Dow futures fell slightly overnight, while S&P 500 futures rose and Nasdaq futures jumped. nvidia (NVDA) has recently risen as demand for AI for its high-power chips booms, raising a variety of chip and AI operations. Fitch warned that the US government’s credit rating is at risk due to the debt ceiling crisis.
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ELF Beauty (dwarf), snowflake (snow) UiPath (road) And splink (SPLK) were also big drivers of earnings.
The stock market rally eased for the second straight session, amid ongoing debt ceiling talks. The Nasdaq is still above key levels, but the S&P 500 is back in its sideways range after pulling back from its 2023 highs. The Dow tested the 200-day line and is now down for the year.
Investors should be careful in the current environment, and willing to cut losses quickly.
Nvidia stock is running IBD Leaderboard, with ELF arrows on the leaderboard watch list. ice stocks on defect 50.
AAA credit rating is questionable on default risk
Late Wednesday, Fitch Ratings put the US government’s AAA credit rating on negative watch. Fitch cited “increasing political partisanship that impedes a decision to raise or suspend the debt ceiling.” The credit rating agency added: “The brinkmanship over the debt ceiling, and the failure of the US authorities to meaningfully address fiscal challenges in the medium term that will lead to widening budget deficits and a growing debt burden, point to downside risks to the creditworthiness of the US.”
On Wednesday, negotiators from the White House and House Republicans continued debt ceiling talks. A default looms in early June, with no agreement to raise the debt limit.
House Speaker Kevin McCarthy said there was still “time” for a debt ceiling deal. But House lawmakers will leave town for Memorial Day weekend.
Dow jones futures today
Dow futures fell 0.2% against fair value. S&P 500 futures rose 0.45%. Nasdaq 100 futures jumped 1.5%. NVDA stock is a large component of the S&P 500 and Nasdaq 100. AMD, Google and MSFT stocks also boosted Technologies overnight in the wake of Nvidia’s results.
Futures weakened slightly as Fitch Ratings put the US credit rating on negative watch.
At 8:30 a.m. ET Thursday, the Labor Department will release its weekly unemployment claims data.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Nvidia earnings
Nvidia’s earnings were down 20% year-over-year and revenue was down 13%, but both comfortably outperformed Views. The graphics chip maker expects $11 billion in second quarter sales, well above the consensus of just over $7 billion.
“The computer industry is going through two simultaneous phases – accelerated computing and generative artificial intelligence,” Nvidia founder and CEO Jensen Huang said in the earnings release.
NVDA stock is up 25% in extended trading, indicating a move above its November 2021 record high of 346.47. Shares fell 0.5 percent to 305.38 on Wednesday, the fourth consecutive weak drop after hitting a 52-week high.
Nvidia competitor advanced micro devices (AMD) rose sharply overnight. Shares rose 0.15% to 108.28 on Wednesday. AMD stock closed near the edge of the buy zone after the breakout last week. But it extends from the fifty-day line.
Nvidia’s earnings were also good news for other AI plays.
Palantir Technologies (PLTR) And C3. ai (Amnesty International) Both rose sharply overnight. Google’s parent the alphabet (Google) And Microsoft (MSFT) rose modestly.
other earnings
Snow’s stock fell overnight. Snowflake’s earnings topped views but the data analytics software company cut its full-year product revenue forecast. Snowflake stocks rose 1.1% on Wednesday, to 177.14. SNOW stock, which had been rising strongly over the past month, could now test the 200-day and 50-day lines on Thursday.
ELF stock jumped more than 10% in late trading. ELF Beauty’s earnings smashed views again, with revenue growth accelerating for the fifth straight quarter, to 78%. Shares rose 1.7% to 86.45 on Wednesday, reclaiming the 50-day line. ELF stock has been declining over the past few weeks after surging 372% from its May 2022 low to its April 24 peak of 97.03. A budget cosmetics maker can make an entry with an upward movement after earnings. She was on track to form a flat base by the end of the week, if she didn’t reach a new base before then.
PATH stock fell in extended action. UiPath’s earnings outperformed, but the automation software maker led to a slight decline in second-quarter revenue. PATH stock was operating at a base of 18.22 cups, but could undermine the 50-day line Thursday morning.
SPLK stock rose strongly after hours. Splunk posted a surprise profit while also topping the revenue. Database and security software rose 0.2% to 96.69 on Wednesday. Splunk stock is moving towards a 110.05 consolidation buy point after clearing the 50-day and 200-day lines last week.
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Stock market rise
The stock market rally extended Tuesday’s heavy losses into late Wednesday morning, but has pulled back somewhat from its lows.
House Republicans and White House Republican negotiators have resumed talks to raise the US debt ceiling, with the possibility of a sovereign default looming in early June. Earlier, House Speaker Kevin McCarthy said he was “hopeful we can make progress” on Wednesday. He said the two sides are separated on spending caps.
