Dow Jones futures were little changed Wednesday night, along with S&P 500 futures and Nasdaq futures, with Nvidia stock, Cisco and Robinhood (HOOD) among the key earnings movers. The stock market rally closed at session lows Wednesday as Fed minutes suggested the central bank could start scaling back asset buys this year.
The Federal Reserve was not yet ready to begin formal “taper talk” late last month, according to the Fed minutes from the July meeting. But several policymakers thought the Fed would begin tapering its monthly bond purchases by year-end, though some thought it would start in early 2022.
Some Fed officials worried about inflation remaining hot for longer, in part due to the ongoing bond buying program. The delta variant was seen as a downside risk for economic growth but also could extend supply chain woes and thus inflation.
The stock market rally gave up ground following the Fed minutes release. Apple (AAPL) fell to just under its 21-day exponential moving average. AAPL stock had flashed a couple of entry points from last Thursday to Monday, rebounding from the 21-day line and clearing a short consolidation.
Nvidia stock climbed modestly on strong earnings late, while rival Advanced Micro Devices (AMD) nudged higher in sympathy. SNPS stock, already in a buy zone, rose to record highs overnight. Cisco and HOOD stock fell on guidance. DLO stock skyrocketed.
Tesla AI Day
Tesla AI Day looms Thursday night. It’s not clear what the event will showcase. Tesla’s self-driving systems, Autopilot and Full Self-Driving, are an attempt to apply a form of AI.
On Monday, the National Highway Traffic Safety Agency opened a Tesla Autopilot probe related to crashes into emergency vehicles on the side of roads. The announcement including language suggesting a tougher approach than previously.
Tesla stock rebounded Wednesday, up 3.5% to 688.99. Shares fell Tuesday but closed just above its 50-day and 200-day lines. The new early entry for TSLA stock is 730, just above last Friday’s intraday high.
Dow Jones Futures Today
Dow Jones futures were little changed vs. fair value. S&P 500 futures edged lower. Nasdaq 100 futures were flat. Cisco stock is a Dow Jones, S&P 500 and Nasdaq component.
Stock Market Rally
The stock market rally didn’t move much until the 2 p.m. ET Fed minutes release. After a momentary uptick, the major indexes retreated on the possibility of a bond taper this year, with losses picking up steam into the final minutes.
The Dow Jones Industrial Average gave up 1.1% in Wednesday’s stock market trading. So did the S&P 500 index. The Nasdaq composite sank 0.9%. The small-cap Russell 2000 retreated 0.8%
Apple stock, as a $2.4 trillion giant in the Dow Jones, S&P 500 and Nasdaq, weighed on the major indexes. Shares slid 2.55% to 146.36. AAPL stock closed just below its 21-day line, the first time it’s done that since June 10.
Crude oil prices fell 1.7%, to settle at $65.46 to their lowest levels since May. Oil futures, which close well before U.S. stock markets, extended losses overnight.
Lowe’s (LOW) and TJX Cos. (TJX) jumped on earnings, flashing at least early entries. Other housing-related stocks and off-price retailers also rose after sinking Tuesday on a weak retail sales report and more. Target (TGT) retreated despite strong results, guidance and buyback, but found support at its 50-day line.
ZIM stock popped toward a buy point, but pared gains somewhat. ZIM reported blowout earnings and sales growth, as shipping rates soar amid limited supply and rebounding global demand. Several other shipping stocks rallied.
Metal miners slumped as copper and iron prices fell. But steelmakers rebounded modestly after pulling back to start the week.
Industrials continued to weaken after looking promising at the end of last week.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) climbed 0.6%, while the Innovator IBD Breakout Opportunities ETF (BOUT) dipped 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.3%. The VanEck Vectors Semiconductor ETF (SMH) sank 1.3%. Nvidia and AMD stock are two key SMH components.
SPDR S&P Metals & Mining ETF (XME) retreated 0.9% as mining woes offset steelmaker bounces. Global X U.S. Infrastructure Development ETF (PAVE) dipped 0.4%. U.S. Global Jets ETF (JETS) slipped 0.6%. SPDR S&P Homebuilders ETF (XHB) dipped 0.2%. The Energy Select SPDR ETF (XLE) gave up 2.1% and the Financial Select SPDR ETF (XLF) retreated 1.2%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) lost less than 0.1% each. Tesla stock is still the No. 1 holding across ARK Invest’s ETFs. HOOD stock has become a significant ARK holding as well.
