.
Mirroring stocks with more speculative histories, ETF ARK Innovation (ARKK) jumped 1.8% and ETF ARK Genomics (ARKG) edged up 0.1%. Tesla stock is the main holding among Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) fell 1.8%. The US Global Jets ETF (JETS) climbed 0.55%. The SPDR S&P Homebuilders ETF (XHB) climbed 0.2%. Energy Select SPDR (XLE) fell 1% and Health Care Select Sector SPDR (XLV) fell 0.6%.
The Financial Select SPDR ETF (XLF) closed just below breakeven. SPDR S&P Regional Bank (KRE) fell 0.2%
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Tesla jumped 4.1% to 201.16, just clearing the 200-day line. Shares hit 204.48 intraday. TSLA stock is working on a buy point of 207.89 from what is either a cup base or a double bottom consolidation.
Tesla was down slightly in premarket.
Tesla CEO Elon Musk is in China for the first time since pre-Covid, meeting with senior government officials. He will probably visit the Tesla factory in Shanghai.
C3.ai (AI) jumped 33% to 43.95 to hit an 18-month high on the eve of earnings. AI stock has more than doubled since C3.ai reported May 15 preliminary fourth-quarter revenue slightly above previous guidance and roughly flat from a year earlier.
AI stock fell slightly early Wednesday, as a number of AI games pulled back somewhat.
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Market rally analysis
The stock market rally remains split with narrow leadership.
The Nasdaq started strong, rising as much as 1.4% and nearly erasing its August high. But the composite erased all that before closing slightly higher. The Nasdaq 100 also pared gains as Nvidia, Tesla stock and others hit highs. It is now 9% above its 50-day line after breaking above 10% at some point on Tuesday intraday.
The S&P 500, which hit a new nine-month intraday high, ended flat.
The Dow Jones drifted towards its 200-day mark, but traded in a tight range. The Russell 2000 continues to test its 50 day after last week’s reversal from the 200 day.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) initially hit a 52-week high but reversed for a fractional loss.
The Invesco S&P 500 Equal Weight (RSP) ETF fell 0.2% and is still stuck below the moving averages.
The decliners edged out the progressives.
AI stocks generally advanced on Tuesday, although a few reversed and many, like Nvidia, were well above early highs. C3.ai was a notable exception.
A few names crossed the official buy points on Tuesday morning, with mixed results. Life Time and Onsemi stocks broke, but quickly reversed.
On the positive side, Arista Networks (ANET) entered a buy zone, but sits 13% above the 50-day line after jumping 23.5% in three sessions. FLNC stock triggered an early entry and finished just below an official buy point, but is 24% above the 50-day line.
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What to do now
A split market rally is not a good situation, and there was little reason or even opportunity to add exposure on Tuesday.
Few stocks work, and most of these winners are extended, like Nvidia. A decent number of stocks are close to the buy points, although some are far from the moving averages.
Over the past few weeks, many promising stocks have staged fakeout or shakeout breakouts, such as LTH stock on Tuesday. It is therefore difficult to advance or build positions.
At some point, buying opportunities will work more consistently as the market rally shows broader breadth and leadership. But it probably won’t be immediately obvious. Investors should therefore be cautious about new purchases and cut losses quickly.
If you own any scorching AI games like Nvidia or stock AI, enjoy the ride. They could continue to operate, but significant pullbacks would not be a surprise in the coming days. NVDA stock, which briefly had a valuation of $1 trillion on Tuesday, is 103% above its 200-day line. C3.ai is 148% above this long-term level.
You could be waiting for a large and significant downside reversal before you start to exit or reduce your holdings. Obviously, the size of your AI-related exposure, your belief in the theme and individual stocks, and your own investment style will be important factors in your decisions.
Keep working on your watchlists.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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