Dow futures were little changed hours later, along with S&P 500 futures and Nasdaq futures, with Federal Reserve Chairman Jerome Powell’s big speech at Jackson Hole.
An attempted rally in the stock market had an ugly session on Thursday, as all major indices reversed lower after hitting resistance near the 50-day line, and closed near session lows.
nvidia (NVDA) basically erased its large initial gain on its massive dividend, while many other AI stocks reversed lower to varying degrees, including MRVL, Broadcom (Avgo), Adobe (ADBE), Palantir Technologies (belter), C3. ai (Amnesty International) as well as the server maker Super microcomputer (SMCI).
MRVL stock fell strongly in late trading as Marvell’s earnings met previous views. This came after a significant bearish reversal in Thursday’s session.
WDAY stock rose strongly overnight after earnings topped Business Day and the software giant soared. Stocks fell modestly on Thursday, moving slightly below the 50-day line in a short consolidation process.
INTU stock fell slightly in an extended move. Intuit’s profits rose and TurboTax raised its dividend by 15%, but revenue guidance was light. Stocks fell on Thursday, maintaining a buy territory after bouncing from the 50-day line last Friday.
Fed Chair Powell’s speech at Jackson Hole
Fed Chair Jerome Powell will deliver a policy speech at 10:05 a.m. Friday at the annual Jackson Hole Symposium.
Fed Chair Powell is likely to signal patience, while leaving the door open for further rate hikes. It is also likely to push back against prospects of lower interest rates. Although inflation is still very high but on its way down, policymakers see less urgency to act.
The big jump in 10-year Treasury yields in recent weeks means that market rates have tightened considerably, reducing the need to raise official interest rates by the Fed.
But Powell could point out that long-term trends will make getting inflation back to 2% challenging.
Powell’s speech will be important for interest rate hike expectations. Investors see a 20% chance of a rate hike by the Fed in late September. But the odds of a rate hike by the November 1st meeting have risen to 45%. Expectations of a rate cut by the Fed have been held well into the coming year.
Dow jones futures today
Dow futures rose 0.1% against fair value. S&P 500 futures rose. Nasdaq 100 futures were flat.
Remember that an overnight move in Dow futures and elsewhere does not necessarily translate into an actual trade in the next regular stock market session.
stock market rally
The stock market rally opened higher, but the indices quickly hit resistance at the 50-day line and reversed lower, with the Nasdaq showing the biggest swing.
The Dow Jones Industrial Average fell 1.1% in stock market trading Thursday. The S&P 500 fell 1.35%. The Nasdaq Composite fell 1.9%. Shares of the small Russell 2000 company sank 1.3%.
US crude oil prices rose 0.2 percent to $79.05 a barrel. Copper futures fell 0.95%.
The yield on the 10-year Treasury rose by 4 basis points to 4.23%. The US dollar continues to rise.
Exchange Traded Funds
Among the growth ETFs, the Innovator IBD 50 ETF (FFTY) decreased by 1.6%. iShares Expanded Tech Software Sector Fund (ETF)IGV) gave up 2.3%, with shares of INTU and Workday key members. VanEck Vectors Trading Semiconductors Corporation (Trait) and decreased by 2.6%. Nvidia stock is the highest holding stock in SMH, and Marvell and AVGO stocks are also notable components.
SPDR S&P Metals & Mining Fund (XME(Sinking 1.5% and Global X US Infrastructure Development ETF)cradle) gave up 1.2%. US Global Gates ETF (Planes) decreased by 1.7%. SPDR S&P Homebuilders ETF (XHB) stepped down by 1.55%. Energy Select SPDR ETF (xle(Down by 0.7% and the SPDR Fund for the healthcare sector)XLV) decreased by 0.8%.
SPDR Fund for Selected Industrial Sector (xli) gave up 1.2%.
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NVDA stock jumped to a record high of 502.66 shortly after the open, on the heels of Nvidia’s latest earnings and guidance Wednesday night. But the stocks quickly pared gains, closing up just 0.1%, at 471.74.
The leading artificial intelligence chip company rose sharply heading into earnings. Nvidia stock is still up 8.9% for the week.
AI stocks plummet
Meanwhile, stocks of other AI companies simply turned negative – modestly, strongly or sharply. Many of them were around key technical levels and outside suffered bearish days after initial gaps higher.
MRVL stock reached 64.23 on the day, jumping from its 50-day line, but then reversed to lose 6.85% to 57.29 before Thursday night’s earnings.
AVGO declined by 2.5% to 854.46 after touching 909.86 after the opening. Broadcom’s dividend is due August 31st.
SMCI declined by 5.4% to 262.50, down from 298.35 on the day.
ADBE declined by 3.4% to 512.43, a 21-day low but held steady at the 50-day level. Shares briefly reached 539.67 Thursday morning.
PLTR declined by 7.6% to 14.14, down from 15.72 on the day as it hit resistance at the 21-day line.
AI reversed near the 21-day level at its morning peak of 33.67, falling 11.6% to 28.83. C3.ai stock hit a three-month low.
Market rally analysis
Thursday was bad. Losses were one thing, but seeing the major indices and several blue-chip stocks fall sharply off key resistance in an emerging market rally was disheartening. The higher trading volume on Thursday came after the market gained in below-average trading.
Obviously, Nvidia’s earnings expectations were too high for the market.
A follow-up day can still happen.
Attempts to rally in the Nasdaq and S&P 500 are intact as long as they remain above their August 18 lows. The Dow fell to an intraday low on Thursday, so the number of days the market is up goes to zero.
Fed Chair Powell’s speech offers a potential catalyst. But, as with Nvidia, we don’t know which way to go. Markets may also take some time to digest the long-term implications of Powell’s outlook.
The market correction may end up being longer and possibly deeper than what investors thought the day before. This may be especially true for AI stocks and the technology sector in general.
Energy and some non-tech fields are holding up better.
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What are you doing now
Investors should remain on the defensive and be prepared to cut individual holdings as needed.
It’s not the time to make new purchases. Instead, Thursday offered some short selling opportunities as major indices and stocks reversed lower from key levels.
Investors should not get too aggressive ahead of the follow-up day as the major indices are facing heavy resistance.
But stay engaged and flexible. Update your watchlists so you are prepared.
Read the big picture every day to stay on top of the market trend, leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson For stock market updates and more.
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