Futures: Nvidia is ramping up its earnings. deepening signs of recession

Dow Jones futures, along with S&P 500 futures and NASDAQ futures, gained slightly overnight, focusing on Nvidia and Cisco earnings. The X stock market rally was set back by weak TGT (Target) earnings, year-end guidance and Micron Technology (MU)’s reduced memory chip production plans. Bond markets further illuminate recession risks, with 10-year Treasury yields continuing to decline while short-term yields remain high. Electric vehicle giant Tesla (TSLA) recently retired with the most sluggish performance among megacap stocks. Nvidia (NVDA), lithium giants Sociedad Quimica y Minera de Chile (SQM) and Cisco Systems (CSCO) reported earnings on Wednesday night. NVDA stock rose moderately in overnight trading following mixed results and guidance. CSCO shares rose 4% in expansionary action as Cisco beat its fiscal first-quarter forecast and sales increased. Cisco stock fell 1.1% on Wednesday, trading between the 50- and 200-day lines. IBD leaderboard stock Arista Networks (ANET) rose slightly on Cisco earnings. SQM revenue is still due tonight. SQM stock fell 2.6% on Wednesday and is down more than 10% this week on concerns about lithium prices. The Chilean lithium and fertilizer giant is in the cup base with 115.82 buy points. It can be a handle operation. Chinese e-commerce giant Alibaba (BABA) and US department store chains Macy’s (M) and Kohl’s (KSS) are closing early Thursday. BABA stock fell moderately on Wednesday, but surged 11% on Tuesday. Macy’s and KSS stocks tumbled Wednesday on Target’s holiday warning. Dow Jones Futures Today Dow Jones Futures Pink 0.15% vs. fair value. S&P 500 futures rose 0.2%. Nasdaq 100 futures rose 0.3%. CSCO stock is a component of the Dow Jones, S&P 500 and Nasdaq, but Nvidia has a larger weight in the S&P 500 and Nasdaq. The 10-year Treasury yield rose 2 basis points to 3.71%. According to several media outlets, Republicans have regained control of the House. But that would be a very thin majority, far less than expected before Election Day. Remember that overnight actions in Dow futures and elsewhere do not necessarily translate into actual trading at the next regular stock market session. In IBD Live Stock Market Rally, join IBD experts analyzing viable stocks in a stock market rally. The stock market rally lost ground on Thursday as small cap and technology stocks led the decline. The Dow Jones Industrial Average fell 0.1% in stock market trading on Wednesday. The S&P 500 Index fell 0.8%. Nasdaq Composite Slide 1.5%. The small-cap Russell 2000 Index fell 1.8%. US crude oil prices fell 1.5% to $85.59 per barrel. Natural gas futures rose 2.8%. Treasury Yield Curve Flashes Recession Risk The 10-year Treasury yield fell 11 basis points to 3.69%. Benchmark Treasury yields are below the current federal funds rate range of 3.75%-4%, and the Fed is expected to raise rates by 50 basis points next month to 4.25%-4.5%. The two-year Treasury yield, more closely related to Fed policy, is pegged at 4.36%, while the three-month yield is 4.23%. The steep yield curve inversion between the 3-month and 10-year Treasuries is the highest since its brief run at the end of 2019. This points to an increased risk of a recession or, at best, marginal economic growth in 2023. Fed Chairman Jerome Powell and some of his colleagues have reported that a recession may be needed to control inflation, but other policymakers see a soft landing as likely. An inverted yield curve still emerges amid a robust labor market and strong October retail sales report. Among the top ETFs, the Innovator IBD 50 ETF (FFTY) lost 1.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost more than 1%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 2.1% as many cloud software names had a bad session. The VanEck Vectors Semiconductor ETF (SMH) was down 3.6% with Nvidia stock and Micron leading constituents. The SPDR S&P Metals & Mining ETF (XME) was down more than 2% and the Global X US Infrastructure Development ETF (PAVE) was down 0.5%. The US Global Jets ETF (JETS) gave up 2.4%. The SPDR S&P Homebuilders ETF (XHB) was down 1.4%. The Energy Select SPDR ETF (XLE) was down 2% and the Financial Select SPDR ETF (XLF) was down 0.5%. The Health Care Select Sector SPDR Fund (XLV) closed just below breakeven. Reflecting more speculative Story stocks, the ARK Innovation ETF (ARKK) fell 5.15% and the ARK Genomics ETF (ARKG) fell 3.7%. Tesla stock remains a major holding across all of Ark Invest’s ETFs. 5 of China’s best stocks to watch now Nvidia performance