Dow Jones futures declined modestly early Wednesday, while S&P 500 futures and especially Nasdaq futures fell sharply as semiconductor-equipment giant ASML tumbled on guidance. Nvidia and several other chip plays also retreated on reports of even-tougher U.S. export curbs to China and former President Donald Trump's comments on Taiwan.
Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value, with Johnson & Johnson a Dow component. S&P 500 futures declined 0.9% and Nasdaq 100 futures tumbled 1.4%.
Nvidia, ASML and other chip names weighed on the Nasdaq, with other megacaps also down. Also, Eli Lilly and Novo Nordisk fell solidly as Roche released positive early-stage data for its oral weight-loss drug.
The 10-year Treasury yield ticked up to 4.18%. Crude oil futures rose slightly.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
The stock market rally had another positive session Tuesday, led by small caps, the Dow and many non-tech sectors. Toast, Uber, UnitedHealth, Woodward and Flowserve flashed buy signals.
The video embedded in the article discussed Tuesday's market action and analyzed Toast, Woodward and Uber stock.
ASML Earnings, Other Chip Headwinds
ASML earnings and revenue topped second-quarter EPS and sales estimates, while surging bookings bodes well for long-term growth. But Q3 revenue guidance was light.
Also, the Biden administration is mulling its toughest-possible trade restrictions if Dutch-based ASML and others continue to sell advanced chip technology to China, Bloomberg reported. The administration has told allies it may impose controls on foreign products that use the tiniest amount of U.S. technology.
ASML stock plunged nearly 8% in premarket trade, set to drop well below a 1,056.34 buy point and undercutting the 50-day line.
Nvidia stock almost 4%, signaling a clear move below its 21-day line and approaching a rising 10-week line. Taiwan Semiconductor, which makes chips for Nvidia and many others, lost more than 5%.
In addition to ASML and tougher export curbs, Trump said Taiwan should pay the U.S. for defense, claiming it "doesn't give us anything." That comment, in a Bloomberg Businessweek interview published late Tuesday, raises concerns about whether Trump would defend Taiwan from a China attack if he became president again.
TSMC earnings are due early Thursday.
ASML peer Applied Materials gave up nearly 5% and U.K. chip design giant Arm Holdings lost more than 4%.
Other Earnings
Johnson & Johnson earnings and sales topped Q2 views, but the Dow Jones giant guided lower on full-year EPS. JNJ stock, which has been trending lower for the past two years, was little changed before the open.
Interactive Brokers topped views late Tuesday, with IBKR stock falling 1% in premarket trade. Shares are working on a 129.19 flat-base buy point. Interactive Brokers stock dipped Tuesday as Charles Schwab tumbled on declining interest income.
The S&P 500 hit a record high though the Nasdaq just edged higher as megacaps generally paused. fell modestly while rose slightly.
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Stock Market Rally Tuesday
The stock market rally continued to show strength Tuesday, with small caps, the Dow Jones and several non-tech sectors leading the way. Markets are now fully pricing in a Fed rate cut in September, and expect three cuts by year-end.
The Dow Jones Industrial Average leapt 1.85% in Tuesday's stock market trading, another record best and the biggest percentage gain since June 2023. The S&P 500 index rose 0.6%, just etching out a new high. The Nasdaq advanced 0.2%, only slightly below all-time levels.
The Magnificent Seven stocks were mixed. Nvidia stock was the biggest loser, down 1.6%. Tesla rose 1.55%, within a recent range with earnings due next week.
Overall breadth remained strong. The small-cap Russell 2000 jumped 3.5%, a fresh multiyear high. The S&P MidCap 400 index popped 2.5% to a record high.
The Invesco S&P 500 Equal Weight ETF rallied 1.8% to a record high.
The First Trust Nasdaq 100 Equal Weighted Index ETF gained 1%, also a new high, easily besting the Nasdaq 100's fractional advance.
Homebuilders, financials, industrials, energy names, infrastructure plays and a variety of medicals all continued recent runs.
The Nasdaq closed Tuesday 6.8% above its 50-day line, still somewhat extended. Continued sideways action or a modest pullback for the tech-heavy index and megacaps would be constructive.
U.S. crude oil prices fell 1.4% to $80.76 a barrel.
The 10-year Treasury yield fell six basis points to 4.17%, right at four-month lows.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF climbed 0.3%. The iShares Expanded Tech-Software Sector ETF rose 0.4%. The VanEck Vectors Semiconductor ETF dipped 0.1%. Nvidia stock is the No. 1 holding in SMH, with ASML stock and Taiwan Semiconductor big members as well.
Reflecting more-speculative story stocks, ARK Innovation ETF popped 3.4% and ARK Genomics ETF soared 7.5%. Tesla stock is the top holding across Ark Invest's ETFs.
The Industrial Select Sector SPDR Fund gained 2.55%, the SPDR S&P Homebuilders ETF spiked 5.85%, the Health Care Select Sector SPDR Fund rose 1.4% and the Financial Select SPDR ETF rose 1.4%, all hitting record highs. The SPDR S&P Regional Banking ETF jumped 4.6% to a 52-week high.
SPDR S&P Metals & Mining ETF climbed 1.4% and the Global X U.S. Infrastructure Development ETF jumped 3%, both just below all-time highs.
The Energy Select SPDR ETF rose 0.45%, its fifth straight gain.
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Stocks In Buy Areas
Toast stock rose 1.55% on Tuesday to 256.56 clearing a 26.29 buy point from a short cup-with-handle base next to a longer consolidation. The restaurant software play is set to turn profitable in 2024. Keep in mind that TOST stock has had multiple failed breakouts over the past year.
Uber stock climbed 2.8% to 74.30, clearing several weeks of trading within a consolidation with an official 82.14 buy point.
UnitedHealth stock jumped 6.5% to 548.87 after the Dow Jones health insurer beat views and reaffirmed guidance. Rising expectation that Trump will regain the White House has also buoyed big Medicare Advantage players. UNH stock decisively cleared a trendline and topped various short-term highs on Tuesday. Shares aren't far from an official buy point of 554.70.
Woodward stock popped 4.6%, rebounding from the 50-day line and coming up to a trendline. WWD stock has a 188.34 buy point from a flat base. The company makes energy control products for the aerospace and industrial markets.
Flowserve stock rallied 3.5% to 51.52, clearing a 50.49 flat-base buy point, according to MarketSurge. The industrial firm have risen for five sessions, with Monday's bounce off the 50-day line offering an early entry.
What To Do Now
The stock market rally has broadened dramatically, with a large number of buying opportunities in the past week. Meanwhile, most of the Big Tech leaders are holding up reasonably well — at least as of Tuesday's close.
Investors should be diversifying into the new areas of market strength. Don't go chasing extended stocks however. Work hard on those watchlists and pay close attention to earnings season.
Nvidia, ASML, Eli Lilly, Novo Nordisk and Taiwan Semiconductor stock are on IBD Leaderboard. Toast stock is on SwingTrader. UnitedHealth stock is on IBD Long-Term Leaders. Nvidia and Interactive Brokers stock are on the IBD 50. Nvidia stock is on IBD Big Cap 20. Toast was Tuesday's IBD Stock Of The Day.
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