Dow Jones futures edged higher early Wednesday, while S&P 500 futures and Nasdaq futures fell slightly as NVDA stock slid on a report that the U.S. could expand chip export restrictions.
The stock market rally had strong gains Tuesday after a mixed session Monday. The Nasdaq and S&P 500 rebounded from near their 21-day exponential moving averages, along with megacaps Tesla and Nvidia. Overall market breadth was strong.
United Airlines, American Airlines, FedEx, Amkor Technology and On Holding all cleared buy points.
Tesla, On Holding and Nvidia stock are on IBD Leaderboard, while UAL stock is on the Leaderboard watchlist. United Airlines and ONON stock are on the IBD 50. Tesla stock is on the IBD Big Cap 20. United Airlines was Tuesday's IBD Stock Of The Day.
Is the market pullback over or is this just a one-day blip? That's a big question. Investors can be taking advantage of buying opportunities, carefully, but ready to step back if positions or the broader market retreat again.
The video embedded in this article discussed Tuesday's strong market rally and analyzed FDX stock, United Airlines and Datadog.
U.S. Mulls AI Chip Export Curbs
The Biden administration is considering new restrictions on exports of artificial intelligence chips, The Wall Street Journal reported Tuesday night, citing sources.
The Commerce Department could halt AI chip shipments by Nvidia and others to China and other countries of concern without first obtaining a license. Late last year, the U.S. imposed significant export bans on China, but Nvidia tweaked some of the affected chips to sidestep the restrictions. Those chips may now be targeted.
Nvidia stock fell more than 3% in premarket trade. Advanced Micro Devices sank 3%. Broadcom dipped 1%.
In addition to possible lost business for Nvidia, AMD and others, expanded chip exports could spur China retaliation. Beijing has already limited sales of Micron Technology chips to key customers, citing cybersecurity concerns. Micron, which reports Wednesday night, edged lower overnight.
In other news, Spirit AeroSystems late Tuesday reached a tentative deal with striking workers, who will vote on it Thursday. Spirit Aero makes 737 fuselages for Boeing. SPR stock rose modestly in premarket trading. BA stock edged higher.
Dow Jones Futures Today
Dow Jones futures were even with fair value, with Boeing stock offering a tiny boost. S&P 500 futures lost 0.2% and Nasdaq 100 futures fell 0.35%. Nvidia and AMD stock are notable S&P 500 and Nasdaq 100 components.
Crude oil futures reversed slightly lower. Copper prices sank 1%.
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 enjoyed a strong, broad-based advance. Economic data was upbeat, with May new-home sales crushing views while June reports on consumer confidence and Richmond-area manufacturing also topped.
The Dow Jones Industrial Average rose 0.6% in Tuesday's stock market trading. The S&P 500 index climbed 1.1%. The Nasdaq composite jumped 1.65%. The small-cap Russell 2000 leapt 1.5%.
U.S. crude oil prices fell 2.4% to $67.70 a barrel.
The 10-year Treasury yield popped 5 basis points to 3.77%, holding within a range going back to late May.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF popped 2.6%, while the Innovator IBD Breakout Opportunities ETF gained 2.5%. The iShares Expanded Tech-Software Sector ETF climbed nearly 2%.
The VanEck Vectors Semiconductor ETF jumped 3.2%. NVDA stock, the top SMH holding, rose 3.1%, bouncing from near the 21-day line. But it was an inside day after slumping 3.7% on Monday.
Reflecting more-speculative story stocks, ARK Innovation ETF leapt 3.4% and ARK Genomics ETF edged up 0.7%. Tesla stock is the No. 1 component across Ark Invest's ETFs. The EV giant ran up 3.8% to 250.21 on Tuesday, bouncing from the 21-day line but after tumbling 6.1% on Monday. TSLA stock arguably has a 274.75 handle buy point on a consolidation going back to September.
SPDR S&P Metals & Mining ETF climbed 1.3% and the Global X U.S. Infrastructure Development ETF 1.7%. U.S. Global Jets ETF flew 4.4%, with UAL stock and American Airlines big parts of the ETF. SPDR S&P Homebuilders ETF stepped up 2.9%. The Energy Select SPDR ETF edged up 0.2% and the Health Care Select Sector SPDR Fund dipped 0.2%.
The Industrial Select Sector SPDR Fund climbed 1.2%.
The Financial Select SPDR ETF advanced 0.8%. The SPDR S&P Regional Banking ETF rebounded 3.2%.
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Stocks In Buy Zones
UAL stock jumped 5.1% to 56.03, clearing a 54.05 cup-with-handle buy point. AAL stock leapt 5.5% to 17.35, flying above a 16.72 entry from its own cup with handle, according to MarketSmith analysis. Both United and American jumped as per Delta Air Lines raised full-year guidance. DAL stock, already extended, leapt 6.8%
FDX stock leapt 5% to 246.76, vaulting above a 235.81 flat-base buy point. FedEx had peeked above that entry in mid-June, but then fell back on mixed earnings. Shares quickly rebounded from the 50-day line.
AMKR stock surged 11.4% to 29.37 in huge volume, easily clearing a 27.20 buy point. The chip-equipment maker is now well past the 5% buy zone, which runs to 28.56.
ONON stock rose 2.2% to 31.30, still in range from its 50-day line and a trendline. The high-end athletic shoe maker moved above those key levels Monday. Intraday Tuesday, shares peeked above a 31.45 short-term high.
Stock Market Forecast For The Next Six Months
Market Rally Analysis
The stock market rally had a clearly bullish session. The indexes rebounded around a key short-term level in higher volume, with strong breadth and a number of stocks flashing buy signals.
The Nasdaq and S&P 500 rebounded from around their 21-day lines. Meanwhile, the Dow Jones and Russell 2000 regained that key level.
The Invesco S&P 500 Equal Weight ETF, which reclaimed its 21-day on Monday, popped 1.2% Tuesday, clearing breaking the recent downtrend and topping the 10-day line
The First Trust Nasdaq 100 Equal Weighted Index ETF, which only dipped 0.2% Monday, popped 1.7% on Tuesday, also bouncing from the 21-day.
Advancers easily beat decliners on Tuesday.
Airlines and travel were big winners, but chips, software, industrials, transports and the broad housing sector all showed bullish action as well.
Energy remains a weak area, while biotechs and some sectors are struggling.
Tuesday may have marked the start of a new leg in the market rally. The Nasdaq staged a subsequent follow-through day. But it hasn't quite broken its recent downturn and is just below its 10-day line.
The AI chip export curbs report hitting Nvidia overnight is an unexpected headwind.
Also, after Tuesday's bounce, the Nasdaq is 6.5% above the 50-day moving average while the Nasdaq 100 is up 7.5%. It wouldn't take much for those to get to extreme levels again.
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What To Do Now
With the stock market rally showing positive signals, investors certainly could have looked for places to add some exposure. There's still risk that the pullback isn't over, and that Tuesday's buying opportunities will go south quickly. But if you wait for definitive proof that the pullback is over, such as the Nasdaq hitting a new high, then it'll be too late to chase stocks.
One option is to take smaller positions in new buys. Be ready to step quickly and consider taking partial profits fast to lock in some gains.
Make buys as close as possible to entries. That will provide some protection from stock and market reversals.
Definitely have your watchlists ready. A broad advance with diverse leadership means it's harder to keep track of all the promising stocks. But that's a good problem to have.
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.
