Dow Jones Futures: Market Rally Pulls As Fed Sees ‘Upside Risk’; 4 drivers of earnings

Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. CSCO’s stock earnings drives overnight, with Walmart (wmt) on tap early Thursday.

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A reeling stock market rally saw significant losses, with the Nasdaq index starting to lose sight of the 50-day line as Fed meeting minutes showed policymakers feared “upside risks” to inflation. The 10-year Treasury note reached its highest level since 2008.

nvidia (NVDA) reversed lower despite a steady stream of analysts touting the chip giant ahead of next week’s earnings. Flirting with aggressive entries, NVDA stock looks better than almost all technologies, especially chip playback and artificial intelligence.

Tesla (TSLA) continued its steady decline amid further price cuts killing margin.

Investors should be defensive as major indices break support and blue chips look increasingly battered.

Nvidia stock is running IBD Leaderboard.

Federal Reserve meeting minutes

Fed policymakers still see “significant upside risks to inflation” at the Fed’s late July meeting, which could lead to more rate hikes, according to minutes of the meeting released at 2 p.m. ET. At that meeting, the Fed raised interest rates by a quarter point to 5.25%-5.5%, after a pause in June.

After that meeting, Fed Chair Jerome Powell said the risks were roughly balanced, as other Fed officials have since shown patience. The relative cooling of inflation data since the Fed meeting has only reinforced this case.

Finally, stocks added to losses somewhat after the Fed’s minutes, while Treasury yields rose slightly.

Dow jones futures today

Dow futures tilted higher against fair value. S&P 500 and Nasdaq 100 futures lost a fraction. CSCO stock is a component of the Dow Jones, S&P 500, and Nasdaq.

The 10-year Treasury yield rose a few basis points, to 4.29%.

Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.

earnings

Cisco systems (CSCO), Synopsys (SNPS), wolfspeed (wolf) and Warren Buffett backed stunco (STNE) reported Wednesday night.

CSCO stock rose modestly in late trading after initially falling. Cisco’s earnings and sales outperformed the financial views for the fourth quarter. The networking giant was guided by first-quarter EPS and in line with sales, but was guided by lower 2024 fiscal revenue. Shares fell 0.7 percent to 52.96 on Wednesday. Cisco stock traded near 53.89 buy point from a narrowing three-week pattern with entry outside the base of a cup with a handle.

SNPS stock rose slightly in extended action after Synopsys earnings and revenue views topped. The chip design software maker also raised guidance and named a new CEO. Shares fell nearly 2% on Wednesday to 428.21, stuck below the 21 and 50 day lines. Synopsys stock has 465.67 buy points from a cup with handle. A decisive move above 50 days might break the downtrend of the handle.

WOLF stock turned tail after reporting a larger-than-expected loss in the fourth quarter and providing weak guidance in the first quarter. The chip equipment maker with heavy EV exposure has been struggling for months, but the news could affect other EV-related chip operations.

STNE stock rose modestly overnight after StoneCo’s earnings and revenue showed solid growth. Brazilian fintech has also given a strong outlook. The stock has a double bottom bottom with 14.83 buy handle high. On Wednesday, StoneCo stock fell 2.1% to 13.34. A move above Wednesday’s high of 14.15 could provide an early entry.

Walmart (wmt) rose 8 cents to 159.26 on Wednesday, maintaining the 21-day line. WMT stock remains in the range from the 154.45 alt entry originally cleared on June 12th.

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Stock market rise

The stock market rally started out narrowly mixed but gradually worsened, especially after the release of the Fed’s minutes. Major indices closed near session lows.

The Dow Jones Industrial Average fell 0.5% in stock market trading Wednesday. The S&P 500 fell 0.8%. The Nasdaq Composite fell 1.15%. Small-cap Russell 2000 shed 1.3%.

US crude oil prices fell 2% to $79.38 a barrel, as China’s concerns outweigh the tight supply. Crude Oil is down 4.6% so far this week.

Copper futures fell 0.3% to their lowest since May 31.

The 10-year Treasury yield rose 4 basis points to 4.26%, its fifth consecutive gain. The yield is just below Wednesday’s high of 4.27% and the 15-year high of 4.33% hit last October. But it is the highest close since June 2008.

