Dow Jones futures fell early Wednesday, along with S&P 500 futures and Nasdaq futures, after Fitch Ratings downgraded the U.S. long-term debt rating. Advanced Micro Devices and ELF Beauty headlined another big night of earnings.
The stock market rally was relatively quiet for a second straight day. The major indexes were narrowly mixed while the 10-year Treasury yield popped back above 4%, nearing 2023 highs.
Caterpillar soared to a record high on earnings, buoying the Dow Jones. Arista Networks skyrocketed from the bottom of a base into a buy zone. A number of leading chip stocks tumbled near the open following earnings. Some slashed or erased losses but others were still down sharply at the close, including ALGM stock.
Tesla stock fell modestly Tuesday amid a new NHTSA safety probe. Microsoft rose slightly. Both megacaps fell early Wednesday as they try to consolidate after post-earnings retreats.
U.S. Debt Downgrade
Late Tuesday, Fitch downgraded the U.S. sovereign long-term debt rating to AA+ from AAA, citing a growing debt burden, fiscal deterioration and eroding governance. The credit-ratings agency put the U.S. rating on downgrade watch in May during the debt-ceiling crisis.
Fitch now has the same U.S. credit rating as S&P Global Ratings, which downgraded the U.S. in 2011 after another debt standoff.
Earnings
Nvidia rival AMD stock, ELF Beauty, Vertex Pharmaceuticals, Exact Sciences and Terex reported earnings Tuesday evening.
ELF stock surged on blowout earnings and guidance, with AMD and Terex up modestly. Vertex stock was little changed while EXAS fell.
Dynatrace, Extreme Networks, Clean Harbors and Generac reported early Wednesday. DT stock fell solidly despite beating views, Extreme Networks edged higher. Clean Harbors just missed on sales. GNRC stock tumbled on mixed results.
GNRC stock, Nvidia, Tesla and Dynatrace are on IBD Leaderboard, with ELF stock and Penumbra on the Leaderboard watchlist. MSFT stock is on IBD Long-Term Leaders. ELF Beauty and DT stock are on the IBD 50. PAYC stock, Tesla and Dynatrace are in the IBD Big Cap 20.
The video embedded in this article reviewed Tuesday's market action and analyzed ANET stock, Oracle and Allegro MicroSystems.
Dow Jones Futures Today
Dow Jones futures fell 0.3% vs. fair value. S&P 500 futures retreated 0.45% and Nasdaq 100 futures declined 0.65%.
The 10-year Treasury yield fell 3 basis points to 4.02%.
Crude oil futures climbed slightly.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally traded mixed once again. The Dow Jones Industrial Average rose 0.2% in Tuesday's stock market trading. The S&P 500 index fell 0.3%. The Nasdaq composite declined 0.4%. The small-cap Russell 2000 retreated 0.45%, with banks falling.
The Nasdaq closed 5.1% above the 50-day line. The tech-heavy index could use a longer pause or pullback, giving growth stocks more room to run.
The market rally continues to enjoy broader leadership in and out of tech, despite individual sell-offs due to earnings.
U.S. crude oil prices fell 0.5% to $81.37 a barrel.
The 10-year Treasury yield jumped 9 basis points to 4.05%, near the 2023 high of 4.09% hit in early July.
With yields rebounding, the U.S. dollar extended its big run since mid-July.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF slumped 1.9%, while the Innovator IBD Breakout Opportunities ETF rose 0.4%. The iShares Expanded Tech-Software Sector ETF edged higher, with MSFT stock a major component. The VanEck Vectors Semiconductor ETF lost a fraction, shrugging off various chip losers. Nvidia is the No. 1 holding with AMD stock a notable component.
Reflecting more-speculative story stocks, ARK Innovation ETF gave up 2.5% and ARK Genomics ETF slid 2%. Tesla stock is the No. 1 holding across most of Ark Invest's ETFs. EXAS stock is a major holding across Cathie Wood's Ark and is No. 1 in ARKG.
SPDR S&P Metals & Mining ETF fell 1.1% and the Global X U.S. Infrastructure Development ETF rose 0.46%. U.S. Global Jets ETF descended 1.9%, as airlines continue to weaken. SPDR S&P Homebuilders ETF rose 0.6%. The Energy Select SPDR ETF and the Health Care Select Sector SPDR Fund both dropped 0.5%. VRTX stock is an XLV holding.
