Dow Jones futures were little changed Friday morning, along with S&P 500 futures and Nasdaq futures, heading into the Fed's key inflation report before the open. Dell Technologies and Costco Wholesale were notable earnings reports late.
The stock market rally saw significantly on the major indexes as Dow giant Salesforce.com plunged on weak revenue and guidance. That triggered heavy losses in the software sector, including ServiceNow and CrowdStrike with Microsoft breaking key support.
Meanwhile, Nvidia fell, halting a huge earnings run, amid reports of fresh U.S. export restrictions on AI chips.
However, small caps and midcaps rebounded.
Costco, Dell Technologies, NetApp and Marvell Technology reported late. Dell stock plunged overnight. while Marvell and Costco also fell. NetApp stock rose modestly.
Nvidia stock is on IBD Leaderboard. Microsoft stock is on IBD Long-Term Leaders. Nvidia and CrowdStrike stock are on the IBD 50.
Core PCE Inflation
The April PCE price index is due out at 8:30 a.m. ET, as part of the Commerce Department's income and spending report. The overall index is seen rising 0.3% vs. the prior month and 2.7% vs. a year earlier, both the same as in March. The core PCE price index, the Fed's favorite inflation gauge should show a modest 0.2% monthly gain, down from 0.3% in March. Core PCE inflation should hold steady at 2.8% vs. a year earlier.
Markets are currently pricing just under a 50-50 chance of a Fed rate cut in September.
Dow Jones Futures Today
Dow Jones futures were just above fair value. S&P 500 futures edged lower and Nasdaq 100 futures declined 0.2%, paring modest overnight losses. Dell stock is an S&P 500 and Nasdaq 100 component.
Overnight, the official China manufacturing index for May unexpectedly fell to 49.5 from 50.4, back under the break-even 50 level and below estimates for 50.5.
Early Friday, Japan confirmed that it spent $62 billion intervening in currency markets to prop up the yen.
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 had a mixed session, with Salesforce and the software sector weighing on the major indexes even as small caps and many sectors advanced.
The Dow Jones Industrial Average slumped 0.9% in Thursday's stock market trading, with CRM stock leading the slide. The S&P 500 index slipped 0.6%, just below its 21-day moving average. The Nasdaq composite gave up 1.1%.
Meanwhile, market breadth was solidly positive after losers dominated Wednesday.
The small-cap Russell 2000 jumped 1%, back above the 50-day line. The S&P MidCap 400 also gained 1%, just shy of its 50-day.
The Invesco S&P 500 Equal Weight ETF advanced 0.5%, though it's still below the 50-day line. The First Trust Nasdaq 100 Equal Weighted Index ETF fell 0.4%, now slightly below the 50-day.
U.S. crude oil prices fell 1.7% to $77.91 a barrel. Copper futures declined 2.6%.
The 10-year Treasury yield fell 7 basis points to 4.55%, but is still up for the week.
Software Stocks
Software took a beating Thursday following Salesforce, Nutanix and Okta selling off on results and guidance, following a weak outlook from Workday last week.
Salesforce crashed 19.7%, Nutanix dived 23.1% and Okta reversed lower for a 7.8% slide.
ServiceNow dived 12% to a six-month low. CRWD stock plunged 9.6%, below early entries and the 50-day line, CrowdStrike earnings are due next Tuesday.
Microsoft stock retreated 3.4%, undercutting its 50-day line. It's still not far from a traditional buy point.
Megacap Stocks
Most megacap techs retreated beyond Microsoft.
Nvidia fell 3.8% on Thursday after soaring 20.9% over the prior four sessions. Reuters reported Thursday afternoon that the U.S. will restrict Nvidia and AMD AI chip sales to the Mideast, in part over fears that some of the chips will end up in China.
Meta Platforms and Amazon.com declined 1.5%, while Google-parent Alphabet lost 2.15%.
Bucking the trend, Apple edged up 0.5%.
Stock Market Areas Of Strength
On the plus side, Birkenstock and Burlington Stores gapped up into buy range on earnings, with the latter also lifting peer TJX Cos. back into buy range.
Hospital chains Universal Health and HCA Healthcare flashed buy signals, while a number of medical names held up or advanced.
Meanwhile, select restaurants, investment managers and overseas e-commerce giants are acting well.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF plunged 5.8%, undercutting the 50-day line for the first time since March 2023. Salesforce and Microsoft stock are huge components, with ServiceNow, Nutanix, CrowdStrike and Zscaler stock also in the ETF. The VanEck Vectors Semiconductor ETF lost 1.4%, with Nvidia stock and Marvell both members.
Reflecting more-speculative story stocks, ARK Innovation ETF slid 1.6% and ARK Genomics ETF rose 0.6%.
SPDR S&P Metals & Mining ETF climbed 1.1% and the Global X U.S. Infrastructure Development ETF added 0.9%. U.S. Global Jets ETF ascended 0.7%. SPDR S&P Homebuilders ETF stepped up 1.7%. The Energy Select SPDR ETF edged up 0.3% and the Health Care Select Sector SPDR Fund rose a fraction.
The Industrial Select Sector SPDR Fund gained 0.7%. The Financial Select SPDR ETF climbed 0.5%.
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Key Earnings
Costco earnings slightly topped views but COST stock fell modestly in overnight trade. Shares rose 1.1% in Thursday's regular session to 815.34, near the top of a buy zone with a 787.08 cup-base entry.
Dell earnings met FactSet views though missed some other consensus forecasts. Revenue beat, returning to growth. The PC and server maker turned AI play gave some weak guidance on earnings and profit margins. Shares dived more than 15% in extended action. Dell stock fell 5.2% to 169.92 on Thursday, but it was an inside day after hitting a record high Wednesday.
NetApp earnings edged past views. NTAP stock rose modestly overnight. The data storage giant dipped 0.85% on Thursday to 116.50, after hitting a record high intraday. NetApp stock closed modestly extended from a double-bottom buy point. NetApp rival Pure Storage edged up 0.4% on Thursday after a wild session, hitting a new high following its own results Wednesday night.
Marvell earnings and sales were largely in line with views. MRVL stock declined solidly in extended trade. The data center chipmaker rose 1.4% to 76.85 intraday, back above a 76.29 buy point from a double-bottom base.
What To Do Now
The market rally continues to be divided, though some of the winners and losers changed places.
So far this uneven market pause or pullback has let some stocks form handles or quickly show relative strength. A few stocks have flashed buy signals, though often from big earnings gap-ups.
Investors could choose to nibble on new positions, or hold what they have, aside from cutting losers.
If the market resumes a broad advance many more buying opportunities will appear. But if a split rally turns into a general slide, investors want to be ready to scale back their investments.
Keep updating your watchlists and your exit strategies.
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