Nvidia’s performance underperformed Q3 views, but the decline in earnings was less than feared. Demand for chips for data centers remained strong. Gaming revenue plummeted, but not as bad as feared. The chip giant saw a slight decline in sales in the fourth quarter. Nvidia stock rose 2% in brisk overnight trading. On Wednesday, shares fell 4.5% to 159.10. However, NVDA shares have surged since hitting the bear market low of 108.13 on October 13th, and we expect business to improve going forward. The behemoth chip is well past the 50-day mark, but still below the 200-day mark. Nvidia stock has no buying points. Ideally, the stock will rise above the 200-day line to establish a new base. Tesla stock Tesla stock fell 3.9% to 186.92 on Wednesday. TSLA stock is encountering resistance at its 10-day moving average while breaking above the two-year low of 177.12 on the 9th of November. The EV giant has not closed above the 21st line since September 21st. Other megacaps struggled, but Apple (AAPL), Microsoft (MSFT) and Google parent Alphabet (GOOGL) managed to break above their 50-day moving averages. Even Facebook-parent Meta Platforms (META) are above the 21st line. Meanwhile, other EV stocks are looking as bad or as bad as Tesla. Additionally, CEO Elon Musk’s reign on Twitter could weigh on TSLA stock in a variety of ways. Musk was put to the test on Wednesday in a court case over 2018 Tesla stock options that account for about $50 billion of his fortune. He hinted that he would not remain permanently at the head of Twitter. Tesla vs. BYD: Which EV Giant Is the Better Buy? Market Rally Analysis The stock market rally was arguably due to a pause or pullback, and that happened on Wednesday. The Dow Jones held comfortably above the 200-day line, pausing just below the short-term highs in August. The S&P 500 looks fairly normal with a slight pullback not too far from the 200-day line. The Nasdaq is still clearly above the 50-day line, but has returned below the short-term highs of October. The Russell 2000 index fell below the 200-day line, hitting the intraday low on Monday. Meanwhile, several stocks that gave buy signals in the past few sessions fell again on Wednesday. Growth stocks faltered widely while defensive names rallied and defensive growth stocks held out, but many retailers fell as Target lost revenue. If the market rebounds in the near future, Wednesday’s actions will soon be forgotten. But if Nasdaq dips below the 50-day line and the major stocks come under greater pressure, that would be worrying. While markets focus on Fed policy, there are other concerns as well. Still, the cumulative effect of the Fed’s rate hikes this year is hurting the economy. And the impact will linger for months after the rate hike ultimately ends. An inverted yield curve reflects rising recession risk. Even now, the combination of high inflation and weakening demand is taking a toll. Earnings target showed this despite competitor Walmart (WMT) having strong results and guidance. Inflation may fade over the next year, but that doesn’t mean corporate earnings and share prices are bright. Time The Market With IBD’s ETF Market Strategy What To Do Now Wednesday’s actions give investors reasons to be cautious about adding rapid exposure. When the market pulls back, like on Wednesday, buying many new positions in one day can backfire. Assuming the market rally and your position is progressing, it’s a good idea to gradually add exposure. Equity market rally remains good, but prone to big swings, sector rotation and earnings surprises. It’s not yet clear which stocks and sectors will lead. So don’t focus too much on a specific field or topic. However, you want to cast a wide net by regularly updating your watchlist. Early entry is still important. Traditional buy points, especially when noticeably higher above the 50-day line, have not worked particularly well. Investors may still want partial gains when a stock makes a quick profit. It can give you the confidence to hold your remaining equity longer and it will protect your portfolio. Read The Big Picture daily to understand market direction and key stocks and sectors. Follow Ed Carson on Twitter @IBD_ECarson for stock market updates and more. You may also like: Why this IBD tool simplifies your search for top stocks Catch the next big winning stock with MarketSmith Want to make quick profits and avoid big losses? Try SwingTrader IBD Digital: Unlock IBD’s premium stock listings, tools and analysis today. 200 Day Average: Last Support Level?
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