Dow Jones futures fell slightly overnight, along with S&P 500 and Nasdaq futures. The stock market rally retreated on Wednesday, with the Nasdaq leading the decline. Knowledge base home (KBH) reported late.
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In the meantime, Nvidia (NVDA) and You’re here (TSLA) retreated after rising on Tuesday. Advanced micro-systems (AMD) and parent company of Google Alphabet (GOOGL) passed a key level, while turbocharged artificial intelligence plays Palantir Technologies (PLTR) and AI shares fell.
Fed Chief Jerome Powell reiterated on Wednesday that more rate hikes are likely, but didn’t really change the outlook from his post-Fed meeting comments a week earlier. At most, Powell provided another catalyst for the market pullback.
In the leading tech and growth sectors, investors should watch the leaders to see which are holding up best during the incipient pullback. Nvidia stock, despite Wednesday’s drop, is looking much better right now than AMD stock.
But outside of the growth in megacaps and AI spaces, sales were subdued. Investors could choose to make purchases in certain non-technology areas. Chipotle Mexican Grill (CMG) issued buy signals on Wednesday.
C3.ai (AI) will hold an analyst day on Thursday.
Tesla and Nvidia shares are on the IBD ranking, with Chipotle on the ranking watch list. CMG stock is on SwingTrader. TSLA stock is on the IBD Big Cap 20. Chipotle was Wednesday’s IBD stock of the day.
The video in this article reviews Wednesday’s market action, analyzes Chipotle, and compares AMD stock to Nvidia.
Dow Jones Futures Today
Dow Jones futures lost a fraction of fair value. S&P 500 futures fell 0.1% and Nasdaq 100 futures fell 0.2%.
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.
KB Home Earnings
KBH stock fell slightly in extended trade after KB Home earnings beat strongly with revenue up an unexpected 1%. The home builder also guided higher. KB Home stock rose 1.9% to 52.01 on Wednesday, extended by various entries.
Accenture (ACN) will report early Thursday. The IT consulting giant announced ties to AI on Wednesday Microsoft (MSFT), Google and Amazon (AMZN). ACN stock fell 1.3% to 313.20 on Wednesday, a third consecutive decline after rising sharply since early May.
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 saw losses across major indices, but the Nasdaq bore the brunt of the sell-off.
The Dow Jones Industrial Average fell 0.3% in trading on Wednesday. The S&P 500 index fell 0.52%. The Nasdaq composite fell 1.2%. The small cap Russell 2000 edged down 0.2%.
U.S. crude oil prices climbed 1.9% to $72.53 a barrel.
The 10-year Treasury yield fell slightly to 3.72%. The probability of a July rate hike barely budged at a 72% chance of a July rate hike. Markets are still pricing in less than a 20% chance of a second additional rate hike this year.
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Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.6%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged down 0.2%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 1.85%. ETF VanEck Vectors Semiconductor (SMH) fell 2.3%. Nvidia stock is the #1 component of SMH, with AMD also a major weight.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) fell 3.6% and ARK Genomics ETF (ARKG) fell 2.7%. TSLA stock is the #1 position among Ark Invest ETFs. Shares fell 5.5% in a decline, outside Wednesday’s session, but are still above the 10-day line. Tesla stock fell slightly overnight.
The SPDR S&P Metals & Mining ETF (XME) climbed 0.85% and the Global X US Infrastructure Development ETF (PAVE) climbed 0.9%. The US Global Jets ETF (JETS) fell 0.1%. The SPDR S&P Homebuilders ETF (XHB) rose 0.5%. The Energy Select SPDR ETF (XLE) climbed 0.8% and the Health Care Select Sector SPDR Fund (XLV) edged higher.
The Financial Select SPDR ETF (XLF) edged down 0.1%. The SPDR S&P Regional Banking (KRE) ETF fell 1.5%.
