Dow Jones futures edged higher Wednesday morning, along with S&P 500 futures and Nasdaq futures. Toll Brothers and Urban Outfitters reported Tuesday night, with Foot Locker and Analog Devices big losers early Wednesday. Nvidia looms large after Wednesday's close.
The stock market rally attempt had a lackluster Tuesday, with the Dow turning negative and the Nasdaq slashing initial gains. The major indexes are still below key levels while breadth was poor again.
The market remains in a correction with huge news on tap. Investors should act accordingly.
Nvidia stock reversed lower from a breakout Tuesday after Monday's powerful move.
It's hard to exaggerate the importance of Nvidia earnings with the market in an uncertain state. Not only will the Nvidia stock reaction be a big factor for techs and the broader market, but Nvidia earnings and guidance will be hugely important for dozens of companies, from chipmakers Broadcom and Marvell Technology to software makers like ServiceNow and Adobe, as well as megacaps such as Microsoft, Meta Platforms and Google parent Alphabet.
Many of these stocks are near possible buy signals, but also could be possible short candidates.
NVDA stock and Meta are on IBD Leaderboard. Microsoft stock is on the IBD Long-Term Leaders list. Google stock, Meta and ServiceNow are on the IBD Big Cap 20.
The video embedded in this article reviewed AVGO stock, ServiceNow and Baker Hughes.
Dow Jones Futures Today
Dow Jones futures were just above fair value. S&P 500 futures edged higher and Nasdaq 100 futures rose 0.1%.
The 10-year Treasury yield fell a few basis points to 4.29%.
Mortgage demand for buying a home tumbled to a 28-year low amid soaring rates. European economic gauges fell to multi-year lows.
Crude oil futures sank nearly 2%, but copper prices 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.
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Earnings
TOL stock rose a fraction in premarket trade after Toll Brothers earnings and revenue topped views Q3 with the luxury homebuilder seeing higher deliveries and margins in Q3. Shares rose 1.2% to 75.92 on Tuesday, but still below the 50-day line after retreating for the prior four sessions. Toll Brothers stock has an 83.72 flat-base buy point, according to MarketSmith analysis of a weekly chart.
URBN stock popped overnight, signaling a move back above the 50-day moving average. Urban Outfitters earnings easily beat and sales slightly topped. Shares of the youth apparel retailer fell 4.3% go 34.09 on Tuesday, undercutting the 50-day.
Early Wednesday, Foot Locker plunged after slightly missing views, slashing guidance and suspending its dividend, citing "consumer softness." That followed weak reports from Dick's Sporting Goods and Macy's on Tuesday.
Chipmaker Analog Devices fell solidly after falling short on fiscal Q3 estimates and guiding lower on Q4.
On the upside, Abercrombie & Fitch reported blowout earnings and strong sales, while also raising guidance.
Stock Market Rally Attempt
The stock market rally attempt got off to a solid start, but the indexes soon erased gains or headed lower.
The Dow Jones Industrial Average fell 0.5% in Tuesday's stock market trading. The S&P 500 index slid 0.3%. The Nasdaq composite edged higher. The small-cap Russell 2000 sank 0.3%.
Dick's Sporting Goods and Macy's sent many retailers skidding lower, though Lowe's made a bullish move on its results.
S&P Global downgraded several regional banks, following a similar move by Moody's a few weeks ago and a broad banking warning from Fitch Ratings.
Losers outpaced winners again Tuesday, as market breadth has been disturbingly weak so far in the rally attempt.
The Invesco S&P 500 Equal Weight ETF dipped 0.4%, slightly underperforming the S&P 500 and just above the 200-day line. On Monday, RSP lost a fraction as the S&P 500 climbed 0.7%.
U.S. crude oil prices fell 0.5% to $80.35 a barrel. Copper futures climbed 1%, or up 2.7% in a four-day win streak.
The 10-year Treasury yield fell 1 basis point to 4.33%, after hitting a fresh 15-year high of 4.36%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF lost a fraction. The iShares Expanded Tech-Software Sector ETF dipped 0.1%, with Microsoft, Adobe and NOW stock all big members. The VanEck Vectors Semiconductor ETF lost 1%. Nvidia stock is the No. 1 SMH holding, with AVGO and MRVL also notable components.
Reflecting more-speculative story stocks, ARK Innovation ETF fell 0.2% and ARK Genomics ETF edged higher.
SPDR S&P Metals & Mining ETF rose 0.5% and the Global X U.S. Infrastructure Development ETF was flat. U.S. Global Jets ETF descended 0.5%. SPDR S&P Homebuilders ETF climbed 0.3%, with TOL stock an XHB holding. The Energy Select SPDR ETF sank 0.8% and the Health Care Select Sector SPDR Fund declined 0.35%.
The Industrial Select Sector SPDR Fund dipped 0.2%.
The Financial Select SPDR ETF retreated 0.9%. The SPDR S&P Regional Banking ETF slumped 2.9%.
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Nvidia Earnings
Nvidia earnings are due Wednesday night, with expectations high. At least seven analysts have upgraded or raised price targets on NVDA stock in the past several sessions.
Nvidia stock rose to an all-time high of 481.87 intraday, briefly clearing a short consolidation. But shares reversed lower, falling 2.8% to 456.68. It's still above its 50-day line after spiking 8.5% on Monday, flashing buy signals. The relative strength line, the blue line in the charts provided, hit a new high Monday.
AI Stocks Await Nvidia Results
Meanwhile, AVGO stock and Marvell fell slightly, both of which are hitting resistance at the 50-day moving average. Marvell earnings are due Friday, with Broadcom next week.
NOW stock rose slightly, also hitting 50-day resistance. ADBE stock edged lower, extending a short consolidation with support at key levels. Both Adobe and ServiceNow have generative AI partnerships with Nvidia. Snowflake earnings Wednesday night also could drive software names, along with AI chip leader Nvidia.
MSFT stock is still below the 50-day line after a post-earnings sell-off. META stock is just below that key level, while Google rose in a buy zone. All three are big buyers of Nvidia AI chips.
The stocks near their 50-day lines could offer buy signals with a strong Nvidia earnings reaction. But they also could be potential shorts.
Nvidia earnings presumably will spur big moves for more-speculative names such as Palantir Technologies and C3.ai.
Market Rally Analysis
The major indexes came off Tuesday morning highs to finish mixed, but the overall picture didn't change. A market rally attempt continues within an ongoing correction, with narrow breadth for now.
Investors should look for a follow-through day to confirm the rally attempt. That could come as early as Wednesday, but it would be hard to be excited about a FTD just moments before Nvidia earnings. A FTD after Nvidia earnings Wednesday night or Fed chief Jerome Powell's Jackson Hole speech Friday morning seems more plausible.
Also, if Treasury yields and the U.S. dollar continue to climb, it's hard to see the stock market having a sustained rally, especially highly valued growth names.
While some tech stocks such as Broadcom and ServiceNow may be setting up, don't neglect the energy sector or various construction-related groups.
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What To Do Now
Few stocks are flashing buy signals, which is probably for the best.
The stock market remains in a correction. This is not a time to be getting aggressive, especially in techs.
When a market rally shows real signs of strength, then investors could step up exposure. It's possible that Nvidia earnings or Fed chief Powell's Jackson Hole speech will be the positive catalyst that confirms a new rally. But don't try to guess how those events will go or how the market will react.
Definitely get a list of stocks that are possible buys ready to go. You might also want to get a list of possible shorts.
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