Dow Jones futures rose slightly early Wednesday, along with S&P 500 futures and Nasdaq futures, with Target and Dynatrace reporting. Tesla rose overnight after holding its annual shareholder meeting, but not offering a lot of big news.
The stock market rally retreated Tuesday as debt-ceiling fears added to selling pressure into the close. The Nasdaq had rallied for much of the session thanks to megacap techs, including Advanced Micro Devices, Nvidia, Microsoft, Amazon.com and Google parent Alphabet.
The S&P 500 and Dow Jones retreated most of the day, with the latter closing below the 50-day line. Market breadth was bleak.
Dow Jones Futures Today
Dow Jones futures climbed 0.4% vs. fair value. S&P 500 futures advanced 0.3% and Nasdaq 100 futures rose 0.2%. Tesla stock is a major S&P 500 and Nasdaq 100 holding.
Regional bank stocks rallied as Western Alliance Bancorp said its deposits have swelled by more than $2 billion since the end of the first quarter. WAL stock jumped 10%.
Crude oil rose slightly. Copper futures, which have tumbled recently, rose more than 1%.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Debt-Ceiling Talks
President Joe Biden and congressional leaders held fresh debt-ceiling talks at the White House Tuesday afternoon. House Speaker Kevin McCarthy said "we've got a lot of work to do," saying the two sides are far apart. But he added that a deal could come this week. President Biden also made positive comments.
However, the White House announced shortly before Tuesday's closing bell that Biden will cut short his upcoming Asia trip due to debt-ceiling negotiations. That news, signaling no debt-limit breakthrough is imminent, pushed the major indexes to session lows.
Without a debt-ceiling hike, the U.S. could default in early June, perhaps June 1. Still, staff work behind the scenes reportedly is making progress.
Meanwhile, the FTC moved to block the Amgen takeover of Horizon Therapeutics. That raised concerns about M&A activity in biotechs and medicals generally.
Key Earnings
Target topped first quarter earnings views early Wednesday, as revenue edged past forecasts but same-store sales missed. The discount retail giant guided low on the current Q2, citing high inventory and store theft. TGT stock, below key moving averages, rose slightly in up-and-down action. Walmart, which reports Thursday, edged higher.
Dynatrace beat fiscal Q4 views and guided higher for the new fiscal year. DT stock is set to jump above a traditional buy point after the software maker already cleared an early entry in early May.
TJX Cos. topped EPS views but just missed on sales. TJX stock edged lower, near a buy point.
Nvidia stock is on the IBD Leaderboard, with Dynatrace joining as an earnings options trade. DT stock is also on the IBD 50 list. MSFT stock is on the IBD Long-Term Leaders list and the IBD Big Cap 20.
The video embedded in this article discussed Tuesday's market action and analyzed On Holding, AMD and Axcelis Technologies.
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Tesla Shareholder Meeting
The Tesla shareholders meeting took place at the Austin EV plant.
TSLA stock investors were looking for more details on a variety of issues and products, including the Cybertruck, 4680 batteries and an updated Model 3.
CEO Elon Musk said Tesla will deliver production Cybertrucks this year, but maybe later than expected. He didn't offer many details, but said it'll be hard to make the stainless-steel Cybertruck affordable.
Tesla did offer a dark silhouette of what could be its next-generation vehicle. But there were no details on when the EV, presumably a cheaper model, will arrive or when its specs might be.
Musk says he expects the economy to pick up 12 months from now.
In a break with long-standing policy, Musk said, "We'll try out a little advertising and see how it goes."
Later, in a CNBC interview, Musk said he won't shy away from tweeting or saying what he wants, and "if the consequence of that is losing money, then so be it."
Early Tuesday, Bloomberg reported Tesla Shanghai is close to starting trial production of a revamped Model 3.
Tesla stock climbed more than 1% in premarket trading. Shares edged up 0.1% to 166.52 in Tuesday's regular session, just below the 21-day line. Tesla stock also faces resistance at the 50-day line, with the 200-day line above that. If Tesla stock makes some progress, it will have a 207.89 double-bottom buy point.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally was mixed for most of Tuesday's session, but the Nasdaq turned lower on debt-ceiling concerns.
