Dow Jones futures fell modestly Wednesday morning, along with S&P 500 futures and Nasdaq futures. Advanced Micro Devices (AMD) headlined overnight earnings with the Federal Reserve wrapping up its two-day meeting Wednesday afternoon.
The stock market rally attempt had a quietly encouraging session, with the major indexes reversing higher from morning declines. Nvidia stock undercut recent lows Tuesday morning, but it slashed losses. Market breadth was better. But the downtrend hasn’t been broken.
Arista Networks (ANET) was a big winner Tuesday, surging toward record highs on earnings after tumbling last week on Meta Platforms (META) capital spending plans. Pinterest (PINS) and Cameco (CCJ) also gapped up on earnings. All flashed buy signals, though risks are elevated now.
But ELF Beauty (ELF) plunged heading into earnings Wednesday night. Nvidia stock undercut recent lows Tuesday morning, but it slashed losses.
Dow Jones Futures Today
Dow Jones futures fell 0.4% vs. fair value. S&P 500 futures slipped 0.5%. Nasdaq 100 futures declined 0.5%. AMD stock is a Nasdaq 100 stock.
The 10-year Treasury yield rose a few basis points to 4.9%.
Crude oil futures climbed 2%.
Nvidia (NVDA) rival AMD reported better-than-expected third-quarter earnings and sales. AMD gave weak guidance, but also bullish AI comments. AMD stock fell slightly early Wednesday. Shares rose 2.4% to 98.50 on Tuesday, but still below the 50-day and 200-day lines.
Paycom Software (PAYC) topped EPS views, but revenue and Q4 guidance fell short. PAYC stock plunged more than 30%.
FDA Panel Mulls Gene-Editing Therapy
Meanwhile, an FDA advisory panel had generally favorable comments for a first-ever gene-therapy treatment for sickle cell disease, developed by Crispr Therapeutics (CRSP) and Vertex Pharmaceuticals (VRTX). Unusually, the panel didn’t vote on whether to recommend the treatment. CRSP stock jumped nearly 10% early Wednesday after being halted throughout Tuesday. VRTX stock rose 1.3% on Tuesday to 362.11, bouncing off the 50-day line. Vertex stock is back near a 367 buy point, but earnings are due next week.
Tesla Autopilot Win
Tesla stock rose 1.8% to 199.96 on Tuesday, moving off a five-month low after winning the Autopilot lawsuit involving a fatal 2019 crash in Riverside County, Calif. It’s the first of a string of lawsuits allegedly involving the EV giant’s driver-assistance software. TSLA stock, which also bounced with the broader market, is still below its 200-day line.
China EV Sales
Early Wednesday, Tesla (TSLA) China rivals Li Auto (LI), XPeng (XPEV) and Nio (NIO) reported October deliveries. Li Auto deliveries topped 40,000 for the first time. XPeng deliveries cleared 20,000 to hit a new record. Nio sales picked up vs. September.
EV and battery giant BYD (BYDDF) should report October sales by Thursday morning, if not sooner.
Li Auto and Nio edged higher while XPEV stock rose solidly early Wednesday, with BYD not trading. All four EV makers fell 3%-4% Tuesday, along with many other China stocks, following weak China economic data.
The video embedded in the article discussed Tuesday’s market action and analyzed ANET stock, Cameco and ELF Beauty.
Fed Meeting Decision
The central bank will make its policy meeting announcement at 2 p.m. ET, with Fed chief Jerome Powell speaking at 2:30 p.m. ET. Markets see no chance of a rate hike Wednesday, and give only modest odds of a December move. Fed policymakers, including some hawks, have made it clear that surging long-term Treasury yields have reduced the need for official rate hikes.
Expect the Fed policy statement and Fed chief Powell to reinforce that message, while still leaving the door open to further tightening.
Stock Market Rally
The stock market rally attempt came off morning lows to close higher Tuesday.
The Dow Jones Industrial Average rose 0.4% in Tuesday’s stock market trading. The S&P 500 index advanced 0.65%, with ANET stock easily the top performer. The Nasdaq composite gained 0.5%.
Nvidia stock tumbled 4.7% Tuesday morning on a report that it may have to cancel AI chip orders from Chinese companies worth over $5 billion due to tighter U.S. restrictions. But the AI chip leader rebounded to close down just 0.9% to 407.80.
Market breadth was better on Tuesday, with winners comfortably beating losers. New lows, of course, continued to crush new highs.
Tuesday marked day three of a stock market rally attempt on the Nasdaq, and day two for the S&P 500 and Dow Jones. A Nasdaq follow-through day could come at any time to confirm the new uptrend.
The composite just retook the 200-day line on Tuesday, but several other resistance levels loom. The other indexes are well below the 200-day line.
Meanwhile, not many stocks are in good position right now.
U.S. crude oil prices fell 1.6% to $81.02 a barrel, tumbling 10.8% for the month.
The 10-year Treasury yield was essentially flat at 4.87% Tuesday, but surged 30 basis points for October, the sixth straight monthly gain. With the Federal Reserve taking its cue from the 10-year yield and not the other way around, it’s unclear if the Fed meeting announcement and Powell will have the kind of impact that they’ve had for the past two years.
The iShares Expanded Tech-Software Sector ETF (IGV) jumped 1.2%. The VanEck Vectors Semiconductor ETF (SMH) advanced 0.7%. Nvidia stock is the largest holding in SMH, with AMD stock also a notable component.
SPDR S&P Metals & Mining ETF (XME) fell 0.6%. SPDR S&P Homebuilders ETF (XHB) stepped up 1.2%. The Energy Select SPDR ETF (XLE) edged up 0.3% and the Health Care Select Sector SPDR Fund (XLV) rose 0.6%. VRTX stock is an XLV holding.
Stocks Gapping Up On Earnings
ANET stock surged 14% to 200.37, clearing a 198.46 buy point from an awkward double-bottom base. It was already actionable Tuesday morning as it gapped decisively above the 50-day line. The relative strength line hit a new high. Last week, Arista stock tumbled after key customer Meta signaled lower-than-expected capital spending. But late Monday, the networking giant reported better-than-expected Q3 results and raised Q4 revenue guidance. Arista earnings rose 46% vs. a year earlier for a second straight quarter, with EPS up more than 20% for an 11th straight quarter.
CCJ stock leapt 8.1% to 40.91, gapping from around the 50-day line to near the top of a short consolidation. Investors could use 42.16 as an official buy point, but was actionable from its Oct. 25 high of 39.77. Uranium producer Cameco reported earnings rocketed nearly 1,000% vs. a year earlier, while also raising sales guidance.
PINS stock gapped up 19% to 29.88, vaulting above the 50-day and 200-day lines, back above key resistance levels around 29. It’s actionable from that, along with a 30.86 official buy point. Pinterest reported booming profit and an 11% revenue gain, both showing accelerating growth for a third straight quarters. User growth also topped views. The social media site also gave some bullish Q4 guidance.
In all these cases, investors could have bought these stocks Tuesday. However, buying earnings gaps in a market correction carries other risk. At this point, investors might want to wait to see if these stocks can forge handles or high handles.
What To Do Now
The stock market is trying to bottom, with a rally attempt underway. But right now it’s a market correction.
If there’s a follow-through day in the near future, investors should look for something to buy, whether it’s a stock or a broad ETF. But there’s no reason to rush in.
Confirmed market rallies don’t already work. As long as Treasury yields are in an uptrend, it’s hard to see stocks going on a meaningful run.
But it’s definitely a time to be building up watchlists. Look for stocks that are setting up, or at least setting up to set up.
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