Dow Jones futures rose modestly early Wednesday, along with S&P 500 futures and Nasdaq futures. CrowdStrike and Hewlett Packard Enterprise jumped on overnight earnings, while Nvidia continued to rise.
The ISM services index is on tap Wednesday morning as markets fear that U.S. and global economic growth is slowing too much.
The stock market rally had a mixed session Tuesday. The major indexes rose slightly but small caps fell solidly.
Nvidia hit a fresh record high. But the AI chip leader has lacked coattails, with Advanced Micro Devices, Broadcom, Taiwan Semiconductor, Dell Technologies among the stocks down since Nvidia's earnings.
Tesla CEO Elon Musk diverted Nvidia AI chips from the EV giant to his X social site and xAI startup. TSLA stock edged lower, still holding a key level.
Nvidia stock is on IBD Leaderboard and the IBD 50. The video embedded in the article discussed Tuesday's market action and analyzed Spotify, GE Aerospace and Novo Nordisk.
Dow Jones Futures Today
Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures advanced 0.35% and Nasdaq 100 futures climbed 0.6%.
The ADP Employment Index is due out at 8:15 a.m. ET. The ISM services index is set for 10 a.m.
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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Key Earnings
CrowdStrike earnings beat views while guidance was slightly above consensus. CRWD stock leapt more than 10% in extended trade, signaling a decisive move back above the 50-day line. Shares fell 1% to 305.58 on Tuesday. CrowdStrike stock has a 358.84 cup-with-handle buy point.
CrowdStrike results are important for cybersecurity plays, but for the broader software sector. With earnings season dying down, there aren't many opportunities for software to show a real boost.
Meanwhile, HP Enterprise earnings and guidance also exceeded forecasts, buoyed by AI growth. HPE stock soared more than 15% before the open, signaling a breakout from a double-bottom base.
Economic Data
Job openings fell much more than expected in April, the Labor Department reported Tuesday. While good news for inflation, it adds to worries that the economy is slowing too much. The ISM manufacturing index on Monday unexpectedly showed a deeper contraction, following Friday's dip in real consumer spending.
Meanwhile, election results in India and Mexico add to concerns about global growth going forward.
So Wednesday's ISM services index and Friday's jobs report will be key.
Stock Market Rally
The stock market rally saw the major indexes edged higher Tuesday despite weak market breadth.
The Dow Jones Industrial Average rose 0.4% in Tuesday's stock market trading, slightly below its 50-day moving average. The S&P 500 index rose 0.15% and the Nasdaq composite climbed 0.2%, both near record highs and above their 21-day lines.
Nvidia stock rose slightly, with other megacaps nudging higher or little changed.
But market breadth was decidedly weak.
The small-cap Russell 2000 fell 1.25% and the S&P MidCap 400 lost 1.3%, both back below their 50-day lines.
The Invesco S&P 500 Equal Weight ETF sank 0.3%, dipping back below the 50-day.
The First Trust Nasdaq 100 Equal Weighted Index ETF lost a fraction, hitting resistance at its 50-day.
U.S. crude oil prices fell 1.3% to $73.25 a barrel, down 8.2% over the last five sessions.
The 10-year Treasury yield sank nearly 7 basis points to 4.335% after tumbling 10 basis points on Monday.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF rose 0.4%, with CrowdStrike stock a holding. The VanEck Vectors Semiconductor ETF dipped 0.4%. Nvidia stock is the dominant SMH holding. Taiwan Semi, Broadcom and AMD stock also are big members.
Reflecting more-speculative story stocks, ARK Innovation ETF and ARK Genomics ETF both climbed 0.6%. Tesla stock is a major holding across Ark Invest's ETFs.
SPDR S&P Metals & Mining ETF plunged 4.7%. The SPDR S&P Homebuilders ETF gave up 2.1%. The Energy Select SPDR ETF retreated nearly 1% and the Health Care Select Sector SPDR Fund advanced 0.3%
The Industrial Select Sector SPDR Fund slipped 0.25%. The Financial Select SPDR ETF declined 0.5%.
Time The Market With IBD's ETF Market Strategy
Nvidia Stock Coattails Lacking
| Company | Ticker | % chg since May 22 |
|---|---|---|
| Nvidia | NVDA | 22.63% |
| Taiwan Semiconductor | TSM | -2.40% |
| AMD | AMD | -3.34% |
| Broadcom | AVGO | -4.41% |
| Modine Manufacturing | MOD | -3.80% |
| Arista Networks | ANET | -7.43% |
| Super Micro Computer | SMCI | -11.64% |
| Arm Holdings | ARM | 11.95% |
Nvidia stock rose 1.25% on Tuesday to 1,164.37, hitting a record high. Shares have jumped 22.6% since its May 22 earnings report.
But the AI chip leader isn't bringing up other AI plays. In the AI chip space, AMD stock is down 3.3% since Nvidia's earnings report. Taiwan Semiconductor stock is off just 2.4%, with TSMC reporting May sales on Friday. Broadcom stock has fallen 4.4% since May 22, with its o results next week.
ANET stock is off 7.4%, though that's in part because Nvidia is seen as a growing competitive threat to Arista Networks.
Dell stock has lost 8.1% since May 22, after plunging last week on the tech giant's own results and guidance.
Super Micro Computer has skidded 11.6%, in part due to Dell.
Vertiv, which makes cooling systems for hot-burning AI data centers, has lost 8%.
One exception: Arm Holdings is up nearly 12% since May 22, flirting with aggressive entries.
Early Wednesday, Nvidia rose slightly again, with a number of AI stocks also moving higher before the open.
Five China Stocks Near Buy Points
Elon Musk Diverts Nvidia Chips From Tesla
Elon Musk diverted thousands of Nvidia chips scheduled for Tesla to his own companies, social site X and AI startup xAI, CNBC reported, citing internal Nvidia emails.
Musk appeared to confirm the report, posting on X that "Tesla had no place to send the Nvidia chips to turn them on, so they would have just sat in a warehouse."
However, Musk later referred to the CNBC reporter as a "liar."
There have been growing concerns that Musk is favoring X and xAI over Tesla, with xAI poaching a number of staff from the EV giant. One argument made for reapproving a massive 2018 pay deal has been Musk's implicit threat that he would starve Tesla of AI and robotics investment.
Meanwhile, weekly Tesla EV registrations and May figures pointed to improving sales in China. But Tesla China sales are still down vs. a year earlier as growing EV rivals grab market share.
Tesla stock fell 0.9% to 174.77 on Tuesday, continuing to trade right around the 21-day line, modestly above the 50-day line.
Tesla Holds Support; BYD Eyes Buy Point On Sales, 1,300-Mile EVs
What To Do Now
This is a tricky market. The Nasdaq and S&P 500 are holding near highs, above their 21-day moving average. But there's a lot of underlying weakness, including in leading stocks.
So investors should be cautious about making many new buys until the market shows more clarity.
If the market rally regains momentum, investors will have a number of opportunities. So have your watchlists ready. But if the market starts to show more serious losses, you need to be ready to step back.
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