The Dow Jones Industrial Average fell 1% in Tuesday's stock market trading. The S&P 500 index slid 0.6%. The Nasdaq composite dipped 0.2%. The small-cap Russell 2000 retreated 1.4%
Megacaps were key drivers. AMD stock spiked 4.2%, briefly topping an official buy point. Nvidia stock rose 0.9% to a new 52-week high. Google stock gained 2.6% and Amazon 2%. MSFT stock advanced 0.7%.
U.S. crude oil prices dipped 0.35% to $70.86 a barrel.
Copper prices fell 2.2%, reflecting weaker-than-expected Chinese economic data and a stronger dollar. Gold retreated 1.5% and silver 1.6%.
The 10-year Treasury yield climbed 4 basis points to 3.45%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF fell 1.1%, while the Innovator IBD Breakout Opportunities ETF retreated 2%. The iShares Expanded Tech-Software Sector ETF dipped 0.3%, with Microsoft stock a top component. The VanEck Vectors Semiconductor ETF closed just below break-even, with AMD stock and Nvidia major holdings.
Reflecting more-speculative story stocks, ARK Innovation ETF retreated 2.5% and ARK Genomics ETF tumbled 3.3%. TSLA stock is the No. 1 holding across Ark Invest's ETFs.
SPDR S&P Metals & Mining ETF slumped 2.8% and the Global X U.S. Infrastructure Development ETF gave up 1.6%. U.S. Global Jets ETF descended 0.45%. SPDR S&P Homebuilders ETF gave up 1.2%. The Energy Select SPDR ETF retreated 2.5% and the Health Care Select Sector SPDR Fund slipped 0.8%.
The Financial Select SPDR ETF sank 0.9%. The SPDR S&P Regional Banking ETF retreated 1.5%.
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Market Rally Analysis
The stock market rally had divergent action Tuesday, with megacap techs powering higher amid a general retreat.
The Nasdaq nudged higher, hitting its best levels since late August. The S&P 500 dipped just below its 21-day line. The Dow Jones fell below its 50-day line with its worst close since late March.
The breadth was unusually negative given the mixed action in the major indexes.
Losers trumped winners by more than 2-to-1 on the Nasdaq and nearly 4-to-1 on the NYSE. New lows easily outpaced new highs.
The Nasdaq 100, led by AMD, Nvidia, Microsoft, Amazon and GOOGL stock, edged up 0.1%, closing in on its August highs. But the First Trust Nasdaq 100 Equal Weighted Index ETF fell 0.95%, though it's still above its 50-day.
The Invesco S&P 500 Equal Weight ETF slumped 1.4% to its worst close since late March. It's now fractionally closer to its October bear market lows than its 2023 highs from early February.
On a positive note, the chip sector is showing renewed strength and improving breadth. The SMH ETF gave up intraday gains Tuesday, but is still outperforming. AMD stock and Nvidia are clearly leading the way. But Lam Research and Applied Materials are chip-gear giants making bullish moves, with AMAT earnings due Thursday night. On Semiconductor and ACLS stock are EV-focused chip plays that have bounced back. Broadcom is close to a buy point.
If the chip sector is ready to step up again, that's a positive sign for the market rally. Semiconductors have a hefty market cap by themselves. Also, chips are basically in everything. So if chips are doing well, that's a good sign for a slew of industries.
Meanwhile, software also has been improving. Yes, MSFT stock is part of that, even though much of its gains reflect cloud computing and AI. But Salesforce.com stock, ServiceNow and Dynatrace are all acting well, with several cloud names rebounding in recent weeks. ServiceNow announced new AI features Tuesday in an alliance with Microsoft.
On the downside, the FTC's move to challenge the Amgen-Horizon deal could be a precedent for blocking many biotech takeovers. So that could affect biotech stocks for some time.
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What To Do Now
The stock market rally continues to move sideways, with narrow leadership. Don't try to force your way into heavy exposure in this environment. If you're in the right stocks, such as the megacaps, you could have decent exposure. If you haven't had as much luck, you may be almost entirely in cash.
When taking new positions, consider small stakes and focus on early entries. You may want to take some partial profits relatively early to make sure you end up with a gain. While some stocks, such as Nvidia, have made huge gains, many others rise modestly from a buy point and then fall back.
Keep working on your watchlists. While there are reasons to be cautious in a choppy market, it also wouldn't take much for the market rally to show renewed strength. So you want to be ready.
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