Dow Jones futures rose solidly early Thursday, along with S&P 500 futures and Nasdaq futures, signaling a small bounce after the stock market rally sold off following the Federal Reserve rate outlook, with the major indexes suffering damaging losses.
Micron Technology dived overnight on weak guidance, while Nvidia and Tesla rose. Vertex Pharmaceuticals plunged as its non-opioid drug only matched a placebo in a midstage study.
Nvidia initially jumped Wednesday, but ultimately reversed lower. Nvidia chipmaker Taiwan Semiconductor fell back from just below a buy point. Both rose slightly overnight.
Tesla sold off along with many leaders in the Fed-led sell-off. But Tesla stock, still above all its moving averages, was rising early Thursday.
Nvidia is a hedged position on IBD Leaderboard. Tesla stock is on the watchlist.
Dow Jones Futures Today
Dow Jones futures rose 0.8% vs. fair value. S&P 500 futures climbed 0.9% and Nasdaq 100 futures advanced 0.9%. Those solid gains are still just a portion of Wednesday's market losses.
The 10-year Treasury yield rose several basis points to 4.54%, which would be a five-month high.
The Bank of Japan kept interest rates at 0.25% overnight. The decision not to hike was largely expected, but the yen still weakened.
The Bank of England kept interest rates at 4.75%, with three members favoring a cut.
Late Wednesday, President-elect Donald Trump opposed a continuing resolution to keep the government open, following objections from key ally, Tesla CEO Elon Musk. That raises the risks of a government shutdown.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Fed Rate Outlook
The Federal Reserve cut rates by a quarter point on Wednesday to 4.25%-4.5%, for a total of 100 basis points over the last three meetings of 2024. The Fed "dot-plot" of individual policymakers' forecasts for interest rates indicated two rate cuts next year. That was all as expected.
But the rate-cut outlook also comes with the Fed projecting relatively modest economic growth in 2025. Central bank forecasts have tended to undershoot actual growth recently. If GDP growth outperforms, keeping inflation pressures high, Fed rate cut plans may not hold up.
Fed chief Jerome Powell, speaking after the policy statement and dot-plot release, was upbeat about the economy. That's a strike against rate cuts. He also spoke about policy uncertainty, including tariffs, under President-elect Donald Trump. That could spur more Fed caution.
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Stock Market Rally
The stock market rally was up modestly heading into the Fed decision and Powell's press conference, but the key indexes sold off hard while Treasury yields spiked.
The Dow Jones Industrial Average plunged 2.6%, or more than 1,100 points, in Wednesday's stock market trading after closing just below the 50-day line on Tuesday. It was the Dow's 10th straight loss, now the longest losing streak since 1974.
The S&P 500 index sold off 2.95%, undercutting the 50-day line. The Nasdaq tumbled 3.6%, below its 21-day line. The small-cap Russell 2000 dived 4.4%, decisively below its 50-day line. It's now wiped out all its postelection gains and more.
The Invesco S&P 500 Equal Weight ETF lost 3% to a three-month low.
The First Trust Nasdaq 100 Equal Weighted Index ETF tumbled 3.7%, going below its 21-day and 50-day lines decisively..
U.S. crude oil prices rose 0.7% to $70.58 a barrel.
The 10-year Treasury yield leapt 11 basis points to 4.49% as of the 3 p.m. ET close. But in electronics trading, with stocks still trading, briefly got to 4.51%, above the Nov. 15 peak that was the highest since May 31. The yield hit a recent low of 4.13% on Dec. 6.
Higher yields sent the dollar soaring to a two-year high.
Bitcoin plunged 5.7% to $100,636 as of 4 p.m. ET.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF plunged 5.95%. The iShares Expanded Tech-Software Sector ETF tumbled 4.5%. The VanEck Vectors Semiconductor ETF gave up 3.2%. Micron stock is a notable SMH holding, but Nvidia and Taiwan Semiconductor are huge components.
ARK Innovation ETF dived 7% and ARK Genomics ETF lost 7.3%. Tesla stock is a major holding across Ark Invest's ETFs. Cathie Wood's Ark has also build up a big NVDA stake.
SPDR S&P Metals & Mining ETF shed 3.95%. SPDR S&P Homebuilders ETF stepped down 4.4%. The Energy Select SPDR ETF gave up 2.8% and the Health Care Select Sector SPDR Fund declined 1.4%.
The Industrial Select Sector SPDR Fund retreated 2.8%. The Financial Select SPDR ETF skidded 3%.
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Micron Earnings
Micron earnings slightly beat while revenue was in line for the fiscal first quarter. But the memory-chip giant guided fall below fiscal Q2 consensus on earnings, revenue and gross margins.
Micron stock dived well over 10% in after-hours action. Shares fell 4.3% to 103.90 on Wednesday, falling back from the 200-day line. MU stock is well below the June peak of 157.33.
Memory plays Western Digital and Seagate Technology fell in premarket trading. So did memory-exposed chip-equipment makers such as Applied Materials.
Nvidia Stock
Nvidia stock initially jumped to 136.70, but ultimately fell 1.1% to 128.91. Shares have fallen for five straight sessions, during which the AI chip giant has tumbled well below its 50-day line to a two-month low, triggering multiple sell signals.
NVDA stock may be working on a double-bottom base with a potential 146.54 buy point, but right now it's in a downtrend and needs to start rising.
Nvidia stock rose modestly overnight despite the Micron earnings sell-off.
Taiwan Semiconductor stock declined 2.5% to 195.56 on Wednesday, just holding the 50-day line. That's after nearly hitting the 205.63 cup-with-handle buy point intraday. Shares rose slightly early Thursday.
Tesla Stock
Tesla stock, among the hottest big-cap stocks in recent weeks, tumbled 8.3% to 440.13. But it's still above its 10-day line and 41% above its 50-day.
Tesla rose modestly early Thursday.
What To Do Now
The stock market rally suffered ugly losses Wednesday, signaling a possible character change.
The magnitude of the sell-off was surprising, but investors have to pay attention to what the market is doing, not what they expect or want.
Investors may want to cut exposure, if only because recent buys and other specific positions are working. But reducing exposure outright would be sound too.
Futures suggest a positive day two reaction to the Fed meeting. But it's only a portion of Wednesday's losses, and they may not hold.
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