Dow futures rose overnight, along with S&P 500 futures and Nasdaq futures, with the focus on Nvidia and Cisco earnings.
The stock market rally fell amid weakness targeting (TGT) gains and guidelines, as well micron technology (mo) cutting plans for the production of memory chips. The bond market presents brighter recessionary risks as the 10-year Treasury yield continues to decline while short-term interest rates remain high.
NVDA stock jumped slightly in overnight trading, after divergent earnings and guidance.
CSCO stock rose 4% in extended action Cisco topped viewership for the first fiscal quarter and revenue guidance. Cisco stock is down 1.1% on Wednesday, and is trading between the 50-day and 200-day lines. IBD Stock Leaderboard Arista Networks (Network) rose slightly on Cisco’s earnings.
SQM earnings are still due tonight. SQM stock fell 2.6% on Wednesday, down more than 10% this week on concerns about lithium prices. The Chilean lithium and fertilizer giant is located in the region cup base with 115.82 Point purchase. It can work on a handle.
Chinese e-commerce giant Ali Baba (Baba) and US department store chains Messi (M) And the kohl (KSS) early Thursday. BABA stock is down modestly on Wednesday, but after soaring 11% on Tuesday. Shares of Macy’s and KSS fell on Wednesday amid a holiday warning from Target.
Dow jones futures today
Dow Jones futures rose against fair value. S&P 500 futures rose. Nasdaq 100 futures rose 0.1%. CSCO stock is a component of the Dow Jones, S&P 500, and Nasdaq, but Nvidia has more weight on the S&P 500 and Nasdaq.
The 10-year Treasury yield advanced 3 basis points to 3.72%.
Crude oil futures fell 1%.
Republicans have regained control of the House of Representatives, according to multiple media outlets. But it will be a narrow majority, far less than expected before Election Day.
Stock market rise
The stock market rally lost steam on Thursday, with small and tech companies leading the decline.
The Dow Jones Industrial Average fell 0.1% on Wednesday Stock market trading. The S&P 500 lost 0.8%. The Nasdaq Composite fell 1.5%. Small Capital Russell 2000 fell 1.8%.
US crude oil prices fell 1.5 percent to $85.59 a barrel. Natural gas futures rose 2.8%.
The Treasury yield curve is blinking from recessionary risks
The 10-year Treasury yield fell 11 basis points to 3.69%, the lowest since early October and down from 4.15% just one week ago. The benchmark Treasury yield is now below the current fed funds rate range of 3.75%-4%, with the Fed expected to raise interest rates by 50 basis points to 4.25%-4.5% next month.
The two-year Treasury yield, which is closely linked to Fed policy, was flat at 4.36%, while the three-month rate was at 4.23%. The sharp inversion of the yield curve between the three-month and 10-year Treasurys is the highest since late 2019. That points to rising recession risks, or at best little economic growth in 2023.
Fed Chairman Jerome Powell and some of his colleagues have indicated that a recession may be necessary to bring inflation under control, though other policymakers see a good chance for a soft landing.
The constantly inverted yield curve comes amid still strong labor markets and a strong October retail sales report.
Exchange Traded Funds
between the The best mutual fundsThe Innovator IBD 50 ETF (fifty(down 1.7%, while the Innovator IBD Breakout Opportunities ETF)fit) lost just over 1%. iShares Expanded Technology and Software ETF (IGV) lost 2.1%, with many cloud software names having a bad session. VanEck Vectors Semiconductor Corporation (SMH) fell 3.6%, with Nvidia shares and key Micron components.
SPDR S&P Metals & Mining ETFs (XME(decreased just over 2% and the Global Infrastructure Development Fund (ETF) in the USA)cradle) fell 0.5%. US Global Gates Foundation ETF (Planes) concession of 2.4%. SPDR S&P Homebuilders ETF (XHB) decreased by 1.4%. Energy Defined Fund SPDR ETF (xle(Down 2% and Financial Select SPDR ETF)XLF) fell 0.5%. SPDR Health Care Sector Selection Fund (XLV) finished just short of breakeven.
Nvidia’s earnings missed the third quarter views, but revenue fell less than expected. Demand for data center chips remained strong. Gaming revenue has declined, but not to the extent that was feared. The chip giant headed for a slight decline in fourth-quarter sales.
Nvidia stock rose 2% in active trading overnight. Shares fell 4.5% to 159.10 on Wednesday. But NVDA stock has jumped since it reached a bear market low of 108.13 on October 13, hoping for better business in the future. The chip giant has moved above the 50-day line but is still below the 200-day mark.
Nvidia stock doesn’t have a buying point in sight. Ideally, the stock will rise above the 200-day line and form a new base.
Tesla shares fell 3.9 percent on Wednesday, to 186.92. While above its two-year low of 177.12 set on November 9, TSLA stock is hitting resistance at the 10-day moving average. The EV giant hasn’t closed above its 21-day line since Sept. 21.
Other megacaps have struggled, however apple (AAPL), Microsoft (MSFT) and the parent of Google the alphabet (The Google) above the 50-day moving average, while even a parent on Facebook Meta platforms (meta) above the 21-day line.
Meanwhile, other EV stocks are looking as bad or worse than Tesla. CEO Elon Musk’s Twitter reign could also affect TSLA stock in various ways.
Musk testified on Wednesday in a lawsuit regarding 2018 Tesla stock options representing about $50 billion of his fortune. He hinted that he would not remain the head of Twitter permanently.
Market rally analysis
It can be said that the rise in the stock market was due to a pause or decline, and this is what happened on Wednesday.
The Dow has held comfortably above its 200-day line, pausing below its short-term highs in August. The S&P 500 looks fairly normal, with a modest decline, not far from the 200-day line.
The NASDAQ is still clearly above the 50-day line but is back below its October highs in the short term. The Russell 2000 fell below the 200-day line and lowered Monday’s low.
Meanwhile, several stocks that had been flashing buy signals in the past few sessions turned back lower on Wednesday. Growth performance faltered broadly while defensive names rebounded and defensive growth stocks held up, although many retailers stumbled on Target’s earnings.
If the market goes up in the near future, Wednesday’s action will soon be forgotten. But if the Nasdaq breaks below 50 days and the blue chips are under more pressure, it will be worrisome.
While the markets have rightly focused on Fed policy, there are other concerns. However, the cumulative effect of the Fed’s rate hikes this year is taking its toll on the economy. The effect will last for several months after the rate hikes finally end.
An inverted yield curve reflects rising recession risks.
So far, the combination of high inflation and weak demand is taking its toll. Target earnings showed it, despite the competition Walmart (wmt) results and strong guidance. Inflation may slowly fade next year, but that doesn’t mean the outlook for corporate earnings and stock prices is bright.
What are you doing now
Wednesday’s action provides a reason why investors should be cautious about rapidly increasing exposure. Buying a bunch of new positions one day could backfire if the market goes down, as it did on Wednesday. It is best to add exposure gradually, assuming the market goes up and your positions are advancing.
The stock market rally is still in good shape, but it is subject to large volatility, sector rotations, and earnings surprises. It is still not clear which stocks and sectors will lead. So don’t focus too much on a particular sector or topic.
But you’ll want to update your watchlists regularly, and cast a wide net.
Early entries are still important. Traditional buy points, especially if they are significantly above the 50-day line, have not worked out so well.
Investors may still want to take partial profits when they get quick gains in the stock. This can give you confidence to hold the remaining stake for longer and will protect your portfolio from stock back and forth.
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