Dow Jones futures rose slightly early Wednesday, while S&P 500 futures and especially Nasdaq futures jumped. Microsoft (MSFT) fell on weak Azure cloud-computing growth, but eased fears of AI spending fatigue. Advanced Micro Devices (AMD) spiked on its own earnings, while Nvidia also rebounded. The Fed meeting decision is on tap Wednesday.
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Nasdaq Skids Into Earnings, Fed; Spotify, Progressive, Texas Roadhouse In Focus
Arista Networks (ANET), another AI play, also reported Tuesday night. So did First Solar (FSLR) and Pinterest (PINS).
Meanwhile, Dutch chip-equipment giant ASML (ASML) spiked early Wednesday on a Reuters report that the U.S. will exempt Japan, South Korea and the Netherlands from expand export restrictions to China. But Taiwan, home to Taiwan Semiconductor Manufacturing (TSM), will not be. TSM stock still rose amid the general AI chip bounce.
The stock market rally diverged Tuesday, heading into huge earnings and the Fed meeting decision. The Dow Jones, small caps and many nontech sectors held up or rose modestly. The S&P 500 undercut key support, while the Nasdaq fell solidly, led by Nvidia (NVDA).
Nvidia stock is on IBD Leaderboard, with AMD on the Leaderboard watchlist. Microsoft stock is on IBD Long-Term Leaders.
The video embedded in the article discusses Tuesday’s market action and analyzes Spotify (SPOT), Progressive (PGR) and Texas Roadhouse (TXRH).
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value, with Microsoft stock a drag while Boeing (BA) provided a lift despite missing Q2 views. S&P 500 futures jumped 1% and Nasdaq 100 futures shot up 1.7%. Microsoft, AMD, Arista Networks and First Solar are S&P 500 and Nasdaq 100 stocks.
Futures signal that the S&P 500 will rebound above its 50-day line but the Nasdaq will still be below that key level.
Crude oil futures rose more than 3%. The 10-year Treasury yield edged down to 4.13%.
The Bank of Japan raised its short-term rate to 0.25% in July from 0%-0.1% and will halve bond purchases, as part of a long shift to normalized monetary policy. The Japanese yen extended July’s strong rally.
The China manufacturing index edged down 0.1 point in July to 49.4, below the break-even 50 level but just above views for 49.3. The nonmanufacturing dipped 0.3 point to 50.2, meeting estimates.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Federal Reserve Meeting
The Federal Reserve meeting ends Wednesday, with a policy statement due at 2 p.m. ET. Fed chief Jerome Powell will speak at 2:30 p.m., with investors hoping Powell will hint that he’s about ready to reduce interest rates. Markets have priced in a September rate cut, so there’s the risk of disappointment.
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Stock Market Rally
The stock market rally showed divergent action Wednesday, with small caps and nontech sectors doing fine while Nvidia and tech leaders kept skidding.
The Dow Jones Industrial Average rose 0.6% in Tuesday’s stock market trading. The S&P 500 index sank 0.5%, just below its 50-day line.
The Nasdaq composite slumped 1.3%, hitting a seven-week low before paring losses slightly. Nvidia stock plunged 7% to 103.73 on Tuesday, hitting a two-month low and getting close to round-tripping the late-May breakout.
The small-cap Russell 2000 advanced 0.35%.
The Invesco S&P 500 Equal Weight ETF (RSP) climbed 0.5%, just below all-time highs.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 0.6%, but better than the Nasdaq 100’s 1.4% skid.
U.S. crude oil prices sank 1.4% to $74.73 a barrel, its lowest close since June 5.
The 10-year Treasury yield fell 3 basis points to 4.14%, hitting its lowest levels since March.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) shed 0.9%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 1%, with Microsoft stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) sold off 3.8%. AMD stock is a big SMH member, but it’s dwarfed by Nvidia.
The SPDR S&P Metals & Mining ETF (XME) slipped 0.4%, and the Global X U.S. Infrastructure Development ETF (PAVE) dipped 0.2%. The SPDR S&P Homebuilders ETF (XHB) climbed 0.7%. The Energy Select SPDR ETF (XLE) gained 1.55%, and the Health Care Select Sector SPDR Fund (XLV) edged up 0.1%.
The Industrial Select Sector SPDR Fund (XLI) advanced 0.3%. The Financial Select SPDR ETF (XLF) rallied 1.15%.
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Microsoft Earnings
Microsoft earnings and revenue slightly beat fiscal Q4 views. Azure cloud-computing revenue jumped 29%, but that was down from Q3’s 31% and slightly below views.
Q4 capital spending was higher than expected.
On the earnings call, the Dow Jones tech titan guided slightly lower on Q1 revenue. But it sees 28%-29% Azure growth in fiscal 2025, with growth accelerating in the second half. Microsoft also sees capital spending up from FY 2024.
The capital spending and capex guidance eased investor fears of AI fatigue, good news for Nvidia, AMD, Arista Networks and many others.
MSFT stock fell modestly in overnight action, paring initial losses after giving guidance. Shares edged down 0.9% in Tuesday’s regular session to 422.92, falling further below the 50-day line and prior buy point of 430.82.
AMD Earnings
AMD earnings beat second-quarter views with sales to data centers doubling. The chipmaker also guided up slightly for Q3.
AMD stock surged in extended trade. Shares declined 0.9% to 138.44 on Tuesday. Since mid-July, AMD has tumbled, falling below its 50-day and then 200-day lines. Shares peaked in early March.
AMD competes in AI processors against Nvidia, with the latter having the technological edge right now.
Nvidia stock rose strongly in the wake of AMD and Microsoft earnings.
Other Key Earnings
Arista earnings exceeded consensus slightly, while the networking giant fractionally guided higher on Q3 revenue.
Microsoft is a 10%-plus customer for Arista Networks. Meta Platforms (META), which reports Wednesday night, is another big Arista customer.
ANET stock climbed solidly early Wednesday. Arista stock fell 2.85% to 311.42 on Tuesday, falling further from its 50-day line and just above a prior buy point.
First Solar earnings doubled, beating views. FSLR stock rose solidly in extended action. First Solar stock slumped 4.3% to 210.89 on Tuesday.
Pinterest earnings edged past views, but the social media site guided lower on Q3 revenue. PINS stock fell more than 10% early Wednesday. Shares lost 1 cent to 37.35 on Tuesday, tumbling over several weeks.
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What To Do Now?
The market reversal over the past few weeks continues, with long-lagging small caps leading and the Nasdaq struggling below the 50-day line.
Futures signal that Nvidia and the Nasdaq are getting a bounce, but the next few days will determine whether Nvidia, other titans and techs overall can find their footing. It may be some time before they lead again.
Investors can continue to find buying opportunities outside of tech, though the barrage of news coming may offer reasons to be cautious about new purchases.
It’s crucial to stay engaged and be ready to act appropriately to different scenarios.
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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