Five best Chinese stocks to watch now
Nvidia vs. AMD Stock
Nvidia fell 1.7% to 430.45 on Wednesday, off session lows. AMD stock fell 5.7% to 112.13. But the real divergence is in the charts. NVDA stock fell after hitting a record high on Tuesday. It is still well above the 10-day and 21-day lines. The shares fell slightly overnight.
In contrast, AMD stock crossed the 21-day line on Wednesday and moved above recent lows after falling to that level on Tuesday. It was the fifth drop in six sessions for AMD, four of which were with above-average volume. It all started with a downward reversal on June 13, as AMD unveiled AI chips to challenge Nvidia.
If AMD investors hadn’t started building before then, Wednesday’s damaging losses were a place to take at least partial profits.
Nvidia and AMD stocks have tended to trade chip leadership in recent years, and it could happen again. But right now, Nvidia is the leader while AMD is struggling a bit.
Meanwhile, Google stock fell 2.1% in light volume on Wednesday. But GOOGL shares fell below the 21-day line for the first time since May 5, according to MarketSmith. A good day could be a game changer. But for now, GOOGL stock looks weaker than other megacap technologies.
CMG Stock
Chipotle stock rose 1.2% to 2,073.67 on Wednesday, after Wedbush raised its price target to 2,300 from 2,200. The shares rebounded slightly from the 21-day and 10-week lines , breaking a downtrend and clearing some short-term levels. All of these provided reasons for an early entry, although shares reached intraday highs of 2,092.51. CMG stock traded very tightly. It enjoys a tight four week with a buy point of 2,139.88 which is on track to be a flat base after Friday.
AI Stock Investor Day
C3.ai will host an Investor Day at 1:30 p.m. ET on Thursday. Will the AI hot game provide new financial guidance, perhaps before the opening? C3 news and commentary could fuel or deflate enthusiasm for AI.
AI stock fell 9.6% to 39.04, its third consecutive day of above-average volume declines. Stocks are still more than double their early May lows and have found support at the 21-day line.
PLTR stock tested its 21-day line on Wednesday, falling 7.3% to 14.64. It was also Palantir’s third consecutive drop in above-average trading.
Market rally analysis
The stock market fell for a third straight session, with a Nasdaq pullback now clearly underway.
The Nasdaq and Nasdaq 100 led Wednesday’s selloff. That’s a change from Tuesday, when Tesla and Nvidia continued to run higher. The Nasdaq just tested its 10-day moving average on Wednesday, still 2% above the 21-day line and 7.1% from the 50-day line.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 1% on Wednesday, not as bad as the Nasdaq or the Nasdaq 100.
The Invesco S&P 500 Equal Weight ETF (RSP) was down just 0.1%, trading slightly higher for much of the session like the Dow and Russell 2000.
The decliners overtook the advances on the Nasdaq, but it wasn’t a wipeout. Meanwhile, the winners edged out the losers on the NYSE. New highs led on the NYSE, but lagged the Nasdaq somewhat.
All of this together sounds positive. The large-cap tech-powered Nasdaq and Nasdaq 100 had been extended while the Dow, Russell 2000 and RSP ETF gained momentum, along with various non-tech sectors. Ideally, the Nasdaq would pull back gradually over several days or weeks so that it is no longer extended, while the rest of the market just declines or moves sideways. This would create new buying opportunities in a multitude of stocks and sectors.
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What to do now
So far, the stock market rally is in a normal and healthy downturn.
Investors could now look outside of the technology for new purchases. But a Nasdaq-led market retreat is still a market retreat. Downside action is not an ideal environment for short-term buying.
For now, investors should wait to see how the AI-infused big winners of 2023 react. Are they resisting the sell off and finding support at the 10 or 21 day lines?
Also keep an eye out for action around buy points, such as monday.com (MNDY), medical shock wave (SWAV) and Rockwell Automation (ROK).
The ones that seem strongest when the withdrawal is largely spent will be the ones you want to target. Keep in mind that big winners that look strong or find support could falter further, while harder-hit names like AMD could consolidate.
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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