Dow Jones futures fell overnight, along with S&P 500 futures and especially Nasdaq futures, as Meta Platforms (META) plunged on guidance. ServiceNow (NOW) and Chipotle Mexican Grill (CMG) also reported, with key economic data on tap.
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The stock market rally attempt opened higher Wednesday, signaling a possible third straight solid advance. But the major indexes erased gains and closed narrowly mixed.
Nvidia (NVDA), the market’s most important stock, suffered an unsightly downside reversal, hitting resistance from near the 50-day line. A number of leading stocks slashed or reversed early gains.
AI play Vertiv (VRT) soared to a record high Wednesday morning but gave up much of its gains. Tesla (TSLA) held onto the bulk of its post-earnings gains, but is a beaten-down stock.
In addition to Meta, ServiceNow and Chipotle, IBM (IBM) and Impinj (PI) reported. Meta stock sold off, while ServiceNow and IBM retreated. Chipotle rose modestly while Impinj leapt.
Early Thursday, Caterpillar (CAT), Tradeweb Markets (TW) and Royal Caribbean (RCL) are among the notable reports.
Also early Thursday, investors will get the first reading for first-quarter GDP growth, along with weekly jobless claims. The GDP report will include the core PCE price index, effectively giving a sneak peak at the March PCE price data due Friday.
Nvidia stock and Meta Platforms are on IBD Leaderboard. Vertiv stock is on the IBD 50. Vertiv, ServiceNow and Meta stock are on the IBD Big Cap 20.
Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value, with IBM a blue chip component. S&P 500 futures sank 0.6%. Nasdaq 100 futures lost 1.1%, with Meta stock having a real-world impact. ServiceNow is NYSE-listed, but several other software plays fell in sympathy, including Microsoft (MSFT).
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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Stock Market Rally
The stock market rally started off with solid gains but quickly erased them.
The Dow Jones Industrial Average fell 0.1% in Wednesday’s stock market trading. The S&P 500 index edged higher and the Nasdaq composite rose 0.1%. The small-cap Russell 2000 fell 0.4%.
Tesla stock came off intraday highs of 167.97 but still soared 12.1% to 162.13 on the EV maker’s comments about “affordable” vehicles and more. Shares hit a 15-month low on Monday. Vertiv stock spiked more than 19% intraday to a record 94.39, but closed up just 6.8% at 84.57
Perhaps Wednesday’s most-negative signal was the market’s most important stock. Nvidia slumped 3.3%, reversing lower from near the 50-day line. That it wasn’t technical action suggests that Nvidia stock won’t have a quick run back to new highs, which isn’t good news for AI stocks and the broader market.
After a big sell-off, the market finally bounced to start the week. But one or two good days is nothing special. What matters is whether the market will stage a follow-through day to confirm the new uptrend. That could still take place starting Thursday. The rally attempt will still be in force as long as the major indexes don’t undercut recent lows.
U.S. crude oil prices fell 0.7% to $82.81 a barrel.
The 10-year Treasury yield climbed 5.5 basis points to 4.65%.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 0.1%, with ServiceNow stock a key holding. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.1%. Nvidia stock is the dominant SMH player with Lam Research also in the ETF.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) edged up 0.1% and ARK Genomics ETF (ARKG) fell 1.3%. Tesla stock is a major holding across Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) declined 0.3%. The U.S. Global Jets ETF (JETS) descended 1.9%. The SPDR S&P Homebuilders ETF (XHB) stepped down 1%. The Energy Select SPDR ETF (XLE) inched up 0.1% and the Health Care Select Sector SPDR Fund (XLV) retreated 0.3%.
The Industrial Select Sector SPDR Fund (XLI) fell 0.8%. The Financial Select SPDR ETF (XLF) lost a fraction.
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Meta Earnings
Meta earnings beat views while revenue rose 27% to $36.46 billion, the fifth straight quarter of faster growth.
However, the Facebook and Instagram parent sees Q2 revenue of $36.5 billion-$39 billion. At the $37.75 billion midpoint, that’s below consensus for $38.254 billion.
Also, Meta raised its 2024 capital expenditures target to $35 billion-$40 billion from $30 billion-$37 billion, “as we continue to accelerate our infrastructure investments to support our artificial intelligence road map.”
That’s good news for suppliers like Arista Networks (ANET).
Meta stock plunged 15% in overnight trade. In Wednesday’s regular session, shares reversed from an intraday high of 510 to close down 0.5% to 493.50, below the 50-day line again.
ServiceNow Earnings
ServiceNow earnings comfortably beat with the 24% revenue gain to $2.6 billion slightly beating. But the first major software maker to report for the current cycle guided slightly lower for subscription revenues in Q2 and the full year.
ServiceNow stock fell 5% in extended action. Shares edged up 0.7% to 746.29 on Wednesday, hitting resistance near the 10-week line. NOW stock has an 815.32 buy point from a flat base.
Chipotle Earnings
Chipotle earnings easily beat. Sales grew nearly 14% to $2.7 billion, slightly beating.
CMG stock rose just over 3% to 3,016 overnight, hovering around a buy point. Shares nudged 0.3% higher on Wednesday to 2,923.32, their third straight slim gain. Chipotle stock has a 3,023.98 buy point from a three-weeks-tight that could turn into a flat base after this week.
Other Earnings
IBM earnings beat but revenue fell short. The Dow tech giant also said it would buy cloud-software play HashiCorp (HCP) in a $6.4 billion deal. Shares tumbled 8.4%.
Impinj earnings solidly beat. Shares surged 10% to 133.06 in extended trade, signaling a possible breakout. PI stock fell 2.2% to 120.91 on Wednesday. PI stock has a 132 buy point.
Market Rally Analysis
Active investors like being active. So when the market has one or two good days after a slide, many want to rush back in. Wednesday’s action was a reality check.
Until there’s a follow-through day to confirm a new uptrend, investors should largely be in cash. It’s OK to try some swing trades or pilot positions early in a rally attempt, if you’re ready to be at least as aggressive in getting out.
Remember, if a market rally is going to last several months or even just several weeks, if you wait for a FTD you’ll still have an opportunity to get the bulk of the run. If a market rally ends up fizzling after a few days or a couple of weeks, getting in early won’t turn out great.
All that being said, a FTD could come any day. So you want to keep updating your watchlists, staying engaged with the market.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
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