Dow futures fall as markets begin pricing in absence of Fed rate cuts; Nvidia is rising

Dow Jones futures fell slightly after hours, along with S&P 500 futures and Nasdaq futures. Another inflation report, the Producer Price Index, is underway.

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The stock market rally eased on Wednesday after a hot CPI inflation report. The Nasdaq and S&P 500 found major support, with the market's most important stocks rising. Nvidia (NVDA) Higher recovery.

But Nvidia shares masked widespread weakness, with small-cap stocks and major ETFs falling below key levels.

Treasury yields rose on the inflation report and a weak 10-year Treasury auction. The Fed's minutes from the March meeting had little impact. It showed that policymakers want to see more progress on inflation but still expect interest rate cuts this year.

Markets have priced in Fed rate cuts for June and July. Investors are now anticipating the first easing in September, but it is not a certainty. Markets are now starting to price in a slim chance of no interest rate cuts in 2024.

In addition to shares of Nvidia, the chip maker Nvidia Taiwan Semiconductor Co., Ltd (TSM) rose after announcing strong sales, building the right side of the base. A third AI chip stock, a recent IPO Astera Laboratories (the father), achieved strong gains. Nutanix (NTNX), Exxon Corporation (Axon) and technology giant Dow Microsoft (MSFT) Show strength.

Tesla (TSLA) Pull back from nearby resistance. Stocks are still up this week.

Nvidia stock exists IBD Leaderboard And SwingTrader. Microsoft stock is on the IBD Long-Term Leaders list. Axon, Nvidia, and Ares stocks are on the market Bahraini dinar 50. Nvidia and Axon shares are in the market IBD Big Cap 20. Nvidia was IBD's stock of the day on Wednesday.

Economic data

The Labor Department will release the March Producer Price Index and weekly unemployment claims at 8:30 a.m. EST on Thursday.

Initial jobless claims are expected to fall by 6,000 in the week ending April 6 to 215,000.

Economists expect the Producer Price Index for March to rise by 0.3% after February's jump of 0.6%. The core Producer Price Index, which excludes food and energy, is expected to rise a modest 0.2% after advancing 0.3% in February. Core PPI inflation is expected to rise to 2.3% from a year earlier, up from 1.6% in February. Core PPI inflation is also expected to reach 2.3%, up from 2%.

The key elements in the PPI report directly feed into the Core Personal Consumption Expenditures Price Index, the Fed's preferred inflation report.

Dow jones futures today

Dow Jones futures were down 0.2% versus fair value. S&P 500 futures fell 0.2%, and Nasdaq 100 futures fell 0.2%.

Remember, an overnight move in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.

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Stock market pool

The stock market rally fell sharply on Wednesday on the back of hotter-than-expected CPI inflation data, although indexes pulled back from intraday lows.

The Dow Jones Industrial Average fell 1.1% in stock market trading Wednesday, falling from its 50-day line to a two-month low. The S&P 500 was down 0.95% and the Nasdaq Composite was down 0.8%, both below the 21-day moving average and testing the 10-week line.

The losers beat the winners on Wednesday. The small-cap Russell 2000 fell 2.5%, below its 50-day line.

Invesco S&P 500 Equal Weight Fund (RSP) fell 1.7%, but found support at the 10-week line. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) gave up 1.6%, breaking below 50 days.

Nvidia and some other AI names helped hide the extent of Wednesday's weakness. It's good to see the most important stocks in the market doing well. However, if Nvidia declines, it could trigger a sharp exodus, possibly fueling the first correction since the market rally began in late October.

On the downside, banks sold off rising interest rates, along with homebuilders and some consumer leaders.

US crude oil prices rose by 1.15% to $86.21 per barrel.

The 10-year Treasury yield jumped 19 basis points to 4.56%, its highest level since mid-November. It was the biggest one-day gain since September 2022. The two-year Treasury yield, which is closely in line with Fed rate expectations, rose 22 basis points to 4.97%, the highest level since late November.

Markets now see only a 19% chance of a rate cut by the Fed at the June meeting and only a 45% chance of a cut by the July 31 meeting. Investors are barely expecting two interest rate cuts in 2023, down from three before the CPI report. There is now a 13% chance of no reduction in 2024.

President Biden says he expects the Fed to cut interest rates before the end of the year.