The Fed’s minutes from its May meeting reinforced market views that policymakers are hesitant about future moves. The rebound subsided by late afternoon at the close as Microsoft warned that Chinese-backed hackers had infiltrated key US cyber infrastructure.
The Dow Jones Industrial Average fell 0.8% in stock market trading Wednesday. The S&P 500 fell 0.7%. The Nasdaq Composite fell 0.6%. Small cap Russell 2000 fell 1.1%
US crude oil prices rose nearly 2% to $74.34 a barrel, the highest level since May 1, after a significant drop in US crude inventories.
Copper prices fell 2.4%, the lowest in nearly 7 months.
The 10-year Treasury yield rose 2 basis points, to 3.72%. The 2-year Treasury yield increased by 6 basis points, to 4.34%.
The US dollar continued to rise, hitting its best level since mid-March. Credit Strong Treasury yields and weak external economic data. Another factor? Debt ceiling default fears, which unexpectedly stimulate safe-haven flows into the dollar.
Exchange Traded Funds
Among the growth ETFs is iShares Expanding Technology and Software Sector Fund (IGV) decreased by 0.5%. Microsoft stock is a major component of IGV, with Splunk and AI stock also in the ETF. VanEck Vectors Semiconductor Corporation (SMH) fell 1.5%. Nvidia shares are one of SMH’s main holding companies, along with AMD.
Reflecting more speculative stories, the ARK Innovation ETF (ARK)ark(down 0.6% and ARK Genomics ETFs)ARKG) decreased by 1.5%. PATH stock is the #2 stock ETF held by Ark Invest. Cathie Wood’s Ark also owns some shares of NVDA and PLTR.
SPDR S&P Metals & Mining ETFs (XME(down 2.5% and the Global Infrastructure Development Fund (ETF) in the US)cradle) lost 1.7%. US Global Gates Foundation ETF (Planes) fell 1.9%. SPDR S&P Homebuilders ETF (XHB) decreased by 0.3%. Energy Defined Fund SPDR ETF (xle(Increased 0.4% and SPDR Healthcare Sector Selection Fund)XLV) decreased by 0.7%.
SPDR Financial Selection Fund (45), which includes banking but also financial giants such as Berkshire Hathaway (BRKB) And visa (Fifth), down 1.3%, back below the 50-day line. SPDR S&P Regional Banking ETF (Creates) sank 1.8% after hitting resistance at the 50-day line on Tuesday.
Top five Chinese stocks to watch now
Market rally analysis
The stock market rally fell again on Wednesday. Major indexes trimmed losses for most of the afternoon, but faded in the final minutes after Microsoft warned of a cyberattack in China.
The NASDAQ is still above its peaks in February and April.
The S&P 500 fell below the 21-day line, although it found some support near the 50-day line. However, last week’s move to the highs of 2023 now looks like a failed breakout.
The Dow fell to its worst level since late March, testing the 200-day line after falling below the 50-day mark on Tuesday. Dow is slightly negative for the year.
Russell tested the 2000 50-day line after reversing lower from the 200-day high in the previous session.
First Trust Nasdaq 100 Equal Weighted Mutual Fund (QQEW) fell 0.6% after Tuesday’s 1.4% loss. QQEW, which hit a three-month high on Monday, just closed above its 21-day line after finding support near 50-days.
Invesco S&P 500 Equal Weight Fund (RSP) rose 1.1%, marking its lowest level since late March. RSP has fallen again after crossing the 200 day line late last week. The equal-weighted S&P 500 ETF is down for the year and is closer to its October low than its peak in early February.
Chips were notable losers heading into Nvidia’s weak earnings and tracking analog devices (ADI) instruct.
But they should get a boost on Thursday on Nvidia’s strong results and impressive guidance.
Biotech companies in general have had a tough session, though PTC treatments (PTCT), Sarpeta treatment (SRPT) And arginex (ARGXBig losers.
More broadly, while some of the leading stocks and groups held up Wednesday, others did not. And the vast majority have lost significant ground since Monday.
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What are you doing now
Major indices are falling, with the S&P 500 and Dow Jones falling below key levels. Blue chip stocks are struggling. A debt ceiling deal could give markets a boost, but don’t count on a huge rally.
Stock futures point to a rebound in Nvidia’s earnings, but also point to a continuing divide between some growth stocks and the broader market.
There are not many actionable stocks out there, with recent buy signals faltering or failing.
Investors should have low to medium exposure. Make sure to cut losses quickly and consider taking partial profits on your winners, especially if they break down below key levels or are at risk of making solid gains.
At some point, the stock market rally will go on a long run. But Wednesday was not that day.
But you want to be ready. Keep working on your watchlists.
Read the big picture every day to stay in sync with market trend, leading stocks and sectors.
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