Dow Jones futures rose solidly Thursday morning, along with S&P 500 futures and Nasdaq futures, with the CPI inflation report on tap before the open. Walt Disney headlined overnight earnings.
The stock market rally lost ground Wednesday. As on Tuesday, the indexes came off morning lows, but this time they faded significantly into the close. The Nasdaq composite fell below its 50-day moving average for the first time since early 2023.
Not coincidentally, Nvidia tumbled to undercut its 50-day line for the first time in months.
A slew of other AI plays had notable or fierce losses, including Super Micro Computer, Palantir Technologies, C3.ai, Upstart Holdings, Broadcom and Marvell Technology.
SMCI stock and Upstart plunged following earnings, while PLTR stock extended its earnings-related sell-off.
Is this a time to sell NVDA stock, or finally a chance to buy?
That's a question for the broader market rally as well.
Dow Jones Futures Today
Dow Jones futures rose 0.6% vs. fair value. DIS stock is a Dow Jones component. S&P 500 futures advanced 0.6% and Nasdaq 100 futures climbed 0.8%.
The 10-year Treasury yield fell 3 basis points to 3.98%.
Crude oil futures fell slightly.
Dow futures and Treasury yields likely will swing on the CPI inflation report at 8:30 a.m. ET.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
CPI Inflation Forecasts
Economists expect July's CPI to climb 0.2% vs. the prior month, after a similar gain in June. Core CPI, which excludes food and energy, also should rise 0.2% vs. June.
The annual CPI inflation rate, however, is expected to pick up to 3.3% from June's 3%. That reflects flat prices in July 2022. The core inflation is seen holding at 4.8%.
The July CPI report isn't expected to be a game-changer for the Federal Reserve rate hike outlook.
Markets see a 13% chance of a Fed rate hike at the Sept. 20 meeting, with the odds rising to about one-third by the Nov. 1 meeting.
Earnings
Walt Disney, Trade Desk, Illumina new IPO Oddity Tech, Fluence Energy and Wynn Resorts reported Wednesday night.
Novo Nordisk and Alibaba reported. early Thursday
Winners: Disney stock climbed slightly after announcing Disney+ price hikes after initially dipping on weak revenue and overall subscribers. FLNC stock jumped early Thursday. BABA stock rose solidly. So did ODD stock after its first earnings report as a public company. Wynn advanced modestly.
Losers: Illumina was a solid loser. NVO stock fell modestly, but after gapping out Tuesday as the Danish drug giant reported that its weight-loss drug Wegovy cuts heart disease risks by 20%.
TTD stock was little changed early Thursday, wavering between gains and losses.
Nvidia stock is on IBD Leaderboard. Fluence Energy and NVO stock are on the IBD 50.
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Stock Market Rally
The stock market rally had a weak open and an intraday rally, but faded to close near session lows.
The Dow Jones Industrial Average fell 0.5% in Wednesday's stock market trading. The S&P 500 index shed 0.7%. The Nasdaq composite retreated 1.2%. The small-cap Russell 2000 stepped back 0.8%.
The Nasdaq closed below its 50-day and 10-week lines, though not decisively. The S&P 500 is getting close to its 50-day and 10-week lines, but hasn't touched them yet. Still, the 21-day line is acting as resistance for the S&P 500 as well as the Russell 2000. The Dow Jones is testing its 21-day, comfortably above the 50-day.
This is a critical time for the stock market rally, which has been under growing pressure over the past week. Any further losses would likely trigger a shift to a market correction.
While AI stocks and other tech names sold off, energy and some commodity plays are still doing well. So are housing, infrastructure and industrial plays. A number of travel stocks and some retailers are doing well, but it's a mixed bag.
Overall, market breadth has weakened over the past several sessions, especially on the Nasdaq.
U.S. crude oil prices rose 1.8% to $84.40 a barrel, the highest since November.
The 10-year Treasury yield fell 1 basis point to 4.01%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF retreated 1.8%. The VanEck Vectors Semiconductor ETF slid 2%, falling below its 50-day line. Nvidia is the No. 1 holding in SMH, with Broadcom and MRVL stock also notable members. The iShares Expanded Tech-Software Sector ETF gave up 1.1%, extending losses after breaking below its 50-day on Tuesday.
