Dow Jones futures fell slightly overnight, but S&P 500 futures rose and Nasdaq futures rose. Nvidia (NVDA) surged in the second half on rising artificial intelligence demand for high-performance chips, pulling up various chip and AI efforts. Fitch has warned that the US government’s credit rating is under threat due to the dispute over the debt ceiling.
X
elf beauty (fairy), snowflake (snow) UiPath (the way) and splunk (Sprak) was also a big profit driver.
Stock market gains retreated for the second day in a row as debt ceiling negotiations continued. The Nasdaq is still above key levels, but the S&P 500 is back in a flat range after retreating from its 2023 highs. Dow Jones tested the 200-day line and is now down for the year.
Investors should be cautious in the current environment and be ready to cut losses quickly.
Nvidia stock is on IBD Leaderboard, with ELF stocks on the leaderboard watchlist. SNOW is in stock IBD50.
AAA credit rating suspected of default risk
Late Wednesday, Fitch Ratings put the US government’s AAA credit rating on negative watch. “Increased conflicts between political factions are preventing resolutions to raise or suspend the debt ceiling,” Fitch said. The ratings agency added, “The brinkmanship of the debt ceiling and the failure of the U.S. authorities to meaningfully address the medium-term fiscal challenges that will lead to rising budget deficits and a growing debt burden pose downside risks to U.S. creditworthiness. suggests,” he added.
White House and House Republican negotiators Wednesday continued negotiations on the debt ceiling. A default is imminent in early June if no deal is reached to raise the debt ceiling.
House Speaker Kevin McCarthy said there was still “time” to reach a deal on the debt ceiling. But lawmakers will be out of town over Memorial Day weekend.
dow jones futures today
Dow Jones futures fell 0.2% against fair value. S&P 500 futures rose 0.45%. Nasdaq 100 futures rose 1.5%. NVDA stock is a large component of the S&P 500 and Nasdaq 100. AMD, Google and MSFT stocks also boosted tech stocks overnight after Nvidia’s results.
Futures fell slightly after Fitch put the US credit rating on negative watch.
The Labor Department releases weekly unemployment claims data at 8:30 a.m. ET on Thursday.
Note that overnight trading such as Dow Futures does not necessarily translate into actual trading in the next regular stock market.
Nvidia Earnings
Nvidia’s revenue fell 20% year-over-year and sales fell 13%, both of which comfortably exceeded views. The graphics chip maker is forecasting second-quarter revenue of $11 billion, well above the consensus consensus of just over $7 billion.
“The computer industry is going through two simultaneous transitions: accelerated computing and generative AI,” Nvidia founder and CEO Jensen Huang said on the earnings call.
NVDA shares climbed 25% in extended trading, signaling a move above the November 2021 all-time high of 346.47. The stock fell 0.5% to 305.38 on Wednesday, marking its fourth straight year of modest declines after hitting a 52-week high.
Nvidia rival Advanced Micro Devices (AMD) also soared overnight. The stock on Wednesday rose 0.15% to 108.28. AMD shares closed near the edge of the buy zone after last week’s breakout. However, it was extended from the 50-day line.
Nvidia’s earnings were good news for the rest of the AI space as well.
Palantir Technologies (PLTR) and C3.ai (AI) both rebounded sharply overnight. Parent company of Google alphabet (Google) and microsoft (MSFTMore) rose moderately.
Other income
SNOW stock plummeted overnight. Snowflake’s revenue outstripped views, but the data analytics software company cut its full-year product revenue forecast. Snowflake shares rose 1.1% to 177.14 on Wednesday. SNOW stocks, which have risen significantly over the past month, may test the 200-day and 50-day lines on Thursday.
Elf shares rose more than 10% in late trading. ELF Beauty’s earnings pushed views down again, and earnings growth accelerated to 78% for his fifth consecutive quarter. On Wednesday, the stock rose 1.7% to 86.45, regaining the 50-day line. The ELF stock has rebounded in recent weeks after surging 372% from its May 2022 low to a high of 97.03 on April 24. Cheap cosmetics makers may offer to enter the market in a bullish move after the settlement of accounts. If we hadn’t established a new value by then, we were on track to build a flat base by the end of the week.
PATH shares fell in long-term trading. UiPath outperformed, but automation software maker second-quarter sales fell slightly. Path shares were trading at an 18.22 cup base, but could break below the 50-day line on Thursday morning.
SPLK shares rose strongly in after-hours trading. Splunk reports unexpected profits and hits record sales. On Wednesday, database and security software deals rose 0.2% to his 96.69. After clearing the 50-day and 200-day lines last week, Splunk stock is moving towards the consolidation buying point at 110.05.
IBD experts analyze hot stocks during the stock market rally on IBD Live.
stock market rise
The stock market rally extended Tuesday’s sharp decline into late Wednesday morning, but broke some of its lows.
