Dow Jones futures edged lower early Thursday, while S&P 500 futures and Nasdaq futures rose modestly. Taiwan Semiconductor Manufacturing earnings topped views overnight.
The stock market rally saw mixed but generally negative action Wednesday. The Nasdaq sold off, suffering its worst one-day percentage loss since December 2022. Chip stocks such as ASML, Nvidia and Taiwan Semiconductor led the way. Other megacaps as well as AI plays broadly suffered.
Eli Lilly and Novo Nordisk slumped as Roche reported strong early-stage results for its oral weight-loss drug.
But outside of tech, the market had a muted session. The Dow Jones, banks and energy stocks continued to rise along with more-defensive areas. The Russell 2000 and many other sectors had solid losses but after several big gains.
Dow Jones Futures Today
Dow Jones futures fell 0.15% vs. fair value. S&P 500 futures climbed 0.15% and Nasdaq 100 futures advanced 0.4%, led by Nvidia and other chip stocks.
The 10-year Treasury yield rose to 4.18%.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Taiwan Semiconductor Earnings
Taiwan Semiconductor earnings and revenue modestly beat Q2 views, after June sales topped forecasts last week. The foundry giant guided higher on Q3 and sees full-year capital spending in the upper half of its previous target. AI and other advanced chips are leading the way.
TSMC makes chips for Nvidia, Apple, Broadcom, AMD and a slew of others, while it's a huge customer for ASML, Applied Materials and other chip gear makers.
Early Thursday, TSM stock rose over 1%. That's after tumbling 8% on Wednesday, gapping below its 21-day line amid the chip sell-off.
Chip Stocks Sold Off
What hit chips? Weak ASML guidance, reports of even tougher U.S. export curbs to China, and former President Donald Trump's comments on Taiwan.
ASML stock gapped down 12.7% to 932.05, far below a 1,056.34 buy point and its 50-day line.
Nvidia stock tumbled 6.6% to 117.97, undercutting late-June lows and its 10-week line. That could be a shakeout that leads to the right side of a base and further gains. Or NVDA could break lower soon.
Meanwhile, Advanced Micro Devices, Broadcom, Arm Holdings and Applied Materials were all down more than 7%.
For the most part, chip stocks saw fractional to modest gains premarket Thursday, with NVDA stock up more than 2%.
Magnificent 7 Suffers Worst Market Cap Loss In Two Years
Other Magnificent Seven Stocks
In addition to Nvidia stock, the rest of the Magnificent Seven — Microsoft, Google parent Alphabet, Tesla, Apple, Meta Platforms and Amazon.com — saw losses, though their charts differed significantly.
Tesla stock retreated, but now has a handle to a long consolidation. Earnings are due July 23. Apple stock declined but is still close to Tuesday's record highs. Google and Microsoft stock fell slightly to test their 10-week lines, potentially setting up buying opportunities. Google also reports July 23, while Apple and Microsoft are due the following week.
Meanwhile, Amazon stock fell below a buy point, just holding its 50-day line. Meta stock, already below those levels, sold off again. In addition to broader tech and online ad concerns, Meta is falling on worries that Trump would not go ahead with a TikTok ban.
These titans all were slightly higher early Thursday.
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Stock Market Rally
The stock market rally is still signaling rotation. But after a few days of lagging while the rest of the market ran, on Wednesday the Nasdaq sold off.
The Dow Jones Industrial Average rose 0.6% in Wednesday's stock market trading, as high-priced UnitedHealth and Goldman Sachs continued to lift the price-weighted index. The S&P 500 index fell 1.4% after hitting a fresh high Tuesday.
The Nasdaq composite fell 2.8%, its worst loss since December 2022 and closing below the 21-day line for the first time since early May. Nvidia stock, ASML and other chip plays were the biggest losers, but Meta and plenty of other tech titans contributed to the red ink.
The small-cap Russell 2000 lost 1%, but that's after surging 6.1% over the prior five sessions.
The Invesco S&P 500 Equal Weight ETF fell just 0.4%.
The First Trust Nasdaq 100 Equal Weighted Index ETF slumped 1.8% after Tuesday's record high, but far better than the Nasdaq 100's 2.9% tumble due to Nvidia, ASML, Meta and other tech titans.
The Nasdaq is now 3.6% above its 50-day line, the first time it's closed within 5% of the 50-day moving average since early June. Ideally, the tech-heavy index would move sideways or pull back modestly, perhaps to a rising 50-day. But the market is going to do what it's going to do.
U.S. crude oil prices popped 2.6% to $82.85 a barrel.
The 10-year Treasury yield fell 2.5 basis points to 4.14%, a fresh four-month low.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF sold off 3.8%. The iShares Expanded Tech-Software Sector ETF gave up 2.1%, with Microsoft stock a major component. The VanEck Vectors Semiconductor ETF dived 7.1%. Nvidia stock is the No. 1 holding in SMH, with ASML stock and Taiwan Semiconductor big members as well.
Reflecting stocks with more speculative stories, the ARK Innovation ETF gave up 2% and ARK Genomics lost 2.4%. Tesla stock is the No. 1 holding across ARK Invest's ETFs
SPDR S&P Metals & Mining fell 2%, and the Global X U.S. Infrastructure Development ETF lost 2.2%. U.S. Global Jets shed 1.6%. The SPDR S&P Homebuilders ETF declined 2.4%. The Energy Select SPDR ETF rose 1%. The Health Care Select Sector SPDR Fund advanced 0.5%.
The Industrial Select Sector SPDR Fund shed 1.3%.
The Financial Select SPDR ETF climbed 0.8%. The SPDR S&P Regional Banking ETF popped 1.2%.
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What To Do Now
Investors likely should have been reducing tech exposure in recent days, partially offset by adding nontech positions amid the market rotation.
Perhaps tech stocks will quickly rebound, but they could be in for more severe losses and weeks or even months of basing time.
If you have big, long-term gains in leaders like Nvidia, you could choose to hold a core position through another potential correction. That depends on what kind of trader you are.
Earnings season raises the possibility of major sector and market moves, so the next few weeks may not be orderly.
Nvidia, Novo Nordisk, Eli Lilly and Amazon stock are on IBD Leaderboard. Microsoft stock is on IBD Long-Term Leaders. Nvidia stock, Novo Nordisk and Google are on the IBD 50. Google stock and Broadcom are on IBD Big Cap 20.
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