Dow Jones futures fell in after-hours trading, as did S&P 500 futures and especially Nasdaq futures Metaplatforms (META) crashed due to the forecast. service now (Now and Chipotle Mexican Grill (CMG) also reported that important economic data is available.
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Stock markets’ attempt to rally started higher on Wednesday, pointing to a possible third straight solid advance. But the most important indices erased their gains and closed just mixed.
Nvidia (NVDA), the market’s top stock, saw an ugly downward move and encountered resistance near the 50-day line. A number of leading stocks pared or reversed early gains.
AI game Vertive (VRT) rose to a record high on Wednesday morning but gave back much of its gains. Tesla (TSLA) managed to retain most of its post-earnings gains, but is a beaten-down stock.
In addition to Meta, ServiceNow and Chipotle, IBM (IBM) and leprechaun (PI) reported. Meta stocks sold off while ServiceNow and IBM fell. Chipotle stood up modestly while Impinj jumped.
Early Thursday, Caterpillar (CAT), Tradeweb Markets (TW) and royal Caribbean (RCL) are among the notable reports.
Also early Thursday, investors will receive the first quarterly GDP growth numbers and weekly jobless claims. The GDP report will include the core PCE price index, providing a preview of March PCE price data due on Friday.
Nvidia stocks and meta platforms are on the IBD leaderboard. Vertiv stock is in the IBD 50. Vertiv, ServiceNow and Meta stock is in the IBD Big Cap 20.
Dow Jones futures today
Dow Jones futures fell 0.2% from fair value, with IBM a blue-chip company. S&P 500 futures fell 0.55%. Nasdaq 100 futures lost 1.1%, with Meta stock having a real impact. ServiceNow is listed on the NYSE, but several other software companies found sympathy, including Microsoft (MSFT).
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
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Stock market rally
The stock market rally started with solid gains but quickly erased them.
The Dow Jones Industrial Average fell 0.1% in trading on Wednesday. The S&P 500 Index rose slightly and the Nasdaq Composite rose 0.1%. The Russell 2000 small-cap index fell 0.4%.
Tesla shares rebounded from their intraday peak of 167.97, but were still up 12.1% at 162.13 on the electric vehicle maker’s comments about “affordable” vehicles and more. Shares hit a 15-month low on Monday. Vertiv shares rose more than 19% intraday to a record 94.39, but closed up just 6.8% at 84.57
Perhaps the most negative signal on Wednesday came from the market’s most important stock. Nvidia fell 3.3%, falling from near the 50-day line. That it wasn’t a technical move suggests that Nvidia stock won’t quickly return to new highs, which isn’t good news for AI stocks and the broader market.
After a major sell-off, the market finally recovered earlier in the week. But one or two good days are nothing special. What matters is whether the market will usher in a subsequent day to confirm the new uptrend. That could still take place from Thursday. As long as the major indices fail to undercut recent lows, the attempted rally will continue.
U.S. crude oil prices fell 0.7% to $82.81 a barrel.
The 10-year Treasury yield rose 5.5 basis points to 4.65%.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 0.1%, with ServiceNow stock a key holding. The VanEck Vectors Semiconductor ETF (SMH) rose 0.1%. Nvidia stock is the dominant SMH player, with Lam Research also included in the ETF.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) rose 0.1% and the ARK Genomics ETF (ARKG) fell 1.3%. Tesla shares are an important component of Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) fell 0.3%. The US Global Jets ETF (JETS) fell 1.9%. The SPDR S&P Homebuilders ETF (XHB) fell 1%. The Energy Select SPDR ETF (XLE) gained 0.1% and the Health Care Select Sector SPDR Fund (XLV) fell 0.3%.
The Industrial Select Sector SPDR Fund (XLI) fell 0.8%. The Financial Select SPDR ETF (XLF) lost a fraction.
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Meta earnings
Meta earnings beat expectations, while revenue rose 27% to $36.46 billion, the fifth straight quarter of faster growth.
However, the Facebook and Instagram parent company expects second-quarter sales of $36.5 billion to $39 billion. At the median of $37.75 billion, this is below the consensus of $38.254 billion.
Meta also increased its 2024 investment target to $35 billion to $40 billion from $30 billion to $37 billion, “as we continue to accelerate our infrastructure investments to support our artificial intelligence roadmap.”
This is good news for suppliers like Arista Networks (A NET).
Meta shares fell 15% in overnight trading. In Wednesday’s regular session, shares reversed from an intraday high of 510 to close down 0.5% at 493.50, again below the 50-day line.
ServiceNow Revenue
ServiceNow’s earnings outperformed significantly, with revenue up slightly by 24% to $2.6 billion. However, the first major software maker to report for the current cycle predicted that subscription revenue fell slightly in the second quarter and for the full year.
ServiceNow shares subsequently fell significantly. Shares rose 0.7% to 746.29 on Wednesday, hitting resistance near the 10-week line. NOW the stock has a buy point of 815.32 from a flat base.
Chipotle earnings
Chipotle revenues significantly exceeded. Sales rose almost 14% to $2.7 billion, slightly higher than the previous year.
CMG stock rose slightly overnight, hovering around a buy point. Shares rose 0.3% to 2,923.32 on Wednesday, their third straight slight gain. Chipotle stock has a 3,023.98 buy point from a three-week squeeze that could turn into a flat base after this week.
Other Income
IBM’s profits rose, but sales lagged. The Dow tech giant also announced it would buy cloud software HashiCorp (HCP) in a $6.4 billion deal. The shares were sold off after the market closed.
Impinj profit significantly exceeded. Shares rose to around 133 in extended trading, signaling a possible breakout. PI shares fell 2.2% to 120.91 on Wednesday. PI stock has a buy point of 132.
Analysis of market rally
Active investors like to be active. So when the market has a good day or two after a dip, many want to get back in. Wednesday’s action was a reality check.
Until there is a subsequent day that confirms a new uptrend, investors should be largely cash-strapped. It’s okay to try some swing trades or pilot positions at the start of a rally attempt if you’re prepared to be at least as aggressive on the exit.
Remember: Even if a market rally lasts several months or even just several weeks, if you wait for an FTD, you still have the opportunity to capture the majority of the increase. If a market rally stalls after a few days or weeks, entering early will not be a success.
That being said, an FTD could happen any day. Therefore, you want to constantly update your watchlists and stay in touch with the market.
Read The Big Picture daily to stay up-to-date on market direction and the leading stocks and sectors.
Please follow Ed Carson in threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
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