Dow futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. Key inflation data is available on Friday morning.
The stock market rally was wildly mixed on Thursday. The Nasdaq, especially the Nasdaq 100, rose nvidia (NVDA) jumped dramatically due to strong earnings and blowout guidance. that also sent advanced micro devices (AMD), Taiwan Semiconductor (TSM) f Arista Networks (ANET) is also on the rise, with strong gains for ASML (ASML), Microsoft (MSFT), a parent at Google the alphabet (GOOGL) and other artificial intelligence or chip games.
But aside from a handful of big winners, the market showed tepid or weak action amid ongoing debt ceiling talks, concerns about the Fed’s rate hike and more. The losers handily beat the winners as the Dow drops below its 200-day line.
ASML and fellow chip equipment giants Applied materials (mortified) and KLA Corp. (KLAC) returned to Over Buy on Thursday, along with the maker of slide design software Cadence Design Systems (CDNS). Anet shares and Mobileye (MBLY) Early entries are flashing.
But investors should be careful about new buying amid the divided market movement and the ultra-focused market leadership.
Dow jones futures today
Dow futures fell 0.1% against fair value. S&P 500 futures were down 0.15% and Nasdaq 100 futures were down 0.1%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Debt ceiling talks
Debt ceiling talks continued throughout Thursday. President Joe Biden said the negotiations were “productive”. A key Republican member of the House of Representatives said differences had narrowed. But there is no deal to raise the debt limit yet. The US could default in early June if there is no agreement by then.
Moody’s said Thursday that the US must make a mid-June interest payment on Treasurys to avoid losing its AAA credit rating. Fitch Ratings late Wednesday placed the US’s AAA rating on negative watch due to the elevated risk of default.
while, Costco wholesale (it costs), Ulta Beauty (ULTA), a work day (memoirs) , outdoor deckers (deck) f Marvell technology (MRVL) and key earnings reports after the close.
Costco’s earnings came in lower than the fiscal outlook for the third quarter. COST stock was little changed in the extended trade after closing modestly below all of its moving averages.
Ulta’s earnings are just above its first quarter hits while it just missed sales. ULTA stock fell overnight, indicating a dip below the 200-day mark after slipping from record highs on May 1.
Workday topped first-quarter earnings views and topped the line for subscription revenue in the second quarter. WDAY stock is still jumping in late trading, indicating a move above multiple buy points. Shares rose 0.1 percent to 196.41 Thursday. The software giant is running a 206.78 cup base buy, with 199.17 as an early entry from an initial handle.
Deckers’ earnings topped views, but DECK’s stock fell hard overnight. Maker of Ugg shoes and running shoes Hoka dropped below its 50-day streak recently. hold on (onon) f foot locker (FL) earnings.
Marvell’s earnings and earnings slightly exceeded first-quarter viewership. It also led the chipmaker higher, forecasting artificial intelligence revenue to double in the second half of the fiscal year. MRVL stock jumped overnight. Shares jumped 7.6% on Wednesday, to 49.47. It was on the cusp of a 49.58 cup bottom rule, but Marvell stock has been extended from the 50-day and 200-day lines.
Nvidia and ASML stocks are on the IBD Leaderboard. Microsoft, KLA, and CDNS stocks are IBD’s long-term leaders. WDAY and ASML stock are at IBD 50. ASML, Workday, Microsoft, Cadence Design and AMAT are at IBD Big Cap 20.
The debt ceiling is just the beginning. These clouds may derail the economy.
PCE inflation data
The Commerce Department will release the Personal Consumption Expenditure Price Index, the Fed’s preferred measure of inflation, at 8:30 a.m. ET on Friday.
Economists expect the personal consumption expenditures price index to rise 0.3% in April. This would bring the 12-month PCE inflation rate to 4.3%. Core personal consumption expenditures, which exclude food and energy, also rose 0.3%, leaving the core inflation rate for personal consumption expenditures unchanged at 4.6%.
Fed Chair Jerome Powell has indicated that he is paying extra attention to core personal consumption expenditure services excluding housing. So find reading these super services inflation.
The odds of another rate hike at the June 13-14 policy meeting are 49%, up sharply over the past several days. And it would reach 73% by the end of the Fed’s meeting last July.
Personal consumption expenditures inflation data is part of the Business Income and Expenditure report. Economists see income and spending rising 0.4% in April.
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Stock market rise
The stock market rally showed a very mixed move, with the Nasdaq gaining ground thanks to a handful of big-cap tech companies.
