Dow Jones futures rose after hours, as did S&P 500 and Nasdaq futures.
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The stock market rally hit its June highs on Wednesday as the CPI inflation report came in softer than expected, dampening Treasury yields and Fed rate hike fears. Headline CPI inflation fell to 3% from 4% in May. Core CPI inflation slowed to 4.8% from 5.3%.
The Nasdaq and S&P 500 hit new 52-week highs, while many stocks issued buy signals.
Nvidia (NVDA) and Microsoft (MSFT), two giants capitalizing on artificial intelligence, issued buy signals on Wednesday. Chipmakers exposed to AI too Taiwan semiconductor (TSM), Monolithic power systems (MPWR) and STMicroelectronics (STM). Other AI coins triggering purchases include Chinese internet giants Ali Baba (BABA) and Baidu (BIDU) as well as Arista Networks (A NET).
Some cybersecurity games fell hard as Microsoft expanded its security offerings this week.
Delta Airlines (DAL) and Attached (FAST) report early Thursday.
Nvidia stock is on the IBD ranking. ANET and Monolithic Power stocks are on SwingTrader. Microsoft and Monolithic Power stocks are among IBD’s long-term leaders. MPWR stock is on IBD 50. Taiwan Semiconductor was Wednesday’s IBD stock of the day.
The video embedded in the article discussed Wednesday’s bullish market action and analyzed Cava Group (HOW ARE YOU), Shopify (SHOP) and MPWR stock.
Dow Jones Futures Today
Dow Jones futures have risen a fraction of fair value. S&P 500 futures climbed 0.1% and Nasdaq 100 futures climbed 0.1%.
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 rebound rose solidly on weaker than expected inflation data.
The Dow Jones Industrial Average rose 0.3% in trading on Wednesday. The Dow briefly peaked in 2023 but closed near session lows. The S&P 500 index climbed 0.75% and the Nasdaq composite 1.15%, both to their best levels in more than a year. The small-cap Russell 2000 rose 1.1%, its fourth consecutive gain of at least 1%.
The Invesco S&P 500 Equal Weight (RSP) ETF climbed 0.5% to its highest level since mid-February. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 0.6% to a 52-week high.
The 10-year Treasury yield fell 12 basis points to 3.86% after briefly hitting a 2023 high of 4.09% on July 9. A Fed rate hike is all but locked in for the end of the month, but markets are pricing in the chances of another quarter-point move this year.
With yields falling, the US dollar sold off sharply, falling for a fifth consecutive session. This gave a boost to equities and especially to commodities.
U.S. crude oil prices rose 1.2% to $75.75 a barrel. Copper prices jumped 2.4%.
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Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 0.55%. The MSFT stock is a major component of the IGV. ETF VanEck Vectors Semiconductor (SMH) jumped 2.1%. NVDA shares and Taiwan Semi are SMH’s two largest holdings, while STM shares and MPWR shares are also part of the ETF.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) gained 0.9% and ARK Genomics ETF (ARKG) jumped 3.6%.
The SPDR S&P Metals & Mining ETF (XME) gained 1.2%. The US Global Jets ETF (JETS) fell 0.8% as the June CPI report showed lower airfares. The DAL stock is a major component of the JETS. SPDR S&P Homebuilders ETF (XHB) rose 2.15. The Energy Select SPDR ETF (XLE) rose 0.9% and the Health Care Select Sector SPDR Fund (XLV) fell 0.3%.
The SPDR Industrial Select Sector (XLI) fund fell 0.2%.
The Financial Select SPDR ETF (XLF) rose 0.6%. SPDR S&P Regional Banking ETF (KRE) posted a 2% gain.
Five best Chinese stocks to watch now
AI Actions in Buy Zones
Nvidia stock rebounded 3.5% to 349.02, a new closing high and topping most of a tight four-week pattern. The official buy point is 439.90. Nvidia will invest $50 million in Recursion (RXRX) AI models used for drug discovery. The AI chip giant could be an anchor investor in an upcoming Arm Holding IPO.
Microsoft stock climbed 1.4% to 337.20, extending a rebound from the 10-week line and recovering the 21-day line. Investors could nibble here, although MSFT stock has hit resistance on a short trendline and some short-term highs. Dow technology is on track for a tight three weeks in an emerging flat base.
Taiwan Semi’s stock rose 2.6% to 103.90, extending a rebound from the 21-day and 10-week lines as well as the top from a previous base. TSM stock also broke a short downtrend in further consolidation. The chip foundry giant is an indirect AI game by manufacturing chips for Nvidia, Broadcom (AVGO), AMD (AMD) and others. Taiwan Semi’s second-quarter results are expected on July 20.
Artificial Intelligence News and AI Stocks to Watch
BABA stock rose 2.4% to 94, breaking a downward trend dating back to late January. Alibaba has risen in above-average trade for four consecutive sessions, retaking the 200-day line on Friday.
BIDU stock gained 3.8% to 148.83, breaking the downtrend of a handful as well as a trendline dating back to late March. Baidu stock has a buy point of 151 handles.
ANET stock crossed a trendline in a 17% consolidation, up 2.4% to 164.04. Volume was below average, but was the highest so far this month. Arista is a big supplier to Microsoft and Metaplatforms (META).
MPWR stock rose 3.4% to 561.04, clearing a fixed base buy point of 553.64, extending a rebound from the 21-day line.
STM stock jumped 4.6% to 51.66, surpassing a buy point of 50.30 cup with handle, according to MarketSmith analysis. STM has a range of customers including You’re here (TSLA) and Alibaba.
Market rally analysis
The stock market rally is seeing new highs for the Nasdaq and S&P 500 composite indices, with Nvidia stocks among those entering new buy zones on Wednesday and many others extending the upside moves. The scope of the market has improved significantly through various measures.
All this is a very positive sign. The only concern is that the Nasdaq is back 6.6% above its 50-day line, with the Nasdaq 100 7% above that key level. It’s not extreme, but it wouldn’t take much for them to do. This could mean another pullback that stalls or undermines recent buying.
Time the Market with IBD’s ETF Market Strategy
What to do now
This week offered plenty of opportunities for investors to add to existing holdings or set up new positions. Doing it gradually on any given day can quickly add up if the market and your buyers are working. If conditions weaken, even if only temporarily, you are protected against a sudden drop in your portfolio.
If you’re an active investor, you don’t just let your money work for you, you work for your money. Much of this work goes through the screens and keeping your watchlists up to date.
With macro headwinds fading for now, the earnings season is about to start picking up steam. So pay attention to the results of the profits of your holdings and your main rivals, suppliers and customers.
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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