The Industrial Select Sector SPDR Fund edged up 0.3%.
The Financial Select SPDR ETF was flat. The SPDR S&P Regional Banking ETF declined 1.1%.
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Earnings
AMD stock rose more than 2% in premarket trade. AMD earnings and sales only narrowly topped views and the chip giant guided slightly lower on Q3 revenue, but management cited progress on AI processors. Shares rose 2.8% in Tuesday's session to 117.60, back above the 50-day line. AMD has an official consolidation buy point of 132.83. A strong post-earnings gain could break a trendline or top the recent high of 122.12, offering an aggressive entry.
NVDA stock sank 1%. AMD and Nvidia have swapped leadership in recent years, but the latter has had a major edge in AI chips so far.
ELF stock soared more than 15% overnight after the hot cosmetics maker obliterated views and guided higher. Shares dipped 0.2% Tuesday, but are holding above the rising 21-day moving average.
VRTX stock was little changed after hours as Vertex earnings and sales nudged past views. The biotech declined 1.3% to 347.74 on Tuesday, dipping back below a 354.94 cup-with-handle buy point, according to MarketSmith analysis.
EXAS stock fell solidly in overnight trade as Exact Sciences reported a smaller than-expected loss and above-forecast revenue. The Cologuard test maker slipped 1.1% to 96.44 on Tuesday, continuing to trade around the 21-day line. Shares have been moving sideways for the past several weeks.
TEX stock rose modestly before the open after Terex earnings easily beat, with revenue and guidance strong. TEX popped 5.8% to 62.03 on Tuesday, back above a 58.85 buy point. The heavy-equipment maker rallied on Caterpillar earnings.
DT stock fell modestly after earnings topped. Dynatrace is extended, but could offer an add-on buy point at 55.87. Shares rose 0.9% to 55.19 on Tuesday.
GNRC stock fell sharply as earnings fell short but revenue beat, signaling a decisive move below a 152.13 buy point but also possibly undercutting a prior 141.51 entry. Generac stock dipped 0.2% to 153.38 on Tuesday.
EXTR stock edged higher after Extreme earnings and revenue slightly topped views. Extreme stock popped 4.7% to 27.85 on Wednesday, boosting by Arista Networks earnings. Shares bounced from the 21-day line and getting above the bulk of a three-weeks-tight pattern. That would offer an aggressive or add-on entry, except for the upcoming earnings.
CLH stock was not yet active after Q2 earnings comfortably beat but revenue came in just below views. Clear Harbors has been consolidating for a few weeks, recently finding support near the 21-day.
Tesla Vs. BYD: TSLA Forges New Entry, With Booming Rival In Buy Zone
Tesla Stock
TSLA stock fell 2.4% to 261.07 on Tuesday, slightly below the 21-day moving average and still above the 10-week line, holding in a range after tumbling July 20 after earnings. The EV giant now has a 299.29 handle buy point on a consolidation going back to September. Investors could use a strong move off the 10-week line as an early entry, though a longer handle or an outright base would be constructive.
The National Highway Traffic Safety Administration said Tuesday that it's opening a preliminary investigation into 2023 Tesla Model 3 and Model Y EVs after a dozen complaints of lost steering control.
Tesla shares fell 2% early Wednesday, suggesting a move below the 10-week line but not the 50-day.
Microsoft Stock
Microsoft stock edged up 0.1% to 336.34 just above the 50-day line while still below the 21-day. Investors could use a strong move from the 50-day line as an entry point, but MSFT stock came down hard recently, including after the Dow tech giant guided to weak revenue and heavy AI-led spending. A longer pause at current levels would be helpful.
MSFT stock fell less than 1% in premarket trade.
What To Do Now
Stocks continue to set up, so investors should be paying close attention and working on watchlists. Many of those stocks still have earnings on tap, which is always a huge wild card. You can get a Symbotic or ANET stock, but you can also get a Rambus or ALGM stock.
With earnings still at full force and the Nasdaq in start-and-stop action, it's not a great time to be ramping up exposure.
But you can nibble at some new positions or add to existing holdings incrementally.
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