Nvidia earnings modestly beat views, with strong gaming revenue and solid data center gains. The company expressed confidence that its Arm Holdings acquisition will go forward, despite regulatory concerns in some countries.
Nvidia stock rose 2% in overnight action, back to its 50-day line. Shares sank 2.15% to 190.40 on Wednesday, closing below its 50-day line for the first time in nearly three months. Nvidia stock now has a short cup-with-handle base with a 207.43 buy point, according to MarketSmith analysis. Investors could buy NVDA stock off a 50-day line bounce, especially if it breaks a trend line in the handle.
AMD stock edged higher in extended trade. After an impressive earnings breakout from 95.54 starting in late July, AMD stock has given up roughly half its gains, trying to find support at the 21-day moving average. Shares fell 3.8% to 103.44
Robinhood reported 131% revenue growth to $565 million amid huge crypto trading, edging past views in its first report since it came public last month. Dogecoin accounted for 62% of Robinhood’s crypto revenue in Q2. But the free trading app said, “We expect lower trading activity.” Cryptocurrency exchange Coinbase (COIN) made similar comments last week.
HOOD stock slumped 9% overnight. Shares popped 6.7% to 49.80 on Wednesday. After pricing at 38 a share in late July, Robinhood stock initially fell but then spiked as high as 85 on Aug. 4. But HOOD stock has pulled back sharply. If it can start moving higher, an IPO base will form with an official buy point of 85.10. An early entry would be nice, but there’s no sign of that so far.
Cisco earnings edged past fiscal fourth-quarter views, but the company gave weak EPS guidance for the current Q1. Revenue guidance was solid.
CSCO stock sank nearly 2% in extended action, suggesting a test of its 50-day line. The Dow Jones tech giant fell 1.5% to 55.15 on Wednesday, below its 21-day line and 55.45 flat-base buy point.
The relative strength line, the blue line in the charts provided, has been trending lower for more than two years, reflecting Cisco stock’s underperformance vs. the S&P 500 index.
Synopsys earnings slightly topped fiscal Q3 views.
SNPS stock climbed nearly 4% to 302. Shares slipped 0.3% to 290.63 on Wednesday. Synopsys stock closed in range from a 283.19 cup-with-handle buy point, though the July breakout came on light volume. The buy zone for SNPS stock runs to 297.35.
DLocal earnings and revenue boomed, beating views.
DLO stock leapt 22.5% to above 60 in extended trade, suggesting a possible breakout. Shares of the Uruguay-based payments firm rose 1.6% to 49.28 on Wednesday, hitting 53.49 intraday. DLocal stock is consolidating in whipsaw fashion with a 57.10 buy point. But, like many recent IPOs, DLO stock is so volatile that any breakout or early entry would be high risk.
Market Rally Analysis
The stock market rally gave up ground after the Fed minutes release at 2 p.m. ET. The Federal Reserve isn’t going to take the punchbowl away, but may not add as much punch in the near futures.
The Dow Jones and S&P 500 fell below their 21-day lines. The Nasdaq composite undercut its 50-day line.
Apple stock had buoyed the major indexes, helping to mask some underlying weakness in growth names. But on Wednesday the tech titan outpaced on the downside.
The Russell 2000 fell to just above its 200-day line. The small-cap index reflects woeful market breadth. The Nasdaq advance/decline is right at 2021 lows.
The saving grace is that many growth stocks did well, with limited losses or decent gains.
Stepping back, the current pullback is healthy. The key question is how far the retreat will go. An outright market correction might create more opportunities in the long run. But a short, shallow retreat would create some new bases, handles or other entries while also letting investors avoid big losses and sweeping cuts in exposure.
What To Do Now
Continue to evaluate your portfolio. Is it time to cut out some losers or laggards, or at least pare them back? If you have winners extended from moving averages and buy points, you might consider taking some partial profits, depending on your conviction in the company and the size of your position.
Keep a close eye on the market rally via the major indexes and leading stocks. The Nasdaq and many top stocks are at key levels. This might be the moment when stocks rebound — or start to sell off harder.
So have a game plan for offense, but be ready to play defense. The market rally could flash a bullish or bearish signal in the morning and reverse course by the close. So there’s always a delicate balance of being decisive yet not impulsive.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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