The US dollar rose slightly to the highest level in 2023.

Exchange Traded Funds

Among the ETFs, the Innovator IBD 50 ETF (fifty) fell 1.3%. iShares Expanded Technology and Software ETF (IGV) decreased by 0.9%. VanEck Vectors Semiconductor Corporation (SMH) fell 1.6%, with Nvidia stock taking the lead. SNPS stock is in both SMH and IGV.

Reflecting more speculative stories, the ARK Innovation ETF (ARK)ark(down 2.2% and ARK Genomics ETF)ARKG) fell 3.2%. Tesla stock is the number one stock ETF held by Ark Invest. Cathie Wood’s Ark also holds positions in STNE stock and Nu Holdings.

SPDR S&P Metals & Mining ETFs (XME) rose 0.3% and the Global Infrastructure Development Fund (ETF) in the USA (cradle) waived 0.75%. US Global Gates Foundation ETF (Planes) fell 1.2%. SPDR S&P Homebuilders ETF (XHB) concession of 1.35%. Energy Defined Fund SPDR ETF (xle(down 0.9% and SPDR Healthcare Fund)XLV) sank 0.8%.

SPDR Industry Selection Fund (XLI) fell 0.6%.

SPDR Financial Selection Fund (XLF) decreased by 0.15%. SPDR S&P Regional Banking ETF (KRE) sank 1.1%.

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stock nvidia

Raymond James raised his price target for NVDA stock on Wednesday, becoming at least the fourth major Wall Street company to beat the chip giant’s table.

Shares initially rose, but reversed with a 1% loss to 434.86, just above the 50-day line but a fraction below the 10-week mark. A move above Tuesday’s high of 452.68 would provide a buying point, but Nvidia’s dividend is due Aug. 23.

Expectations are high, and it’s not just NVDA stock. The AI-led market rally can use the upside earnings and guidance from the AI ​​leader.

Tesla stock

TSLA stock fell 3.2% to 224.86, its ninth drop in the past 10 sessions. The shares are at a two-month low and more than 13% below the 50-day line. The bright side is that August’s losses were due to light trading volume.

On Wednesday, Tesla sharply raised Model S and X discounts on China inventory. This follows China’s price reductions on some Model Y variants and new limited-run Model S and X vehicles in the US that are $10,000 cheaper than previous base trims.

This continues a slew of price cuts and rebates in the third quarter, pointing to more pressure on margins.

The long-rumored Model 3 upgrade may go on sale in China this month, but not much is known about the changes or potential production cost savings.

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Stock market rally analysis

The market rally remains an “uptrend under pressure”, although an argument can be made that we are in a correction.

The NASDAQ is now 2.3% below the 50-day line. The S&P 500 and Russell 2000 lost more steam for 50 days as well. The Dow is still above the 50-day level, but is heading in that direction after its 21-day break on Tuesday.

Many of the leading stocks suffered significant damage. Some hold up, but are prone to giving up daily gains or solid progression.

The overall market breadth has weakened considerably, with the Nasdaq advance/decline line flirting with the long-term bottom set in early May. The NYSE A/D line is trending down, but modestly.

Two silver linings: First, the stock market has become extremely oversold, which indicates the possibility of a bounce. But it doesn’t have to happen right away, and it doesn’t have to last.

Secondly, the overly bullish sentiment is gone. The latest reading for the bulls for investment news releases fell to 47.1% from 57.2% just two weeks ago.

What are you doing now

The risk-reward scenario for making new purchases continues to worsen.

Here and there some stocks are flashing buy signals this week. But often these were short-lived. Some of the plays that looked interesting Wednesday morning, including NU stocks, Saia (SAIA), Terex (text), and quickly pared the gains or reversed downward.

With the market likely to rally in the last moments, investors should get more defensive, even if only to take partial profits or cut losses on individual holdings.

If the market shows renewed strength — not just a strong open — a large number of stocks will quickly look doable.

So you want to be prepared. Keep working on the watchlists, focusing on stocks that show relative strength.

Read the big picture every day to stay in sync with market trend, leading stocks and sectors.

Please follow Ed Carson on Twitter at @tweet For stock market updates and more.

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