House Republicans and White House negotiators resumed talks to raise the U.S. debt ceiling in early June amid a possible sovereign default. Earlier, House Speaker Kevin McCarthy said on Wednesday that he was “hoping to make progress.” He said the two sides were divided on the spending cap.
The minutes of the Fed’s May meeting confirmed the market’s view that policymakers are undecided about future moves. The late-afternoon backlash cooled as Microsoft warned that China-backed hackers were infiltrating key U.S. cyber infrastructure.
The Dow Jones Industrial Average fell 0.8% in stock market trading on Wednesday. The S&P 500 index fell 0.7%. The Nasdaq Composite fell 0.6%. Small-cap Russell 2000 fell 1.1%.
U.S. oil prices jumped nearly 2% to $74.34 a barrel, the highest since May 1, as U.S. oil inventories plummeted.
Copper prices fell 2.4% to a seven-month low.
The 10-year U.S. Treasury yield rose two basis points to 3.72%. Yields on two-year US Treasuries rose six basis points to 4.34%.
The US dollar continued its rally, reaching its highest level since mid-March. U.S. Treasury yields boosted credit quality and weaker international economic data. another factor? Fears of debt defaults hitting the debt ceiling are counter-intuitively driving inflows into the safe-haven dollar.
ETFs
Among growth ETFs, the iShares Expanded Technology Software Sector ETF (IGV) fell 0.5%. Microsoft stock is a key component of IGV, and Splunk and AI stocks are also included in the ETF. VanEck Vectors Semiconductor ETF (SMH) retreated 1.5%. Nvidia shares are SMH’s major holdings alongside AMD.
A stock that reflects a more speculative story, the ARK Innovation ETF (Arkuk) down 0.6%, the ARK Genomics ETF (Argu) fell 1.5%. PATH is the second largest holding of Ark Invest ETFs overall. Cathie Wood’s Ark also owns her NVDA and a portion of her PLTR shares.
SPDR S&P Metals & Mining ETF (XME) fell 2.5%, while the Global X US Infrastructure Development ETF (pave) gave up 1.7%. US Global Jets ETF (Jets) fell 1.9%. SPDR S&P Homebuilders ETF (XHB) fell 0.3%. Energy Select SPDR ETF (XLE) rose 0.4%, while the Healthcare Select Sector SPDR Fund (XLV) fell 0.7%.
Financial Select SPDR ETF (XLF), which includes not only large banks, but also financial institutions such as: Berkshire Hathaway (BRKB) and visa (V.), down 1.3%, below the 50-day line. SPDR S&P Regional Banking ETF (KRE) fell 1.8% after hitting resistance at the 50-day line on Tuesday.
Top 5 Chinese stocks to watch right now
market rise analysis
Stock market gains fell again on Wednesday. The major indexes eased their losses for most of the afternoon, but their losses narrowed in the final minutes after Microsoft warned of a cyberattack in China.
The Nasdaq is still above February and April highs.
The S&P 500 broke below the 21-day line but found some support near the 50-day line. However, last week’s rally to 2023 highs now looks like a failed breakout.
After falling below the 50-day line on Tuesday, the Dow Jones dropped to its worst level since late March and tested the 200-day line. The Dow Jones Industrial Average is slightly negative this year.
The Russell 2000 has tested the 50-day line after falling from the 200-day line in the previous trade.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 0.6% after a 1.4% drop on Tuesday. QQEW hit a three-month high on Monday, but closed above the 21-day line after finding support near the 50-day line.
Invesco S&P 500 Equal Weight ETF (RSP) fell 1.1% to its lowest since late March. The RSP, which had just crossed the 200-day line late last week, has turned back. The equal-weight S&P 500 ETF has been down since the beginning of the year, closer to its October lows than its early February highs.
Chips suffered a notable loss to Nvidia’s earnings and following the downturn Analog Devices (ADI) information.
But they should get a boost on Thursday from Nvidia’s strong performance and excellent guidance.
Biotechnology was a tough session overall. PTC Therapeutics (PTCT), Serpenta Therapeutics (SRPT) and Argenks (ARGX) big loser.
More broadly, some heavyweights and groups held up Wednesday, while others did not. And the majority have slowed significantly since Monday.
Timing the Market with IBD’s ETF Market Strategy
what to do now
Major indices are pulling back, with the S&P 500 and Dow Jones below their major levels. Major stocks are struggling. A deal to set a debt ceiling could boost the market, but a significant rise is not expected.
Equity futures point to a rebound in Nvidia’s earnings, but they also show a continuing gulf between some growth stocks and the broader market.
With the recent weakening or failing buy signal, there aren’t many viable stocks.
Investors should have low to moderate exposure. Consider cutting losses immediately and taking a portion of the winner’s profits, especially if they are below a significant level or are in danger of reciprocating a solid profit.
At some point, the stock market rally will continue for a long time. But Wednesday was not that day.
But be prepared. Keep building your watchlist.
Read “The Big Picture” daily to stay on top of market direction and key stocks and sectors.
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