Dow Jones futures fell slightly after hours, while S&P 500 and Nasdaq futures fell slightly. NVDA stock fell overnight on a report that the United States may expand chip export restrictions.
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The stock market rally posted solid gains on Tuesday after a mixed session on Monday. The Nasdaq and S&P 500 bounced near their 21-day exponential moving averages, along with megacaps You’re here (TSLA) and Nvidia (NVDA). The overall market breadth was strong.
United Airlines (UAL), American airlines (ALA), fedex (FDX), Amkor Technology (AMKR) and On hold (ONON) all purchase points cleared.
Tesla, On Holding and Nvidia stocks are on the IBD ranking, while UAL stocks are on the ranking’s watchlist. United Airlines and ONON shares are on the IBD 50. Tesla shares are on the IBD Big Cap 20. United Airlines was Tuesday’s IBD Stock Of The Day.
Is the market pullback over or is it just a one-time event? It’s a big question. Investors can take advantage of buying opportunities, cautiously, but ready to take a step back if positions or the broader market pull back again.
The video embedded in this article discusses Tuesday’s strong market rally and analyzes FDX, United Airlines and Datadog (DDOG).
US plans to cut AI chip exports
The Biden administration is considering new restrictions on exports of artificial intelligence chips, The Wall Street Journal reported Tuesday evening, citing sources.
The Commerce Department could stop shipments of AI chips by Nvidia and others to China and other affected countries without first obtaining a license.
Nvidia stock fell 2% in extended trade. Advanced micro-systems (AMD) sank more than 1%. Broadcom (AVGO) fell 1%.
In addition to possible loss of business for Nvidia, AMD and others, expanding chip exports could spur retaliation from China. Beijing has previously restricted sales of Micron TechnologyMU chips to major customers, citing cybersecurity concerns. Micron, which reports Wednesday evening, fell slightly overnight.
In other news, Spirit AeroSystems (SPR) reached an agreement in principle with the strikers on Tuesday evening. Spirit Aero manufactures 737 fuselages for Boeing (BA). SPR stock rose slightly late in the session. BA shares rose slightly.
Dow Jones Futures Today
Dow Jones futures were just below fair value, although Boeing shares offered a small boost. S&P 500 futures fell 0.15% and Nasdaq 100 futures fell 0.3%. Nvidia and AMD stocks are notable components of the S&P 500 and Nasdaq 100.
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 recovery experienced strong general progress. Economic data was upbeat, with May new home sales overwhelming the views while June reports of consumer confidence and manufacturing in the Richmond area also topped the charts.
The Dow Jones Industrial Average rose 0.6% in trading on Tuesday. The S&P 500 index climbed 1.1%. The Nasdaq composite jumped 1.65%. The small-cap Russell 2000 jumped 1.5%.
U.S. crude oil prices fell 2.4% to $67.70 a barrel.
The 10-year Treasury yield jumped 5 basis points to 3.77%, remaining in a range dating back to late May.
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Among growth ETFs, the Innovator IBD 50 ETF (FFTY) jumped 2.6%, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 2.5%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed almost 2%.
ETF VanEck Vectors Semiconductor (SMH) jumped 3.2%. NVDA stock, SMH’s top holding, rose 3.1%, rebounding near the 21-day line. But it was an inside day after falling 3.7% on Monday.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) jumped 3.4% and ARK Genomics ETF (ARKG) edged up 0.7%. Tesla stock is the #1 component of Ark Invest’s ETFs. The electric vehicle giant rose 3.8% to 250.21 on Tuesday, rebounding from the 21-day line but after falling 6.1% on Monday. TSLA stock likely has a buy point of 274.75 on a consolidation dating back to September.
The SPDR S&P Metals & Mining ETF (XME) climbed 1.3% and the Global X US Infrastructure Development ETF (PAVE) climbed 1.7%. The US Global Jets (JETS) ETF soared 4.4%, with UAL and American Airlines stocks making up a large portion of the ETF. SPDR S&P Homebuilders ETF (XHB) rose 2.9%. The Energy Select SPDR ETF (XLE) edged up 0.2% and the Health Care Select Sector SPDR Fund (XLV) fell 0.2%.
The SPDR Industrial Select Sector (XLI) fund rose 1.2%.
The Financial Select SPDR ETF (XLF) rose 0.8%. The SPDR S&P Regional Banking ETF (KRE) rebounded 3.2%.
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UAL stock jumped 5.1% to 56.03, off a buy point of 54.05 cup with handle. AAL stock jumped 5.5% to 17.35, hovering over an entry of 16.72 from its own cup with handle, according to MarketSmith analysis. United and American jumped according Delta Airlines (DAL) raised its forecast for the full year. Already extended DAL stock jumped 6.8%
FDX stock jumped 5% to 246.76, surpassing a flat-based buy point of 235.81. FedEx peeked above that entry in mid-June, but then fell back to mixed earnings. Stocks quickly rebounded from the 50-day line.
AMKR stock jumped 11.4% to 29.37 in huge volume, easily clearing a buy point of 27.20. The chip maker is now well above the 5% buy zone, which extends to 28.56.
ONON stock was up 2.2% at 31:30 p.m., still within the range of its 50-day line and a trendline. The high-end athletic shoe maker surpassed those key levels on Monday. On Tuesday intraday, shares moved above the short-term high of 31.45.
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Market rally analysis
The stock market rally had a clearly bullish session. The indices bounced around a key near-term level in higher volume, with strong momentum and a number of stocks showing buy signals.
The Nasdaq and S&P 500 rallied around their 21-day lines. Meanwhile, the Dow Jones and the Russell 2000 have regained that key level.
The Invesco S&P 500 Equal Weight (RSP) ETF, which recovered its 21-day mark on Monday, jumped 1.2% on Tuesday, breaking the recent downtrend and crossing the 10-day line
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW), which plunged just 0.2% on Monday, jumped 1.7% on Tuesday, also rebounding over 21 days.
The advancers easily beat the decliners on Tuesday.
Airlines and travel were the big winners, but chips, software, industrials, transportation and the broad housing sector also all showed bullish action.
Energy remains a weak sector, while biotechnology and some sectors are struggling.
Tuesday may have marked the start of a new stage in the market rally. The Nasdaq held a follow-up day later. But it hasn’t quite broken its recent downturn and is just below its 10-day line.
Additionally, after Tuesday’s rebound, the Nasdaq is 6.5% above the 50-day moving average while the Nasdaq 100 is up 7.5%. It would not take much for these to reach extreme levels again.
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What to do now
With the stock market rally showing positive signals, investors certainly could have looked for places to add some exposure. There is still a risk that the pullback may not be over and Tuesday’s buying opportunities will quickly deteriorate. But if you wait for definitive proof that the pullback is over, such as the Nasdaq hitting a new high, then it will be too late to chase stocks.
One option is to take smaller positions in new buys. Be prepared to act quickly and consider taking partial profits early to lock in some gains.
Shop as close to the entrances as possible. This will provide some protection against stock and market reversals.
Definitely have your watchlists ready. A large lead with diverse leadership means it’s harder to track every promising stock. But it’s a good problem to have.
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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