ETFs

Among the growth ETFs is the iShares Expanded Technology Software Sector ETF (IGV) decreased by 1.3%. Microsoft is the first company to own the IGV, and Nutanix shares are also a member. VanEck Vectors Semiconductor ETF (Trait) by 0.9%, with Nvidia and Taiwan Semi shares the largest holdings.

Reflecting more speculative stocks, the ARK Innovation ETF (Ark(down 2.3% and ARK Genomics ETF)Arkj) decreased by 4.6%. Tesla stock remains a significant holding across Ark Invest's ETFs.

SPDR S&P Metals and Mining Fund (XME(Down 1% while US Global Jets ETF fell)Planes) decreased by 2.55%. SPDR S&P Homebuilders ETF (XHB) Step down by 2.55%. Energy Select SPDR ETF (XLE(Up 0.3% and the Healthcare Sector SPDR Fund)Forty-fifth) Decreased 1.2%. Selected Industrial Sector SPDR Fund (forty-first) decreased by 0.85%.

Financial Select SPDR ETF (XLF) decreased by 1.5%. SPDR S&P Regional Banking Fund (Cree) decreased by 5%.

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Stocks to watch

Nvidia stock rose 2% to 870.39, rebounding from the 10-week line, and reaching resistance at the 21-day line. Stocks are still on track to suffer their third weekly loss in a row. The company and stock that defines the AI ​​revolution and AI market rally is on track to soon have a firm base at 974 buy points. Investors can use a decisive move above the 21-day moving average and a break of a very short trend line as an early entry.

Taiwan Semiconductor shares rose 0.6% to 146.22, the fourth straight advance from a 21-day line. TSM stock is running on a potential base with a potential buy point of 158.40. Early Wednesday, the foundry giant, which makes chips for Nvidia, apple (Camel), Broadcom (Afgo) and several other companies reported strong sales in March and the first quarter, supported by demand for AI-powered semiconductors.

Astera Labs stock rose 4.3% to 71.31 in offshore session. ALAB stock has a new IPO base with an official buy point of 95.21, but resistance at 75 will provide early entry for these AI networking chips.

Nutanix stock rose 1.7% to 65.57, rebounding from a 21-day streak. The data storage software company is on track for a firm buy point at 66.99 after this week. Investors can use 66.51 as a slightly early entry for NTNX stock.

Axon stock rose 2.25% to 318.26, rebounding from a 21-day line and breaking a very short downtrend. Investors can use this level or the short-term high of 321.77 as early buy signals. The Taser and body camera maker has an official buy point of 325.63 from a new flat base, according to Market Smith analysis.

Microsoft stock fell 0.7% to 423.26, but rebounded from the 21-day and settled above a buy point at 420.82 from a short consolidation. MSFT stock could run in a three-week narrow pattern.

Tesla shares

Tesla stock fell 2.9% to 171.76, retreating from the roughly 10-week moving average as shares face resistance in 2024. TSLA stock is still up 4.2% on the week, following Elon Musk's announcement late Friday. About the unveiling of Robotaxi on August 8.

Two more analysts cut Tesla's earnings estimates on Wednesday, forecasting lower deliveries in 2024 in the wake of stunningly weak demand in the first quarter. Tesla will report first-quarter earnings on April 23, but the focus will be on future growth drivers and whether robotaxis will actually be in service over the next several years.

Market rise analysis

The S&P 500 and Nasdaq found support on Wednesday along with a number of leaders. A few leaders, including the most important stock, Nvidia, had strong sessions.

However, the rising market, which was already under pressure, suffered significant losses. The Russell 2000 and the equally weighted RSP and QQEW ETFs broke key levels.

Even just looking at the Nasdaq or Nvidia, just because the index or the stock finds support for a day — or two, three, five sessions — doesn't mean it's going to continue to do so.

Investors may want to avoid making new purchases—except for swing trades—until there is clear strength in the market and not add exposure significantly until the Nasdaq breaks out of its current sideways pattern.

At the same time, you may need to cut back on some of your recent purchases. Prepare an exit strategy for your various properties.

Keep working on your watch lists. The stock market can improve quickly with a strong session or two. So look for those emerging rules and withdrawals. Also look for stocks that simply show strong relative strength.

Read The Big Picture every day to stay on top of market trend and leading stocks and sectors.

Please follow Ed Carson on topics at @edcarson1971 And X/Twitter at @IBD_ECarson For stock market updates and more.

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