Dow Jones futures rose slightly after hours, along with S&P 500 futures and Nasdaq futures. Micron Technology dived late on weak guidance, bad news for the chip sector.
The stock market rally sold off on Wednesday, even though the Federal Reserve cut interest rates and signaled two more cuts in 2025. The Dow Jones plunged more than 1,100 points while the Russell 2000 knifed well below the 50-day line. The S&P 500 undercut that key level. Treasury yields spiked to their highest levels since the end of May.
Nvidia jumped Wednesday morning, but ultimately reversed lower with the market. Nvidia chipmaker Taiwan Semiconductor fell back from just below a buy point. Both rose slightly overnight.
Tesla sold off along with many leaders following the Federal Reserve meeting and Fed chief Jerome Powell's comments. But Tesla stock is still above all its moving averages.
Nvidia is a hedged position on IBD Leaderboard. Tesla stock is on the watchlist. Disney stock is on SwingTrader.
Fed Rate Outlook
The Federal Reserve cut rates by a quarter point on Wednesday, for a total of 100 basis points over the last three meetings of 2024. The Fed "dot-plot" of individual policymakers' forecasts for interest rates indicated two rate cuts next year. That was all as expected.
But the rate-cut outlook also comes with the Fed projecting relatively modest economic growth in 2025. Central bank forecasts have tended to undershoot actual growth recently. If GDP growth outperforms, keeping inflation pressures high, Fed rate cut plans may not hold up.
Fed chief Jerome Powell, speaking after the policy statement and dot-plot release, was upbeat about the economy. That's a strike against rate cuts. He also spoke about policy uncertainty, including tariffs, under President-elect Donald Trump. That could spur more Fed caution.
Dow Jones Futures Today
Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures advanced 0.1% and Nasdaq 100 futures edged higher. Nvidia and several other techs provided a lift to futures, despite Micron.
The 10-year Treasury yield has risen to 4.52%.
Late Wednesday, President-elect Donald Trump opposed a continuing resolution to keep the government open, following objections from key ally, Tesla CEO Elon Musk. That raises the risks of a government shutdown.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally was up modestly heading into the Fed decision and Powell's press conference, but the key indexes sold off hard while Treasury yields spiked.
The Dow Jones Industrial Average plunged 2.6% in Wednesday's stock market trading after closing just below the 50-day line on Tuesday. It was the Dow's 10th straight loss, now the longest losing streak since 1974.
The S&P 500 index sold off 2.95%, undercutting the 50-day line. The Nasdaq composite tumbled 3.6%, below its 21-day line, in its worst Fed decision day loss since March 2001. The small-cap Russell 2000 dived 4.4%, decisively below its 50-day line, wiping out all its postelection gains and more.
The Invesco S&P 500 Equal Weight ETF lost 3% to a three-month low.
The First Trust Nasdaq 100 Equal Weighted Index ETF tumbled 3.7%, going below its 21-day and 50-day lines decisively..
U.S. crude oil prices rose 0.7% to $70.58 a barrel.
The 10-year Treasury yield leapt 11 basis points to 4.49% as of the 3 p.m. ET close. But in electronics trading, with stocks still trading, briefly got to 4.51%, above the Nov. 15 peak that was the highest since May 31. The yield hit a recent low of 4.13% on Dec. 6.
Higher yields sent the dollar soaring to a two-year high.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF plunged 5.95%. The iShares Expanded Tech-Software Sector ETF tumbled 4.5%. The VanEck Vectors Semiconductor ETF gave up 3.2%. Micron stock is a notable SMH holding, but Nvidia and Taiwan Semiconductor are huge components.
ARK Innovation ETF dived 7% and ARK Genomics ETF lost 7.3%. Tesla stock is a major holding across Ark Invest's ETFs. Cathie Wood's Ark has also build up a big NVDA stake.
SPDR S&P Metals & Mining ETF shed 3.95%. SPDR S&P Homebuilders ETF stepped down 4.4%. The Energy Select SPDR ETF gave up 2.8% and the Health Care Select Sector SPDR Fund declined 1.4%.
The Industrial Select Sector SPDR Fund retreated 2.8%. The Financial Select SPDR ETF skidded 3%.
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Micron Earnings
Micron earnings slightly beat while revenue was in line for the fiscal first quarter. But the memory-chip giant guided fall below fiscal Q2 consensus on earnings, revenue and gross margins.
Micron stock dived in after-hours action. Shares fell 4.3% to 103.90 on Wednesday, falling back from the 200-day line. MU stock is well below the June peak of 157.33.
Memory plays Western Digital and Seagate Technology fell modestly. So did memory-exposed chip-equipment makers such as Applied Materials.
Nvidia Stock
Nvidia stock initially jumped to 136.70, but ultimately fell 1.1% to 128.91. Shares have now fallen for five straight sessions, during which the AI chip giant has fallen well below its 50-day line to a two-month low, triggering multiple sell signals.
NVDA stock may be working on a double-bottom base with a potential 146.54 buy point, but right now it's in a downtrend and needs to start rising.
Nvidia stock rose slightly overnight despite the Micron earnings sell-off.
Taiwan Semiconductor stock declined 2.5% to 195.56 in Wednesday's session, just holding the 50-day line. That's after nearly hitting the 205.63 cup-with-handle buy point intraday. Shares edged higher overnight.
Tesla Stock
Tesla stock, among the hottest big-cap stocks in recent weeks, tumbled 8.3% to 440.13. But it's still above its 10-day line and 41% above its 50-day.
TSLA stock edged higher overnight.
What To Do Now
The stock market rally suffered ugly losses Wednesday, signaling a possible character change.
The magnitude of the sell-off was surprising, but investors have to pay attention to what the market is doing, not what they expect or want.
Investors may have wanted to cut exposure, if only because recent buys and other specific positions weren't working. But reducing exposure outright would have made since too.
It's possible that the market will rebound in a day two reaction to the Fed meeting. But the selling could continue.
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