The Dow Jones Industrial Average fell 0.1% in stock market trading Thursday. The S&P 500 rose 0.9%. The Nasdaq Composite Index jumped 1.7%. Small cap Russell 2000 fell 0.8%.
Nvidia stock jumped 24%. AMD shares jumped 11% and Taiwan half 12%. ANET stock fell nearly 11%. ASML, KLA and AMAT shares rose 6%-7%. Microsoft stock rose nearly 4% to a 52-week high, while Google stock rose 2.1%%. Excluding Arista and KLAC shares, its market cap is at least $100 billion. Nvidia’s price is close to $1 trillion, with GOOGL stock passing $1.5 trillion and Microsoft $2 trillion.
US crude oil prices fell 3.4% to $71.83 a barrel. Copper prices rose 0.8%, but from their lowest levels in nearly seven months.
The 10-year Treasury yield jumped 10 basis points, to 3.81%.
The US dollar continued to rally, closing at the 2023 highs set in early March.
Exchange Traded Funds
Among the ETFs, the iShares Expanded Technology and Software Sector Fund (IGV) gained 2.5%, hitting a 10-month high. MSFT stock is one of IGV’s most important holdings. The VanEck Vectors Semiconductor Index (SMH) rose 8.6% to a 52-week high. NVDA, Taiwan Semiconductor, AMD ASML, Applied Materials, and KLA Corp. All are notable SMH ingredients. CDNS stock is in IGV and SMH ETFs.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) sank 2.7% and ARK Genomics ETF (ARKG) sank 2.5%.
The SPDR S&P Metals & Mining ETF (XME) was down 0.8%. The US Global Jets ETF (JETS) rose 1.2%. The SPDR S&P Homebuilders ETF (XHB) rose 0.3%. The Energy Select SPDR ETF (XLE) was down 1.8% and the SPDR Healthcare Sector Fund (XLV) was down 1%.
The Financial Select SPDR ETF (XLF) closed below the break-even point. The SPDR S&P Regional Banking Index (KRE) fell 0.8%.
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Market rally analysis
The stock market rally showed a sharp divergence on Thursday. The Nasdaq 100 rose more than 2% while the losers outweighed the winners two to one.
The Nasdaq Composite Index recovered almost all of the losses from the previous two days. The S&P 500 has regained its 21-day line in a solid advance. But those reflect significant to huge gains at Nvidia, AMD, Microsoft, Google, and more.
Meanwhile, debt default fears, along with rising Treasury and dollar yields, weaker external economies and growing prospects for higher federal interest rates weighed on the broader market.
The Dow Jones, even MSFT stock as a component, fell below its 200-day line, although it closed off lows. Russell 2000 fell below the 50-day line.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) gained just 0.5%, rebounding from 21 days.
The Invesco S&P 500 Equivalent Weight ETF (RSP) fell less than 0.1%, but off session lows. The RSP is down 2.1% for the week, below all of its moving averages.
New lows easily overcome new highs.
Aside from AI and playing on the chips, there weren’t many stocks flashing buy signals ELF Beauty (ELF) was an exception.
Some names showed a strong move, but many stocks in or near overbought areas pulled back significantly. This was a disturbing trend this week.
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What are you doing now
The forked market rally continues to show extraordinary movement. A number of stocks were big winners but the market in general was lackluster at best.
Investors can modest exposure. How much depends greatly on whether you are in the winning stocks.
If you are not among the great winners of 2023 and are struggling to make progress, don’t beat yourself up. It is difficult to pass a tight march in the market, with a different alternation of segments. Plenty of stocks looked promising, only for breakouts or entries to quickly fade, or to quickly post solid gains back and forth.
What you don’t want to do is chase the extended stock. Nvidia stock has crossed more than 90% of its 200-day moving average. A major pullback and possibly the creation of a new base over the next several weeks wouldn’t be a surprise. This may offer new entries in the future, but NVDA is out of reach at the moment.
Don’t be too focused. Among the many issues with a highly divided market and narrow leadership is that traders can be highly exposed to a particular stock, group, or topic. Anyone who was heavily invested in Nvidia and related plays was clearly a big winner Thursday, but negative portfolio risk is high. Investors could have bought shares of ANET, ASML, KLA, or a few other names Thursday, but they probably don’t want to buy many of them.
The time to invest heavily is when there is a clear and broad uptrend in the market, with a large number of stocks from a variety of sectors flashing buy signals and continuing higher. At various points, the market rally triggered such a turnaround, only to turn back down again.
But you want to be ready for action. So keep working on the watchlists.
Read the big picture every day to stay in sync with market trend, leading stocks and sectors.
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