Reflecting stocks with more speculative stories, the ARK Innovation ETF slumped 3.6% and is now decisively below the 50-day line. The ARK Genomics ETF, which tumbled through its 50-day last week, gave up 1.3% Wednesday. PLTR stock is a holding in ARK Invest ETFs.
The SPDR S&P Metals & Mining ETF closed a fraction lower, holding the 200-day line. The Global X U.S. Infrastructure Development ETF dipped 0.6%, holding near record highs. U.S. Global Jets descended 1.55% and is back below its 50-day.
The SPDR S&P Homebuilders ETF fell 0.9%, but near is still highs. The Energy Select SPDR ETF rose 1.3% to its best level since mid-February. The Health Care Select Sector SPDR Fund edged lower.
The Industrial Select Sector SPDR Fund lost less than 0.1%, near highs and holding the 21-day line.
The Financial Select SPDR ETF declined 0.7% and the SPDR S&P Regional Banking ETF fell 1.45%, both holding their 21-day lines.
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Nvidia Stock
Nvidia stock skidded 4.7% to 425.45, falling below the 50-day line for the first time since early January. Wednesday's move was in above-average volume, but the pullback was generally in quiet trade.
A bounce from the 50-day line could offer the best buying opportunity in months for the market rally leader. When the indexes tried to rally intraday Wednesday, Nvidia stock pared losses and briefly reclaimed the 50-day, only to slump again into the close.
Investors could use the 21-day line or recent highs as a specific trigger. But breaking decisively below the 50-day line would be a signal to longer-term investors to take at least partial profits.
Market conditions will be a big factor for Nvidia's next step. Then again, how the AI chip leader behaves will have a significant impact for the ailing market rally.
Note that Nvidia earnings are due on Aug. 23.
Other AI Stocks
Broadcom stock slumped 3.7% to 850.73, below its 50-day line for the first time in almost three months. The chip giant has a 921.78 buy point from a 16%-deep consolidation. AVGO stock's tumble Wednesday technically invalidates that entry, but investors could still use it. The upside of Broadcom's retreat in the past several days is that the stock is getting a real shakeout after some wedging action over several weeks.
MRVL stock fell 3.3% to 59.94, undercutting its 50-day line. Marvell stock has a 66.81 cup-with-handle buy point.
SMCI stock dived 23% to 266.13, closing modestly below the 50-day line. Super Micro earnings easily beat views Tuesday night, but current-quarter revenue guidance was slightly below consensus at the midpoint.
UPST stock plummeted 34% to 34.03, diving decisively through the 50-day moving average. The AI-based lending platform has plunged 53% since its Aug. 1 peak of 72.58. Upstart topped Q2 views but guided low on Q3.
PLTR stock sold off 10.5%, its sixth straight decline, with the last three coming in heavy volume. Shares fell through the 50-day line after bouncing from that level on Tuesday. Late Monday, Palantir earnings and revenue were roughly in line, with the data analytics firm guiding slightly higher and announcing a $1 billion buyback.
AI stock slumped 8.7%. On Aug. 1, C3.ai flashed an early entry in a consolidation. But since then AI stock has tumbled 26% over the past six sessions, breaking below the 50-day line on Aug. 4.
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What To Do Now
The market rally had been nearing a critical test, and now it's clearly underway. It's not going well, but it's not over.
AI stocks, which have been leading the market, are facing big challenges or simply breaking down. But there's a difference between institutional-quality leaders such as Nvidia and mor -speculative names. Nvidia could offer buying opportunities soon. But that's not clear yet.
A number of nontech sectors are still showing strength, but leadership and market breadth are weakening.
You can consider taking new positions, especially in energy, which often runs counter to the broader market. SLB broke out Wednesday and is the IBD Stock Of The Day.
But investors should be somewhat defensive, cutting overall exposure, especially in ailing tech names. Be ready to act quickly, in either direction.
Keep working on your stock watchlists. If the market rally shows renewed strength, buying opportunities will be numerous.
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Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
